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EU succession regulation and French property

View profile for Loic Raboteau
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Before Brussels IV:

The general rule was that French property would pass under French succession rules irrespective of your nationality, residence or domicile. An English will dealing with a French property would have been accepted, provided that it does not override the legal reserve of the heirs. Under French Law, the children cannot be deprived of a legal reserve (a defined proportion of the estate) of your French estate when you die.

The French forced heirship rules for children are as follows: one child receives 50% of the French estate and the remaining pass under the deceased parent’s Will; two children take two-third (and the remaining pass under the deceased’s Will) and three or more children take three-quarter (and the remaining pass under the deceased’s Will). In the absence of children, the surviving spouse cannot be excluded from the French estate.

In practice British owners could either have a UK will or a separate French to cover the French property.

After Brussels IV:

Regarding the right of succession, the European Regulation No. 650/2012 (Brussels IV) will enter into force on 17 August 2015 and will apply to the estates of individuals dying after that date. Its purpose is to simplify succession planning with an international dimension. Cross-border successions can be sometimes complicated as there might be conflicts of laws.

Should UK nationals be concerned due to UK opting out from Brussels IV?

This EU regulation is universal (article 20 of Brussels IV) which means that it applies even if the designated law is not that of a EU Member State or from a state who opted out. Therefore, even through the UK has opted out, Brussels IV will still affect UK nationals residing in the UK or abroad.

By application of this new EU regulation, the law that determines the heirs is the law of the last residence of the deceased. The residence is the residence where the deceased actually lived (“notion of habitual residence”) and not the place of his last domicile. The future deceased may elect, in his Will, that his whole estate should obey his national law rather than the law of his residence. This choice will permit stability since the change of residence will not be taken into account. Otherwise, every change of residence will imply different inheritance rules.

In accordance with Brussels IV, UK nationals who are closely connected with the jurisdiction of England & Wales, who have assets in France can choose in their Will English & Welsh law to apply to their whole estate including their assets located in France. Several formalities must be observed when drafting the Will. The validity of the Will will be governed by the chosen law.

However, as the UK opted out, the English succession laws will still apply to the succession of immovable assets located in England & Wales for British citizen living abroad or EU citizens living in the UK.

What now?

UK nationals living in France or in the UK can make a Will designating English law to settle their French estate.

So it is probably good news since French law differs starkly to English Law where, subject to limited statutory control, an individual is free to dispose of his/her assets as he/she wishes. This would provide freedom for UK nationals to decide how their French assets should be passed on.

Limits

It must be reminded that Brussels IV will not change the taxation status of French estates. French inheritance tax rules will still apply to the devolution of any French estate. Therefore any devolution under English law to non-married partners, step-children or any non-relatives will attract an inheritance tax rate of 60%. France, inheritance tax is calculated on the basis of the amount that each individual beneficiary receives and how he or she is related to the deceased owner.

Furthermore, another issue remains unresolved: as Brussels IV just came out of the “legal factory” (in force in August 2015): the legal reserve of the children. In its article 35, Brussels IV provides that the application of the chosen law in the will must not be incompatible with public policies of the country where it will apply. French succession laws are very protective towards the children and the designation of English law in a will depriving the children of any successions could be found incompatible with the legal reserve of the children. It is therefore possible that the French courts could consider an English Will invalid, as it excludes the children from the French estate. Given the novelty of Brussels IV, this issue remains unanswered until a challenge is being brought before a French court.

Conclusions:

UK nationals can elect English law  in their Will to apply to their French assets. Although Brussels 4 appears to be good news for UK nationals owning properties In France, it still remains the uncertainty over an English Will being challenged before the French court if it deprives the children of their right to inherit.

To avoid these uncertainties and taking into account that French taxation rules still apply, people intending to purchase properties in France should still consider the French estate planning structures and take advice on the appropriate purchase structure and wills to ascertain that they will be in a position to transfer their French property in the way they wish and in a tax efficient manner.

For more information on this topic or on French Estate Planning, please contact Loic Raboteau via email at loicr@bandmlaw.co.uk or tel on +44 (0) 20 7356 0833.

Disclaimer: These articles are for information purposes only and are not intended as legal advice. Professional advice should always be obtained before applying any information to particular circumstances.

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