New EU law on French matrimonial regimes

New EU law on French matrimonial property regimes

When purchasing a property in France as a couple, it is important to consider the purchase structure and the couple’s matrimonial regime in order to determine how the property is owned during marriage, after death or divorce.

The French Notaire will always ask the buyers if they entered into a marriage contract and the matrimonial regime they have chosen. This may come as a surprise for British buyers as matrimonial regimes do not exist in the UK.

In contrast, there are many matrimonial regimes in France to choose from. By default, in the absence of a marriage contract in France, the legal regime is the “régime de la communauté réduite aux acquêts” in which assets owned by the spouses before the marriage remain their respective assets and assets owned by the spouses during the marriage belong to the married couple.

The default matrimonial regime for British property owners who married in the UK is the regime of separation of assets (“régime de séparation de biens”). Under this regime, each spouse is treated as owning their own individual assets separately from the other.

The 1978 Hague Convention on matrimonial property regimes allows however married couples to change the law applicable to their matrimonial regime. Couples may choose to adopt the law of a country of which at least one of them is a national or of a country in which one of them is resident. In addition, in respect of real estate only, they can choose to apply the law of the country in which that real estate is situated.

Using La Hague Convention, British couples living in the UK, with no children from a previous relationship, owning properties in France, have been able to choose the French matrimonial regime of “Régime de la Communauté Universelle des Biens” to apply to their French properties only. This matrimonial regime was often chosen to structure a purchase in joint ownership guaranteeing the French property to pass to the surviving spouse and avoiding the forced heirship rules of the children.

On the 24^th June 2016, however, two new important European Regulations have been adopted and will come into force on the 29^th January 2019. EU Regulation no 2016/1103 will now regulate the choice of law applicable to matrimonial regime and EU Regulation no 2016/1104 will regulate the choice of law applicable to the assets regime of registered partnerships.

From the 29^th January 2019, future married couples will be able to choose either the law of their habitual residence or the law of the nationality of one spouse to regulate the ownership of their matrimonial assets.

An important change has also been introduced. As I indicated above, under La Hague Convention, it was possible for British couples to choose a French matrimonial regime to apply to their French assets only. This possibility has now been excluded by the new EU laws.  It means that British nationals residing in the UK and who married in the UK after 29^th January 2019 will no longer be able to choose the French matrimonial “Régime de la Communauté Universelle des Biens” to apply to their French properties. English law will apply to the distribution of their French assets in the event of divorce or dissolution of a civil partnership.

However, the new EU regulations will have little impact for British owners who may be worried about the French forced heirship rules.  The EU regulation 650/2012, which came into force on 17^th August 2015, allow British owners to choose the law of England & Wales in their Will to apply to the devolution of their French property, enabling them to leave their share of the property to the surviving spouse.

Other purchase structures can also be considered to protect the surviving spouse or registered partner such as the insertion of a clause tontine in the title deed or the creation of a holding company type SCI or SARL.

It is important to seek professional advice at the time of purchase and decide on the most suitable purchase structure and wills to ensure you will be in a position to transfer the property in the way you would wish and in a tax efficient manner.

If you need advice on French estate planning, please contact Loic Raboteau via email at loicr@bandmlaw.co.uk or tel on +44 (0) 20 7356 0833.