By Stephen Langton, Forth Capital
From the 17th August 2015, an EU national living in France will have the right to choose the law of their nationality to determine the disposal of their estate on death. In other words the estate need no longer be subject to French Succession Law and its inherent forced heirship.
These changes have prompted suggestions that one should immediately rush out and change ones will to ensure that the estate passes to beneficiaries in accordance with ones wishes rather than those of the state.
Rarely mentioned however, is that this new regulation (EU regulation 650/2012) concerns the rights of succession but not the right of taxation. The right of taxation will still remain with the state in which the individual is domiciled. The choice of applicable law is not a choice of applicable taxation.
Countries, like the UK which use Common Law principles define domicile as being where one is from whereas in France, domicile is determined broadly by where one lives. It is therefore quite simple to be considered to be domiciled under both countries' rules. Fortunately double tax treaties exist to allow a determination to be reached.
Should one be deemed to be domicile in France and a choice is made to leave property to say nieces, nephews, stepchildren and an unmarried partner, French succession rates, at rates of 55% and 60% would be payable by the inheritors.
Potential complications may also arise if married, depending on the kind of marriage arrangement in place.
French Succession Law already allows many opportunities for effective succession planning. As an example, liquid assets such as cash, equities and bonds can already be structured in such a way that a choice of beneficiaries can be made and the liability to succession tax reduced.
Before rushing to seek solutions under your own countries law, it might still be prudent to see what can be achieved by careful planning using French Law.
I will be reviewing this subject at our next seminar on the 5th November. If you have any questions that you would like answered please come along and have them answered in person.
Author's bio
Stephen Langton has been working in financial services since 1988 working for both small investment companies as well as major institutions such as Royal Bank of Scotland and SEB. Having lived for seven years in South East Asia and seven years in France, Stephen has a good appreciation of the financial issues faced by expatriates.
For much of the last ten years Stephen has provided advice to retired expatriates living in France. A new member of the Forth Capital team, Stephen is delighted to be back living close to the mountains, where he will have ample opportunity to ski!
