Reduce French Inheritance Tax
Best French Mortgage explain how to reduce French inheritance tax liability and immediately free up capital by using a French Equity Release Mortgage.
Reduce French Inheritance Tax
To reduce tax you need to be aware of the inheritance tax rules for all assets held in France.
These are set out in the Code Civil, often referred to as the Code Napoleon, which dictates who will inherit from you and what share each inheritor will receive.
The Code civil will apply to all property you own in France, whether you are French tax domiciled or not.
If you are tax domiciled outside France, none of your assets held outside France will be subject to the Code civil.
French Equity Release Mortgage
The simplest, cheapest and most flexible way to reduce French inheritance tax is to use a French equity release mortgage.
Unlike the standard alternatives offered by French notaires, you can use a French equity release mortgage to reduce French tax at any time after your French property has been purchased.
A French equity release mortgage to reduces tax by reducing your net assets held in France (i.e. property asset less outstanding mortgage liability) to below the French inheritance tax threshold.
If you are domiciled outside France, you can immediately move the proceeds of your equity release mortgage out of France and thus outside the scope of the Code civil whilst still enjoying all the benefit of your French property.
However, if you are French tax domiciled, your worldwide assets will be subject to French inheritance laws and this strategy will not be effective for you.
This financial strategy is completely legal, entails no legal fees to implement and in today’s financial markets has the added benefit of a potential investment profit because you can choose how to reinvest the equity you release.
Assuming your financial profile meets the French banks lending requirements, we can help you reduce your estate’s French inheritance tax liability in less than 14 weeks.
The solution is very cost effective and the costs are made up of the following elements:
- A Bank administration and property valuation fee which is likely to be of the order of €1,000 to €1,500. This is only payable if you accept the French equity release mortgage offer and draw down the funds to reduce your French inheritance tax liability.
- A notarial charge of around €2,000 to cover the legal costs of registering the lending bank’s first charge over the property with the Banque de France. This is only payable if you accept the French equity release mortgage offer and draw down the funds to reduce your French inheritance tax liability.
- There are no other fees or charges and there are no French mortgage broking charges if you use Best French Mortgage as your French mortgage broker.
Do I Qualify
The use of an equity release mortgage to reduce French inheritance tax is not available to everyone, because the French banks have very strict lending criteria which a borrower needs to meet to qualify.
It is also not permissible to use the equity released to directly enhance your income, though it is acceptable to use the released equity for some investment purposes.
Because of the restrictions, it is not possible to fully cover all the options here. If you are interested in exploring your options in detail, please contact us and we will give you a free personalised assessment of what might be possible for you.
If you ask your Notaire for advice as to how you can minimise the impact of the Code civil on your estate you are likely to be offered three alternatives derived from the French Droit de Biens:
- The ‘Communauté universelle’ marital regime to avoid Reserve Legale and avoid inheritance tax between spouses
- Property purchase en tontine to avoid the Reserve Legale
- An SCI to avoid the Reserve Legale
There are 4 problems with these alternatives:
- They can be very expensive to implement
- They create an additional tax burden
- They don’t totally solve the problem
- They are best implemented before your French property has been purchased otherwise significant taxes have to be paid in the form of notaires fees.