Inheriting a 400,000€ property – tax free. Is it too good to be true?
The laws of inheritance in France are notoriously restrictive and complex.
Paying tax on inheritance will always be a controversial topic. It makes sense therefore to consider various ways to mitigate your inheritance tax liability.
Donation partage is one option which may be suitable for your situation. It is a form of ‘living will’ that enables your beneficiaries to receive value from your assets during your lifetime … whilst you continue retaining the use of those same assets.
Unlike a will which takes effect when a person dies, a donation partage enables you to transfer all or part of your property to your children, for example, during your lifetime.
And so, a Donation partage is potentially an extremely efficient way of reducing the amount of tax paid by your beneficiaries.
Let’s use the example of a 400,000€ property with two children as the beneficiaries.
The rate of tax payable between parent and each child for this property value would normally be roughly 20%, the tax-free allowance per child of 100,000€ being taken into account.
If the children inherited the property under a standard will arrangement their rough total tax liability would be around 40,000€.
However, under the donation partage whereby the parent transferred only the ownership of the property to the children – retaining a lifetime interest – the two children could effectively inherit the property tax free.
Are there any drawbacks to donation partage? Certainly it will not be suitable for everyone as their needs to be at least a twelve year period between the donation and death, and other factors need to be taken into account. It is also important to consider such aspects as, for example, were there to be a need for capital or additional income to fund an eventual nursing home.
So despite some niggles that may need to be considered depending on each individual’s personal situation, there can be significant fiscal advantages.
If you would like to discuss this further please contact us.
Pelican Consulting SARL is a bespoke French-regulated « Conseiller en Ingénierie Patrimoniale » and International Taxation consultancy company, owned by Dr Michael Annett with over 20 years’ experience in France as well as the UK.
Our expertise as wealth management consultants rests in advising on investments and savings, pensions, marital and succession law and international taxation.
+ 33 (0)4 90 72 33 52
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