Your succession planning could be impacted by new rules recently introduced in France, but with expert knowledge of all ‘legal tools’ and smart Assurance Vie solutions, DTB Wealth Management can help you avoid the pitfalls.
A new law in France “La Loi n° 2021-1109 du 24 août 2021” could severely impact expats’ succession and pension outcomes if it is not considered during the planning process.
The law overrides the succession rules that had been fixed across the EU in August 2015 by the “The European Succession Regulation, 4 July 2012, no. 650/2012”, also known as “Brussels IV”.
The existing rules allowed citizens to choose which law they wanted to apply their EU-located assets to. For example, a French national could decide that their assets in Germany are treated with French rather than German law.
However, France’s new rules, introduced in November 2021, take that choice away.
“France’s new rules are a big change from a legal perspective (in terms of tax nothing has changed) and it is very important that people are aware of it,” said expat investment expert Daniel Butcher, Founder of DTB Wealth Management. “This new law means that France’s forced heirship kicks in, no matter what your will stipulates and even if you have chosen to disinherit a child.”
While people may be concerned by the affect these changes could have on inheritance planning, Butcher says that there are ways around it.
“France has a great number of ‘legal tools’ which can override forced heirship, but each client’s situation is unique and must be dealt with on a case-by-case basis,” he said.
Strategies to alleviate the forced heirship can include changing the “quotité disponible” – where each partner can leave up to half of their wealth to whomever they desire – or the marital regime.
“You can change to a ‘régime de la communauté universelle’ so that the remaining spouse inherits the entire wealth – although this does require a signature from any children,” said Daniel.
“You can also use Articles 763 and 764, which give the surviving spouse life entitlement to the main or temporary residence, or make a ‘donation au dernier vivant’. There is also the tontine clause, which is old, but still helpful, as it ensures that after a first death the property reverts entirely to the surviving partner.”
Daniel believes that taking out an Assurance Vie policy is the best solution. “Once your capital is invested in Assurance Vie it is not included in the existing assets and therefore not counted in the estate,” said Daniel.
It is also the most effective way to leave assets to non-blood-line beneficiaries due to its €152,000 allowance. “One can significantly reduce the tax burden for the step-children, for example,” he added.
“What works depends on the client’s situation and their desired results,” said Daniel. “At DTB Wealth Management we help you find the right combination of legal and tax rules to keep your inheritance requirements on target and minimise the impact of this new law.”