French property buyers often consider their French estate planning after the purchase, which can sometimes in the long run turn out to be a costly oversight for them or their loved ones. It is important to seek 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, in a tax efficient manner.
The purchase structures in France
The “indivision” (equivalent in the UK to the tenancy in common) is the standard French legal structure in which several individuals have the same rights on the same property. When two or more individuals jointly acquire a French property directly in their individual names, the French Notaire will usually structure their legal ownership of the French property in the “indivision” method, either equally or in the proportions to which they contributed to the purchase price. Its implementation requires neither formalities or costs (excluding costs arising from the possible drafting of a management agreement called “convention d’indivision”).
The “tontine”: If a couple purchase jointly, it is possible to add into the deed of sale the so-called “tontine clause” (or “clause d’accroissement”). The effect of such clause is that on the death of the first spouse, the surviving spouse automatically becomes the absolute owner of the property. The surviving spouse is deemed to have been the owner of the whole of the property from the date on which it was purchased and has complete freedom to dispose of the property as he/she wishes.
The “communauté universelle” matrimonial regime: In French Inheritance Law, the change of matrimonial regime is another way for passing a French property to the surviving spouse.
The 1978 Hague Convention on matrimonial property regimes allows couples to change the law applicable to their matrimonial regime. Under Article 6 of the Convention, 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.
If your main concern is to ensure that the surviving spouse inherits the deceased spouse’s share in the French property absolutely, you may adopt the French matrimonial regime of “Régime de la Communauté Universelle des Biens” in respect of the French property and any other immovable property that you may acquire in the future in France. This will have the effect of placing the property in joint ownership (“Communauté”).
This matrimonial regime will however no longer be possible for future British couples after the 29th January 2019 following EU Regulation no 2016/1103, which was adopted on 24th June 2016.
The SCI (“Société Civile Immobilière") is a civil company as defined by the French Civil Code. It means that it is a non-trading entity. This company is frequently used to own properties in France for the purposes of management and preservation of assets. The company can hold one or several properties, either available to its associates or rented to third parties. In an SCI, the associates do not own the property but the company owns it. The co-purchasers are holding shares in proportion to their participation in the company.
Other structures: we can also advise you on other structures such as a foreign company, French SARL or EURL, trusts, Monegasque SCI.
By application of the European regulation no 650/2012 which was adopted on 4th July 2012 and came into force in France on 17th August 2015, 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 place of last residence may be uncertain since more and more people move beyond their national borders. Also, to avoid the uncertainty of the law applicable to the succession, the future deceased may elect, by a will that his/her estate should obey his/her national law rather than the law of 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 local inheritance rules.
In case of a British national owning a property in France, the later can make a will in England and choose English law to govern the succession of his estate located in France.
Our legal team will advise you on the purchase structures you may choose and whether you should make a will where you live or in France.
To find out how we can help with your French legal matters, call us on 0044 (0) 20 3642 0742 or contact us online.