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Diaporama
Diaporama

Estate Planning

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The real-life story begins with a conversation between one of LEGALCY Lawyers advisor’s clients, a Swiss citizen, and former president of the Bar Association, Bâtonnier Jean-Michel CAMUS, the firm's founding lawyer.

The client was delighted to inform him, not without a certain amount of pride, that he had just signed a pre-sale agreement for the purchase of a beautiful flat in a famous and charming little fishing village on the Côte d'Azur, for the price of 3.5 million euros.

He explained that his Swiss notary had told him that, in order for his partner of over 30 years, with whom he is neither married nor in a civil partnership, to inherit the property, he should make a will stating that he bequeaths to her the building he is in the process of buying.

Bâtonnier Jean-Michel Camus congratulated him and asked whether his Swiss notary had informed him that, given that the property was in France, even if he could choose the law applicable to his estate in his will, the applicable tax law would be French law?

And given that he is neither married nor in a civil partnership, even though his partner has lived with him for several decades, the French tax authorities will claim 60% inheritance tax when the property is transferred from his estate to that of his partner?

The client quickly did the maths: 60% of 3.5 million euros = 2.1 million euros, and replied: "But then she'll have to sell the flat to pay the rights?”

Bâtonnier Jean-Michel Camus replied that this was indeed what could happen, but that fortunately there were ways of avoiding it.

The client then entrusted the management of this situation to LEGALCY law firm, to put in place a strategy for optimising assets and inheritance, using several legal tools to ensure that the client will:
- retain management of the property for the rest of his live,
- with the possibility of selling it and collecting the price at any time,
- pass the property on to his partner after his death, without her having to pay any inheritance tax.

The tax cost of the transaction was less than €100.

Thanks to the advice of Jean-Michel CAMUS, a lawyer specialising in family law, individuals and their assets, the savings on inheritance tax that would have had to be paid amounted to around €2.1 million.

This example clearly demonstrates the importance of preparing the legal situation before making a property purchase, to avoid having to pay exorbitant inheritance tax when the time comes, and to do so in a legally and fiscally compliant manner.
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One should not think that the benefits of optimising assets and inheritance are reserved for foreign residents; they are important, and work in the same way, with the same benefits, including for French nationals and residents.

You may note the rate of inheritance tax applicable in France, including for the closest family members, i.e. the direct descendants, i.e. the children, who are, in most cases, the heirs. This applies regardless of the nationality or country of residence of the heir, if the inherited property is in France.

After an allowance of €100,000 per child, and if it has not been used up in the previous 15 years, the amount of inheritance tax is progressive; thus, in 2024, it increases in brackets from 5% to 45%, with the following thresholds:

 
Up to €8,072 5%
From €8,073 to €12,109 10%
From €12,110 to €15,932 15%
From €15,933 to €552,324 20%
From €552,325 to €902,838 30%
From €902,839 to €1,805,677 40%
More than €1,805,674 45%


To give a concrete example:

If a property valued at €650,000 belongs to only one of the parents, for example because he acquired it alone under a pre-nuptial contract, he passes it on to the couple's only child; at the time of his death, assuming that he has not made any gifts in the previous 15 years, the taxable portion will therefore be around €550,000, representing inheritance tax payable of €108,600, i.e. an average tax rate of 19.75%.

For a direct line heir, this sum may seem very high, given that the inheritance of an asset was acquired using the fruits of the owner's labour, which was itself taxed at personal income tax or capital gains tax during the lifetime of the person who acquired it, especially when it is possible, if the right decisions are taken, to reduce it to 0.

In the same way as for inheritance tax in collateral lines, which is much higher (35% and 45%), or even for a person who is not related (60%), there are perfectly legal solutions, valid for French citizens as well as foreigners, which make it possible to drastically reduce this tax, or even cancel it completely.
* * *
Many legal tools must and can be put in place to achieve this.

It is obviously important to do this as early as possible, and possibly even before the acquisition of the asset or assets that are to be transferred.

This is why it is advisable to carry out estate and inheritance optimisation operations as early and as quickly as possible.

Our firm, which specialised in family law, personal law, and inheritance law, is perfectly placed to assist, and guide you through the process through a secure and informed manner.

Our day-to-day experience of litigation in family and inheritance law means that we are particularly well placed to understand the limits and potential dangers of using certain legal techniques that are not properly controlled.

This is an additional advantage that our firm puts at the disposal of its clients.

Each family situation has its own particularities, and requires an in-depth, personalised study.

Our team will be delighted to assist you with these specific legal issues.

Do not hesitate to contact us !
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