The following case study shows the importance for non-married couples to take legal & tax advice when purchasing properties in France.
In contrast to married couples, non-married couples ('concubins') have low legal protection and are subject to very high inheritance tax (at a rate of 60%) in France.
Question:
My partner and I live in a house in France, owned by my partner. My partner would like to make a Will which allows him to leave the house upon his death to his brother and his brother’s children, but should I still be living (I am 10yrs younger than my partner), to also allow me to continue to live in the house until my death. The house then passing to the brother and his children on my death. Please advise if the wishes of this Will would this be possible.
For your information: Neither my partner or myself have children. We are not married. We do not want to get married. I do not wish to have a legal right to the property, as I wish the property to go to my partner’s family and do not want it to become part of my estate. My partner is 61 and I am 51 years old.
Our answer:
As you and your partner are not married, you have no legal rights to stay in your partner’s property until your death unless you both take legal measures now to protect your interests.
Because your partner has no children, he is free to bequeath his property to whoever he wishes to. In France, only children are privileged heirs and must receive a minimum proportion of the estate.
To resolve this, your partner would need to make a will bequeathing you the “usufruit” (the right to use and enjoy the property until your death) of the property and the “nue-propriété” (bare ownership) to his brother and nephews. Upon your death, the “usufruit” will then be transferred “in fine” to your partner’s heirs.
Perhaps, the preferred and safer solution for you would be if your partner now offered you (via a lifetime gift) the “usufruit” of the property without waiting for the will to be drawn up, partly because a will is normally confidential and could be amended by your partner at any time during his life.
In view of above, I must advise you that you will have to pay inheritance or gift taxes at a rate of 60% of the 'usufruit' ‘s value.
The value of the 'usufruit' will depend on your age at the time you receive it. It will be calculated in accordance with the following scale:
10% of the property value, if the usufructuary (the person receiving the 'usufruit') is over 91 years old
20% of the property value, if the usufructuary is between 81 and 90 years old
30% of the property value, if the usufructuary is between 71 and 80 years old
40% of the property value, if the usufructuary is between 61 and 70 years old
50% of the property value, if the usufructuary is between 51 and 61 years old
For example, if the property current value is €200,000.00 and you receive today the “usufruit”, the value of the “usufruit” will amount to €100,000.00 (50% of the property value). You will have to pay inheritance or gift taxes of €60,000.00 (60%).
As you and your partner do not wish to get married, a solution to minimise your tax liability would be to enter into a PACS (“Pacte Civile de Solidarité” or French Civil Partnership), with the aim to organise the division and possession of your respective assets. The PACS can be possible only if you are currently residing in France and there are no inheritance taxes between PACS partners on death. PACS partners benefit from a tax allowance of €80,724.00 on life time gifts and are taxed on the balance increasing progressively from 5 per cent to 45 per cent.
This article was written by Loic Raboteau, French Legal Advisor and director of French Legal Consulting.
Francophile legal Consulting can assist you with international property matters. For more information on this topic, please do not hesitate to contact Loic Raboteau, managing director by completing the form below.
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