Planning for your succession is not always straight-forward, especially where you have a complex estate or have assets located overseas. Professional legal advice should always be taken under these circumstances.
You may be familiar with the French forced heirship rules: under French law, the children must receive a minimum portion of their parents’ estate. This proportion is called the “réserve héréditaire”.
The issue of the French forced heirship is currently a hot topic in the French media following the ongoing dispute of the succession of the late famous French singer Johnny Hallyday who excluded his two eldest children from his Will he made in California where he was living since 2013.
Since the EU Regulation No 650/2012, which came into force on 17th August 2015, it is possible for a testator to elect in his Will his national law to govern the future devolution of his assets located in the 24 signatory countries to this EU Regulation
Although the UK opted out of this EU regulation, a British testator living in England could, therefore, elect English law in his English Will to apply to his assets located in France. Such election can in some circumstances be appropriate to avoid the application of the French forced heirship in order to pass the estate to the surviving spouse for instance. Another available option would be purchasing the property via a holding company (eg. SCI or SARL) whose shares would pass in accordance with the law of the habitual residence of the deceased shareholder.
In contrast, the general rule under English law is the testamentary freedom, so a testator could potentially leave his French estate to whomever he chooses.
However, the above EU regulation provides that the application of the chosen law in the Will must be compatible with the public policies of the country where it will apply. French succession laws are very protective towards the children and it has been debated whether the designation of a foreign law in a Will depriving the children of any successions could be found incompatible with the French public policies.
In a recent case law of 27 September 2017 (judgment no 16-17.198), the French Supreme Court (“Cour de Cassation”) provided some light to this debate and held that the application of Californian law to the administration of an estate located in France was not against French international public policies. In this case, the deceased was a French national domiciled in the State of California (USA) and owned an apartment in Paris via an SCI. At his death, he left a spouse, two children from a precedent union and an adoptive child. The deceased made a will in California under which his wife and the trustees of his family trust were the beneficiaries. By application of international private laws, the law of California was applicable to the transmission of the deceased ‘s estate in France and the children of the deceased were deprived of inheriting their father’s estate. The children made a claim in France against the deceased estate arguing that the application of the law of California, which ignores the children forced heirship, was against French international public policies.
The Supreme Court held that the application of the California law was not against French international public policies and can only be rejected if it leads to a situation incompatible with essential French law principles. In the present matter, the Court took into consideration that the expatriation of the deceased to the state of California was old and durable and his children were not in financial difficulties or financial needs.
In the UK, although the general rule is the testamentary freedom, a Will can be challenged under the Inheritance (Provision for Family and Dependants) Act 1975 by someone who was financially dependent on the deceased and for whom no provision (or inadequate provision) has been made in the Will. In practice, in the case of a child making a claim on the estate in the UK, the court will take into account the child’s needs and resources, the deceased’s obligations towards him and the size of the estate.
What we can conclude from this important French case law, is that a foreign law, which does not recognise the forced heirship of the children, is not against the French international public policies and can be applicable to the administration of an estate located in France. The French court will take into account the financial situation of the children when assessing a claim made by them if they have been left out as a result of the application of a foreign law.
A British testator could potentially have his national law to govern the transmission of his French estate and exclude his children from it provided he has taken into consideration their financial situation and needs or any other obligations he owes towards them.
Although, a foreign law can govern the transmission of a French estate, it is important to remember that French inheritance tax rules will still apply when the deceased left a property in France. Each beneficiary will have their own tax allowance and their own tax rate depending on the value of the inheritance and closeness (in terms of bloodline) of the deceased.
If you require advice on Wills and cross-border estate planning involving French real estate, please do not hesitate to contact me for assistance at firstname.lastname@example.org