Guide us through French inheritance laws
Q. My husband and I are looking to buy in France. My husband has been married before and has two adult children. I have not been previously married and have no children. Would it be better to buy the property in my name only? Also, if we did this, would his children still automatically inherit a share of the property should he die first? The children are to be left the property after our deaths, but we want to protect my interests should he pass on first.
KATIE GREENFORD, BIRMINGHAM
A. France is one of the many countries where certain family members have reserved rights to inherit. These rights are set out in law and are known as forced heirship rules. If a will conflicts with the legal rights of the protected heirs, their legal rights override it. The rights attach only to a share of the estate, known as the reserved portion. The rest of the estate is known as the disposable portion, and this portion can be dealt with according to the deceased's will.
In your situation, your husband's children have reserved rights. They will be entitled to a third each of the value of their father's estate that is affected by the rules. If a child predeceases, leaving children of his or her own, those children will step into the shoes of their deceased parent.
A surviving spouse is entitled to a quarter of the estate as a reserved heir. There are different ways in which property may be left by will to a surviving spouse. To gain as much flexibility as possible in relation to a spouse's inheritance of French real estate, it is common to ask the surviving spouse to elect one of the following:
- The disposable portion in the property
- One quarter absolutely and life interest in the remainder
- A life interest only in the whole
Due to the forced heirship rules, having children from a previous relationship often makes it harder to decide how to buy a property in France.
There are two options available to you. One is the matrimonial property regime. Under article 6 of the Hague Convention it is possible for an English couple to adopt the French regime of "community property with attribution of the life interest to the surviving spouse".
The effect of this is that if your husband passes away first, you will inherit from the community his half of the property and a life interest in the remaining half. The life interest, known in French as usufruit confers to the person (called the usufruitier) the right to use the property and the right to the income from the property. His children will hold the remainder of half of the property with this right and this is called la nue propriété. This essentially means that if you wanted to sell the property, you would need the agreement of his children.
When the usufruitier dies, the life interest joins the remainder and together this forms the absolute or outright ownership, which means that his children will each own half of half of the property, together with your heirs in relation to the other half. If you do not have any reserved heirs, you could make a Will gifting your interest in the property to the children. The main drawback to this would be liability for French inheritance tax which would amount to 60 per cent over a small nil rate threshold of EU1,564 (£1,348).
The second option is to buy the property in your own name. In order to avoid payment of inheritance tax of 60 per cent, your husband could purchase the property in his own name and make a will to give you the life interest on his death. During your lifetime you will have the right to use the property and the right to the income as mentioned above. On your death, the life interest will join the remainder and together will form the absolute or outright ownership, which means that your husband's children will own the property equally (half each).
The problem with this is that your name is not put on the title deeds even if you financially contribute 50 per cent of the purchase price of the property.
In itself, this would not be fair to you. However, in the title deed it could be indicated that you lent your husband 50 per cent of the financing. If you get divorced or you want to sell the property if your husband passed away, his children would inherit the property, subject to repayment to you of 50 per cent of the value of the property. You would be able to enjoy a life interest and claim your 50 per cent repayment against his children if you want to sell and his children do not want to. It looks to me like this solution could be the best for everyone, with the additional advantage for his children of not being taxed at 60 per cent.