Is it necessary to have a French Will?
The purpose of a will is to communicate your wishes as to what will happen to your personal possessions after you die. It is a written legal document setting out the people you would like to inherit specified parts of your estate.
The laws in relation to wills and inheritance in France are very different to those in England. If you have assets in both France and England, these differences will need to be carefully considered when you are preparing a will whether in England or in France.
French law does recognise a will that has been prepared in another country as long as it is valid in that country. Therefore your French assets could be dealt with together with your English assets under a carefully drafted English will. However, it is recommended to make a separate French will in certain circumstances.
It is recommended that you make a French will if you are living permanently in France and could be considered to be a “resident” at the time of death or if you own a house, a flat or land in France. This is because French law governs the inheritance of immovable property situated in France (i.e. houses, flats and land) regardless of the deceased’s nationality or where they were living at the time of death. Moveable property (ie bank accounts, furniture, stocks and shares etc) is governed by the law of the deceased’s domicile (permanent country of residence) at the date of their death.
Whether or not it would be beneficial for you to have a French will in addition to your English will depends on your individual circumstances and you should always seek professional advice from a properly qualified lawyer experienced in dealing with international wealth planning.
Who will inherit my French Assets?
Under English law anyone making a will has “testamentary freedom” which means that you can choose whoever you want to inherit your estate and in whatever proportions as long as this is set out in a valid will.
France however has a system of forced heirship. This means that you may not freely determine who gets what in your estate as French law makes it obligatory for particular family members to inherit certain proportions of your estate regardless of what it says in your will. This will always apply to your French immoveable property (ie land, house or flat) but depending on your circumstances may not apply to your other assets in France. The actual beneficiaries of your estate will therefore depend on your specific circumstances.
There may be some ways to avoid the application of the forced heriship provisions and you should seek expert advice regarding your options in relation to this. The way in which your French estate will be distributed may also have a bearing on how you would like your assets in England or any other country to be divided on your death.
You should discuss the extent of your worldwide assets with a lawyer who is experienced in dealing with both French and English estates so that your entire estate can be considered as a whole when planning the succession of your assets.
Will there be any inheritance tax to pay?
This will depend on a number of factors and your personal circumstances.
As a general rule, if you are “domiciled” in the UK at the date of your death your worldwide estate (i.e not just the assets in the UK) will be liable to UK inheritance tax (IHT).
IHT is charged in the UK at 40%, however, everyone is entitled to a tax free amount (also known as the “nil rate band”) which is currently £325,000 (or up to £650,000 for married couples and registered civil partners if the “transferrable nil rate band” applies). This means that the combined value of your worldwide estate is calculated and only the amount that is over the tax free amount will be taxed at 40%. The tax is paid from the assets in the estate before they are distributed to the beneficiaries.
The question of whether or not a person is domiciled in a particular country for inheritance tax purposes is an extremely complex one. You should always obtain expert legal advice to ensure you understand how this will be dealt with on your death so that you can obtain the intended results for your beneficiaries.
Your “worldwide estate” includes the value of your French and English assets as well as assets that you may have in any other country. It may also include any gifts that you have made in the last 7 years.
There may be some exemptions or reliefs available in respect of the amount of IHT payable depending on who your beneficiaries are and the nature of your assets. Your French inheritance lawyer will be able to advise you about this.
If you are not domiciled in the UK, UK inheritance tax will only apply to your assets that are located in the UK. If you are considered to be domiciled in France, your worldwide assets will be liable to French succession tax. In France, succession tax is paid by each individual beneficiary and not by the estate as in the UK. The French tax rates and allowances vary according to who the beneficiary is. The rates range from 5% to 60%.
There are circumstances in which both IHT and French succession tax will be payable in respect of the same asset. However, the UK and France are part of a Double Taxation Treaty, which prevents people having to pay two lots of tax in respect of the same assets. In this situation your beneficiaries may be entitled to a credit for the tax paid in one country against the tax due in another.
Succession tax planning is extremely important if you want to ensure your beneficiaries get to keep as much of their inheritance as possible. Professional advice and careful planning can often make a significant difference to the amount of tax payable.You should always ensure that you get proper specialist advice in relation to your individual circumstances. Your lawyer can discuss inheritance tax planning with you as part of the preparation of your will.