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The Connexion - Legal Notes - Life Interests And Gifts To Grandchildren


We have lived in France permanently for almost 13 years. We have a French usufruit Will made out about 5/6 years ago but even though we had a translator present we still do not quite understand our situation. My husband wants my grandchildren to be inheritors of any part of his share. Can my husband do this? He has no children and does not want his share to go to his side of the family. He would like to know what happens about lifetime gifts to my grandchildren. May I also ask ' if my husband dies before me ' do all proceeds go to me and then on to my relatives in future or would his Will dictate where his part goes? I will leave my share to my 2 sons. What share would be given to the grandchildren if I were to die first? What inheritance tax would the grandchildren have to pay?


It sounds as though you have existing French Wills drafted by a notaire under which you each leave a life interest (usufruit) to the surviving spouse.

Under your Will the underlying legal ownership (nue propriété) will pass to your children (to respect your children’s reserved right to inherit under French law).

As you have said that your husband would like to leave his share of the property to your grandchildren (who are not his blood line relations) we assume that his Will leaves the underlying legal ownership to them, subject to your life interest…(?)

As your husband has no children, there are no French law restrictions on his estate, he can therefore leave his estate to anyone he wishes. Assuming you did not insert a tontine clause in your purchase deed and have not signed a French marriage contract, if your husband leaves a valid Will then his estate passes under the terms of that Will. If your husband was to die first, the life interest to you as surviving spouse is exempt from inheritance tax, although a value will be attributed to the life interest depending on your age at the time of his death, e.g. if you are aged 71 to 80 then that value is 30% and the bare ownership inherited by your grandchildren is 70%.

As your grandchildren are not blood relatives of your husband they will be liable to pay inheritance tax of 60% on the value of assets received by them exceeding 1,594 Euros.

As you are resident in France, the of the whole of your worldwide estate will be assessed for French inheritance tax. On your subsequent death, your life interest ends and the grandchildren would become sole owners of your husband’s estate. On your death, we assume your Will is drafted to leave your estate to your sons but with a life interest to your husband. Any lifetime gift to non-blood relations is also taxed at 60% (as with a gift on death by your husband to your grandchildren) once the tax free allowance of 1,594 Euros has been used up. A notaire must handle any lifetime gifts and will collect the tax due at the time of signature of the deed of gift. The gift falls outside of the eventual estate for inheritance tax only if the donor survives the gift by 15 full years.

If you were to make a lifetime gift, of any assets, directly to your grandchildren they would inherit the first 31,865 Euros tax free and thereafter inheritance tax applies on a sliding scale from 5% to 45%. If, at the time of the gift, you are younger than 80 and the grandchild receiving the gift is 18 or older he or she could benefit from a second 31,865 Euros tax free allowance for a gift of money only, (i.e. not property or any other assets). If you were to die first, your husband would inherit a life interest in your estate under your Will. Your sons would inherit the underlying legal ownership. The life interest is valued as outlined above. Your sons each benefit from a tax free allowance of 100,000 Euros and thereafter inheritance tax applies on a sliding scale from 5% to 45%. On your husband's subsequent death your life interest ends and your sons become sole owners of your part of the estate. On the basis of what you have told us your husband's Will is probably worded to leave his estate to your grandchildren if you predecease him.

Given that your Wills were drafted more than five years ago and in light of the tax liability for your grandchildren which you had perhaps not fully understood, we recommend you consider re-examining your testamentary wishes and make new Wills.

Finally, electing the law of your nationality to govern your estate in place of French law – would not change the tax position outlined above.

This article first appeared in The Connexion - Legal Notes - May 2017.

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