Before 17 August 2015, the usual advice to people owning property in both the UK and France was that it was preferable to have two separate Wills governing the assets in each country.
French inheritance law with its rules of forced heirship for beneficiaries such as children applied to all French land and buildings, and for French residents, French inheritance law applied to their movable assets such as bank accounts too. The rigidity of these succession laws often posed problems for UK nationals who, for example, could not pass their assets entirely to the surviving spouse as they would in the UK, due to the entrenched rights of children.
In this article, French law expert and specialist in cross-border Will and Trust arrangements, Sarah Walker, outlines the issues that need to be considered if you own property or indeed, are thinking about buying property in France and have not addressed this in your Will.
- How has the law changed in relation to succession?
- One Will or two, what’s best for me?
- What are the risks of ignoring French assets?
- Are there any exceptions to how choice of law can be applied?
- Has inheritance tax been affected by Brussels IV?
- Potential tax and trust issues to be aware of
With the arrival of the EU Succession Regulation known as Brussels IV in 2015, it became possible for British nationals living in either the UK or France to choose to apply English law, and the testamentary freedom that comes with it, to their French assets.
This has appealed to many people, not least because of the simplicity of applying one set of laws to your estate as a whole and having one universal Will covering all of your assets.
However, it is really important to take advice from a lawyer who is conversant with both English and French inheritance law and tax to see whether a choice of English law will be the best option in your specific circumstances, and also whether you should have one Will or two.
Whether or not you would be better off with a universal Will or separate Wills will depend on:
- the location, value and nature of your assets
- your personal circumstances and wishes regarding the distribution of your estate.
A cross border Wills specialist will be able to help you meet as many of your aims as possible and give you clarity about the inheritance tax position in both countries. It is particularly important to take this type of advice if you are resident in France or have plans to become resident in the future.
It is worth noting in this context that France and the UK have different views of residence and domicile and French tax resident status can apply to you more commonly than you might imagine.
If you instruct your UK solicitor to prepare your English Will with the intention that you will see a separate lawyer to deal with France at a later date, the risk is
- you may never get around to doing so;
- you may run into problems if the two Wills are not compatible.
In some scenarios it can be the case that, through having a separate French Will, you may avoid the need for a Grant of Probate on your death if one is not needed for other assets in the UK.
It is fairly common for this to be the case with a married couple who own all of their assets jointly, for example. This can mean that your French estate can be dealt with more quickly than would otherwise be the case.
There are methods of owning French property which mean that a property will devolve outside the terms of any Will and regardless of any choice of law. These are:
- a matrimonial property regime;
- a corporate structure, or
- some forms of joint ownership such as a tontine arrangement.
Most English solicitors will not have the expertise to advise on this, and yet clearly it is very important that the full picture in this respect is known before any Will can be prepared that incorporates the French property concerned.
Whilst Brussels IV allows for a choice of succession law, it has not changed the position at all with regards to inheritance tax. If you are domiciled in the UK or own UK assets, then consideration must be given to the inheritance tax implications in both countries if you also have property in France.
An English solicitor with knowledge of both French and English inheritance and tax law can be invaluable in helping you decide how best to structure your Will(s) in this respect.
For example, whilst you may now be able to choose to leave your French property to people unrelated to you such as stepchildren or an unmarried partner, these individuals will pay French inheritance tax at 60% on any share passing to them.
Some concepts that are possible under French law and which a French Notaire may suggest, such as including an “usufruit” in your Will can have negative inheritance tax consequences in the UK.
It is also important to bear in mind the potential issues that can arise when an English Will comes to be interpreted and administered in France following your death. In France there are ordinarily no Executors, instead the assets vest in the beneficiaries directly. Problems can sometimes arise if the French authorities seek to tax the assets twice on a perceived transfer of ownership to the Executors and then on to the beneficiaries.
If your English Will contains trusts then it is important to be aware of the French rules regarding tax treatment of trusts and the reporting obligations, which can be punitive. An English Will prepared without due consideration of the French position can cause complications in France when a French lawyer comes to transfer the property to the beneficiaries after your death.
Often it will be advisable to prepare a separate French Will or to draft the English Will in a particular way to avoid problems of this nature, or an unnecessary tax bill.
Finally, it is important that any steps taken or documents drafted for assets in either country dovetail together to avoid any conflict or accidental revocation. Giving proper consideration to these issues at the time you are preparing your Will can give you peace of mind and be of huge benefit to your beneficiaries through saving them time and money further down the line.
What to do next
Chat to the Author, Sarah Walker
Executive Partner, Wills, Trusts, Tax and Probate, Bishop's Stortford officeMeet Sarah
Legal 500 UK 2024
'Sarah Walker is exceptional in helping us with wills in France and the UK. She listens brilliantly, responds appropriately, and gives clear and simple principles to work to'
You have a wonderful way about you which, with your professional competence and efficiency puts you in a different league. Tees is fortunate indeed to have you.