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Inheritance in France: Leaving a property to charity can bypass tax

Some guidelines for people who want to bequeath their estate to an association or foundation.

Question

I am an American living in France with no legal heirs. I do not want to burden other relatives or friends with onerous French estate taxes so I am thinking of leaving my home to an association or foundation for the public good. Can you explain the process?

Answer

It is true that when leaving any estate subject to French inheritance tax to relatives other than a surviving spouse or direct descendant, the tax payable will almost certainly be substantially higher.

As an example, if siblings were to inherit, then each beneficiary would get less than €16,000 tax-free. The next €24,430 is taxed at 35%, the remainder at 45%.

If you are concerned about burdening relatives with this tax, it may nevertheless be worth speaking to them first: they could, after all, pay it with the proceeds of sale of your French house and keep the balance.

If the decision is still to name a charity, then provided it qualifies under the 1901 law on charities, it should not have to pay inheritance tax.

Non-French charities might find the procedures burdensome, so it may be preferable to identify a French equivalent.

While you could name a testamentary executor, this is not obligatory.

If you just name a charity in the will without an executor, the notaire will deal with it directly.

If an executor is named, that executor may deal with the house sale. If not, it would be the charitable organisation itself.

As for wording of your will, seek specialist professional advice.

Fees for the administration of the estate would become an expense borne by the beneficiary, and it is likely these could be drawn in large part from the estate.

You may wish to inquire with your bank or financial adviser whether a separate fund can be set aside to cover this.

You would need to take specialist financial advice in relation to any assets or investments that may be held outside France.

This article was first published in response to a reader query in The Connexion - January 2022.

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