As a US expat living in France, you’ll need to get used to form filling and paperwork. You’ll need to declare assets and income in France, wherever the source is, plus pay tax, and you’ll also have to continue reporting your finances in the US. We asked the experts at Sanderling Expat Advisers, who specialise in helping Americans in France to deal with their finance and taxation requirements, to explain more about reporting your foreign income for American expats in France.

Income from the U.S.

If you’re an American living in France on a permanent or long-term basis, and therefore tax resident, it’s highly likely that you’re receiving income from a U.S. source. This could be in several forms including social security payments, fees from U.S. clients, capital gains or dividends from your U.S. brokerage accounts, interest from your U.S. bank or withdrawals from your U.S. IRA or 401k. There are lots of income sources that are classified as “foreign income”, or in French, “revenus de source étrangère.”

Good planning makes a big difference

As a tax resident of France you do, absolutely, need to report every centime of this income, in France. But you likely won’t have to pay tax on all of it. In fact, Americans in France get some pretty amazing breaks on their U.S.-sourced income. And good planning in advance makes a big difference – working with independent advisors like us to help you bring together comprehensive financial planning and assistance will help you solve problems and minimise tax liabilities before they arise.

Some income, like retirement plan withdrawals, social security and even some capital gains doesn’t get taxed in France at all. You must report them to French authorities, but you’ll receive a full credit for the taxes that would have been owed – had it not been for the US. -France tax treaty.

Other forms of U.S. income, such as dividends, receive a partial credit for the U.S. tax deducted, considerably lowering the amount of taxes/social charges you will pay in France. But your U.S.-based income does figure into the calculation of your effective tax rate in France (taux effectif).

Start getting your foreign-sourced income worked out with the French tax authorities by filling out the Form 2047 with help from the “Notice,” or instruction guide, that goes with it. This is the official form for reporting income that comes from outside of France. And for expats, it is generally the first thing to figure out as you begin your French taxes.

Reporting your foreign income for American Expats in France

There’s no getting away from the fact that there’s a lot of form filling to do.

Start by filling in all the fields that apply on the 2047. Then move to the 2042 supplements that make sense in your situation. You will see these lined up as options in your online impots.gouv account (or in the PDF forms dropdown box if you are a first-time filer). There are supplementary forms allow you to provide more details, specify credits or deductions you should be getting (2042 RICI),), or break down your micro-entrepreneur, agricultural or other self-employment income (2042 C Pro), etc…

When you’ve sorted out which of the supplements apply to you, fill in your foreign-sourced income information again. That’s correct, not a typo, you do need to do it again. You should view your 2042 supplements as summaries of each type of income you receive, with the U.S. and French sourced stuff added together.

Form 2042 enables you to list all the types of income and the deductions/credits together in a single, summary form. It offers appropriate boxes for the results of all those supplementary form efforts.

These forms address both income taxes and social charges (referred to with the acronyms CSG, CRDS, and CASA). If you have U.S. income that is subject to social charges, you will use line 9 of Form 2047 and then line 8 on the 2042C.

Also you should use Form 3916 to report every foreign-held account you had during the year being reported on. That includes investment accounts, bank accounts, money transfer accounts (i.e. Paypal and Wise) and even your credit card accounts.

All forms are available through your personal impots.gouv account. But if this is your first year of filing, you will be in paper format.

If you’d like guidance and help with any aspect of finance and tax planning as Americans in France, feel free to get in touch with Sanderling Expat Advisors at: sanderlingexpat.com

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If you’re planning to buy a home in France, you will no doubt have considered affordability, income and many other financial issues as part of your decision-making process. Whether it will be your main residence or a second home, there’s always plenty to consider in terms of running costs, renovations and affordability. What you may not have thought about in as much depth however, are long-term investment options to ensure that any income and savings you have are working as hard as possible for you. Planning tax efficient savings and investments for expats  in France is an essential part of your move.

You may be unsure how to make certain that you are saving your money in the most tax-efficient form possible. What worked in your home country may not make the most sense in France, and you may well discover that there are investment options that you either weren’t aware of or don’t feel as though you fully understand due to difference in tax laws and the language barrier. Perhaps your main concern, having made the move to France or invested in a French property, is to ensure that your children or other beneficiaries will not be left with an excessive tax burden or administrative tangles when they inherit from you.

ABC Europe

Alexander Bates Campbell Europe Limited is a company of Independent Financial Advisers specialising in wealth preservation and management, tax, financial and succession planning for private clients and their families, throughout Europe. The company is a member of the Federation of European Independent Financial Advisers and company director, Richard Alexander, advises clients across Europe and the UK.

French expertise

Independent Financial Adviser, Jennie Poate, moved to France in 2008 with her family. Now a fluent French speaker, she offers specialist financial advice to ABC’s English-speaking clients who live, or have financial interests, in France. Jennie originally trained as a certified financial adviser in the UK, where she held various management positions with large banking institutions for many years. She has retrained since moving to France and is currently working to finish her UK chartered diploma.

Jennie says: “Living and working in France means I have a unique perspective on what France is really like as a home and means I’m well-placed to be able to advise clients. My areas of expertise are cross border inheritance planning, tax and investment advice.”

Financial reviews

Richard says, “moving to another country can be a daunting prospect. Often, we find that reviewing finances can be way down the list of priorities for our clients. It certainly comes below booking the removal van and making sure visa applications are submitted for most people. Reviewing your investments and what you want them to achieve for you can be vitally important however. Taking advice now can help you avoid making tax errors that could lead to nasty surprises later.”

ABC Europe work with clients to ensure that they have everything detailed, right down to values in various bank accounts and any pension ‘pots’ that may have been collected over the years. Advisers can then explain the different taxes you might come across in your new country and give estimates as to how much they might be. Recommendations may follow to move, change or close investments and pensions so that they fit into your new country.

“Sometimes, things like ISAs are a round peg in a square hole outside of the UK,” Richard adds. “They are almost always taxable overseas. We also consider pension planning as an important aspect of moving, regardless of whether you are retiring early or planning to work. In France, getting that right and making sure any state pension contributions are up to date, and will continue to remain so in the future, will certainly help you breathe easier in the future.

Wills and inheritance

Laws around inheritance and taxation of inherited wealth differ in France and the UK, this is an area that ABC Europe specialise in advising clients on. “Understanding the importance of different inheritance rules from country to country and making a will with this in mind will mean you can have peace of mind in the future too,” Richard says. “This gives you more control over your assets. Certainly, there are many planning tools that will ease the mind and having the right professional to guide you is really important. At ABC Europe, we are by your side every step of the way.”

French investment options

As you would expect there are many ways to save your money and invest your wealth in France. Some, like the standard savings account, will be very familiar to most people, whereas the Assurance Vie, for instance, may not be something you’ve come across. It’s an investment, but with additional tax benefits that are well worth exploring. You can have it in joint or sole names and it’s  great for keeping control over funds during your lifetime before passing the remaining funds to loved ones.

Working with UK-Based financial advisers

If you already work with a financial adviser that you trust, you may not want to lose touch with them when you move overseas. In some circumstances, they may be able to continue to advise you when you visit the UK in future but, if they aren’t in a position to advise you on European laws and financial regulations, this is where ABC Europe can step in. By liaising directly with your  UK-based financial advisers we can ensure we understand the history which in turn enables a smooth transition. That way you can move to France and still be confident of getting accurate advice from a trusted adviser who understands the past advice and helps to adapt to your new life.

Find out more

ABC Europe will work with you at a pace you are comfortable with and they ensure that all fees and charges are transparent so that you can be sure of the service you are paying for. “Most importantly,” Jennie adds, “we want to be by your side as you commence and continue your financial journey so that we can help you plan and adjust as you settle into your new life in France. For us, maintaining regular contact and building new relationships for the longer term is as important for us as it is for you.”

Contact Jennie Poate at  jennie@abc-eu.com to find out more and arrange a consultation.

This communication is for informational purposes only based on our understanding of current legislation and practices which is subject to change and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.

ABC-EU are members of Nexus Global (IFA Network). Nexus Global EU is a division of Blacktower Financial Management (Cyprus) Limited (BFMCL) and Blacktower Insurance Agents & Advisors Ltd (BIAAL). ABC-EU is an Appointed Representative of BFMCL which is licensed and regulated by the Cyprus Securities & Exchange Commission (CySEC) – Licence No. 386/20. ABC-EU is an Appointed Representative of BIAAL which is licensed and regulated by the Insurance Companies Control Service (ICCS) – Licence No. 5101

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Estate planning, succession law, inheritance tax – these could well be terms you’re already familiar with. But what do they all mean, and how do they differ from one another? If you’re an American expat living in France you may want to plan for the future to ensure your loved ones don’t inherit a costly and confusing administrative tangle when you’re no longer there to help them through it. If you’re considering writing a will, you probably already have an idea of who you want to inherit what when you die.

What can be more complicated however, is ensuring that you are complying with American and French laws relating to the distribution of your estate, who can get what and – significantly – how much tax they will pay and at what point during the process.

It could be you’re also considering gift-giving during your lifetime as a way to ease the financial burden on loved ones – now or in the future.

We asked Amy Witherbee, president of Sanderling Expat Advisors. She lives in Rennes, Brittany holds multiple qualifications including a law degree, and is a registered financial advisor in France. She shares her expertise and experience saying “I have written a series of articles that include what I refer to as the things that people often get wrong. One of the most important distinctions that it’s very easy to misunderstand is the difference between succession and inheritance tax.”

Succession or inheritance. What do I need to know?

“When someone dies, there are specific laws used by the courts, and the rest of us, to work out who gets what,” Amy says. “In the States, these trust and estate laws are specific to each state, but they are all quite similar. These laws explain how to ensure a will is lawful, what kind of things you can pass down when you die, who gets your stuff if your will can’t be found and whether you’re allowed to leave everything to your favourite pet.”

Where it gets more complicated, Amy explains, is working out who pays tax, when, where and how when someone dies. “This is the legal stuff that we spend a lot of time considering as financial advisors or lawyers,” she says. She adds that you can live in one country and opt to choose succession laws that apply in your home country in a lot of cases. “For instance, under French law you are not allowed to completely disinherit a child or spouse. If you really want to disinherit the child who forgot your birthday, you can choose to do so by applying US succession law to your estate instead. But” warns Amy, “you need to be aware that this isn’t going to do much about the taxes that those who do inherit will pay. Succession laws have nothing to do with this aspect of estate planning.”

Gifts, tax laws and the Franco-American tax treaty

There are U.S. and French laws concerning gifts (including inheritance) that apply respectively to citizens and residents of each of these countries. Americans who are French residents are subject to slightly different tax laws when it comes to gifts however, because of the treaties that exist between the U.S. and France.

“The right to opt for U.S. succession laws does exist.” Amy says. “It’s part of an EU Succession Regulation from 2015 known as ‘Brussels IV.’ In theory this means that you should be able to avoid France’s so-called ‘forced heirship’ laws that prevent you from completely disinheriting your children or your spouse.

The right to avoid these French laws has been somewhat in doubt however, because France is interpreting the legislation differently This is probably incorrect in Amy’s view and she says that most French legal experts seem to think that this situation will be corrected.

The problem, advises Amy, is that opting for U.S. succession law probably doesn’t solve the problem you originally had in mind. If you really do want to totally disinherit your children and even your spouse, electing for U.S. succession law is a good idea. If on the other hand, you were trying to cut down on estate taxes when your kids do inherit, you should probably know that the succession laws have nothing to do with the that.

Amy explains the situation further. “Exactly how the rules are applied will depend on the residency status of the person giving, and of the person receiving the gift. If this sounds complicated, it’s probably because it is. Even the authorities in each country seem confused about exactly who pays the taxes applying to gifts and estates. You should always declare your gift, however, to French tax authorities. To date this has meant that your tax bill will be credited to ensure that you don’t pay tax in France.

“If you are an American, however, and you receive a gift from a non-American French resident, there is a completely different issue to consider. If the gift is not of property or land, you shouldn’t, as the recipient, be subject to French tax. Americans though, are always subject to the U.S. Foreign Gift Regulations no matter where they live. This means if you receive a gift or inheritance of more than $100,000 from an individual you must report it to the U.S. government or face strict penalties. The same is true if you receive more than $19,570 (2024) from a foreign corporation or partnership.”

Find out more and get in touch with Sanderling Expat Advisors at sanderlingexpat.com

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Tax return season is almost upon us and of course rules and regulations differ from country to country. So here are some things to consider.

• The tax year runs January to December.
• Tax forms are generally done per household for married or PACS’s couples and even children get an allowance
• There is a small window to complete last year’s tax declaration which opens shortly and runs until the beginning of June but actual dates differ according to area.
• So, you complete a tax form shortly for the time you were in France for 2023, even if you arrived say in October.

A summary of French tax rates 2024 per adult

Up to €11,294:  Nil
€11,294 to €28,797: 11%
€28,797 to €82,341: 30%
€82,341 to €177,106: 41%
Over €157,806: 45%

Flat tax on investment income in France

The tax rate for investment income remains unchanged at 30% (inc. social charges) for income. This is known as PFU or Prélèvement Forfaitaire Uniquement and for those of UK State Pension Retirement age, the social charges can reduce but you must provide evidence to the tax office to get the discount

French social charges

No changes were announced for social charges, so it looks like they will remain as:

9.7% for employment/self-employment income
9.1% for pension income
17.2% for investment income including rental income.

Real Estate Wealth tax and Succession Tax in France

The current threshold of €1,300,000 for the ‘IFI’ real estate wealth tax will stay in place for 2020, with no changes to the scale rates of tax. The 75% limitation also remains unchanged.

Don’t forget, that all income must be included on your tax return even if it has been taxed elsewhere. Usually there are agreements between countries known as a DTT or Double Taxation Treaty that clearly lists which types of income get taxed in which country so that generally you don’t get taxed twice.

Different types of pensions for example can remain taxable in their country of origin or be taxed here.

Investment income is treated similarly. So, you may have got a great interest rate say in the UK for deposit accounts, only to find that not only is the interest declarable in France but is subject to a maximum 30% tax. That account in the UK may not look so positive afterall.

Looking carefully at your finances so that you make the most of your money and get the best returns is key. Tax return time is a good time to review and refine what you have in assets. Its always good to review things from time to time.

If you’d like to find out more or have questions about how to maximise your investments, contact Jennie for an obligation free consultation at: jennie@abc-eu.com

abc-eu.com

This communication is for informational purposes only based on our understanding of current legislation and practices which is subject to change and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.

ABC-EU are members of Nexus Global (IFA Network). Nexus Global EU is a division of Blacktower Financial Management (Cyprus) Limited (BFMCL) and Blacktower Insurance Agents & Advisors Ltd (BIAAL). ABC-EU is an Appointed Representative of BFMCL which is licensed and regulated by the Cyprus Securities & Exchange Commission (CySEC) – Licence No. 386/20. ABC-EU is an Appointed Representative of BIAAL which is licensed and regulated by the Insurance Companies Control Service (ICCS) – Licence No. 5101

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For Americans who are expats in France (or anywhere), tax reporting requirements are something you don’t leave behind when you move to a new country. U.S filing requirements go with you – wherever you go. And not just that, there are additional tax reporting requirements known as FATCA and FBAR. We asked Douglas Soons and Amy Witherbee, the experts at Sanderling Expat Advisors who specialise in helping Americans in France to deal with their finance and taxation requirements to explain more…

What is the FATCA

FATCA means Foreign Account Tax Compliance Act. To summarise it’s an IRS requirement that you give notice of any financial assets you hold outside of the U.S. You’ll need to complete a form Form 8938 and submit it when you file your regular income tax return. This only applies to individuals, and you must file if you are living abroad and all of your foreign-held assets combined total more than $200k on the last day of the tax year OR more than $300k at any time during the year. If you’re filing jointly as a married couple that amount changes $400k and $600k. It also affects those living in the US with assets abroad.

What is the FBAR

FBAR means Foreign Bank and Financial Accounts. Yes, at first glance it can seem similar to the FATCA – but it’s not. This one is about money laundering, or rather the prevention of money laundering. And, even if you don’t meet the asset thresholds for the FBAR, you might be required to file an FBAR. Unlike the FBAR, you don’t file it with your tax return but file through a different system – BSA-E Filing system. Technically it must be filed by April, but the government gives everyone an automatic extension to October 15th. Once that is done, you file your U.S. returns, taking a credit for your French taxes by taking advantage of the other IRS automatic extension, this one for U.S. expats filing their regular U.S. returns.

If you’re already reporting everything on a FATCA consolidated reporting, you do not need to file an FBAR notice, too. If you’re not filing through the FACTA notice, and you had more than $10k at any time during the year combined across foreign accounts (including PayPal), or your listed as a signatory on someone else’s account, you need to file an FBAR. This applies not just to individuals but to corporations etc.

You’ll need to deal with foreign exchange rates, file on time, and keep on top of those filing requirements in order to avoid issues.

French tax for US expats in France

We haven’t even mentioned filing your French tax returns yet – but yes, that needs to be done too. Even if you receive income from the US – for instance fees, dividends, that too needs to be reported – in France. You won’t pay tax on all of it as the US and France have a double taxation treaty in place, and in fact you may even find that there are ways to mitigate tax.

If you’d like guidance and help with any aspect of finance and tax as Americans in France, whether filing for American taxes, French taxes, or both – feel free to get in touch with Sanderling Expat Advisors at: sanderlingexpat.com

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Nothing great ever came easy a wise person once said. And when it comes to being an American living in France, dealing with your tax, reporting requirements, and knowing how to manage finances to suit US IRS rules, is essential to making life great. Get it wrong, and you’ll sure know about it. Luckily there is help and plenty of support to make sure you get it right and live the good life in France that you planned.

Whatever stage you’re at – moving to, living in, or returning from France, you need to bear in mind “citizenship-based taxation” because if you’re an American, you must still file tax returns in the US. It doesn’t matter how long you’ve lived in France (or anywhere else), the IRS rules apply. And it’s not just about filing tax, you’re also restricted in the types of investments you can hold and that includes certain pension and life insurance vehicles. And some investment vehicles may seem like a great idea but may not provide the details the IRS require, making them unsuitable for Americas, for instance the Assurance Vie.

Add to that mix the complications of French financial systems and investment vehicles and says Amy Witherbee of Sanderling Expat Advisors “you have the makings of a mess. But it doesn’t need to be painful, as professional tax and investment advisors specialising in helping American expats in France with their finances, we will make sure that everything is sorted out, reports are filed correctly and all the paperwork is taken care of.”

Moving to France

If you’re at the stage where you’re considering moving to France, Sanderling Expat Advisors say this is an ideal time to get everything in order with your finances so that when you arrive, you know that’s one worry you don’t have on your plate. Instead you can focus your energies on creating the life you dreamed of.

“Before leaving the U.S. for France, we help by developing a list of documents the client will need to report assets, open accounts etc. in France,” says Douglas Soons of Sanderling Expat Advisors. “Crucially for us Americans, we also help clients make adjustments to their U.S. investment accounts before their new EU-based status makes certain holdings (i.e. mutual funds) become a tax problem. And again, there is a question of how the sale of a home, or investment assets might be treated before certain deadlines vs. others. For instance, if you know you are going to have capital gains on a home sale at closing, you want to be sure in advance that the timing of that sale gives you the benefit of a primary home tax break (before you move and make your primary home into a secondary one).

Likewise, if you will need to take money out of your U.S. investment account (i.e. to buy a property in France), you might want to do that sooner, rather than later, so that you are reporting that only on American tax returns.”

Living in France

Already living in France? It’s absolutely not too late to get things sorted out. Get help to create and manage the reporting requirements that you are by law required to undertake under US financial rules. We won’t go into too much detail here but just as an example – FBARs and FATCAs. Or to give them their full names – FATCA: Foreign Account Tax Compliance Act, basically an IRS requirement to provide details of financial assets held outside of the US. FBAR: Foreign Bank and Financial Accounts – like a FATCA but filed on a different system. If you’d like to read more about the requirements, who has to do this, how, what, where and when to file, read Sanderlings Expat Advisors FATCA and FBAR jargon-free explanation here.

And when it comes to filing returns in the French system, Sanderling Expat Advisors can also help you with that.

Moving back to the U.S. from France

As you can imagine, it’s not just a question of packing up your belongings, shipping them back and hopping on a plane. Sort out the financial requirements before you leave to help for a smooth move.

“Before returning to the U.S. we recommend people identify what reports, filings and taxes will be due to each country during the next 12 months. This helps us create a checklist of deadlines for the client and pull together what they will need to submit. But it also helps us determine whether the client is better off to close certain accounts, move assets, etc. before particular deadlines, i.e. the end of a tax year. Or if certain accounts, like the PEA, (a French investment vehicle) for instance, might need to stay in place a while longer to avoid punitive taxes.”

Find out more and book your consultation with one of the qualified cross border financial and tax advisers at Sanderling Expat Advisors: sanderlingexpat.com

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Succession law is probably one of the most contentious rules for the British moving to France, as it seemingly infringes on our right to leave our money to whoever we choose.  We asked Robert Kent at Kentingtons, the professional tax and financial advisors in France for British expats, to explain succession law and it’s potential problems.

What is succession law in France?

France uses Napoleonic law that ensures that the family is protected and that money from the parents should filter down to their children. Children are deemed “reserved heirs” and must inherit a percentage of their parent’s estate on their death. This law forms part of the French constitution, and these rules have significant importance and can be difficult to get around, although there are ways to do it.

Succession law is especially problematic for those with children from a former marriage, with the stepparent being left to battle with their stepchildren to hold onto the house and home.

What are the rules for inheritance for children in France

The amount of the estate to be left to the children is as follows:

1 child = one-half of the estate
2 children = two-thirds of the estate
3 children = or more three-quarters of the estate

The remaining fraction is unreserved and may be left to anyone the donor pleases.

To be clear, it is only that part of the deceased’s estate. So if the deceased owned half the property and there was one child, it would be half of the half, therefore only a quarter. This means that in many cases, it does not give the child control of the property – but it is their right to demand their share on any sale.

Can I choose who I leave my money to in France?

For those who want to choose where their money goes, there are solutions. However, there is some planning involved. Ideally this would be done before buying property in France, but it isn’t too late to do it afterwards.

It is usually possible to leave the surviving partner the right of use or “usufruit” of a property. The “usufruitier” can live in the property and make any alterations they wish. They may even rent out the property. However, on the sale of the property, the children will generally have the right to their share.

If this isn’t what you want, then beware that a little information can be a dangerous thing. Sometimes people copy each other’s solutions, but this doesn’t always work. Generally there is a different solution for every situation.

The worst thing you can do is nothing. The only safety net for those who do nothing is the “right of living and right of use.” This literally means you have the right to use the property. You have no rights to do anything to the property, or even rent it out, without the children’s agreement.

Can I avoid the law of succession issues

It is possible to reduce or even eliminate succession and inheritance law issues in many cases using either legal or investment techniques or a combination of the two.

This article provides a basic understanding of the French rules. However, there are regular changes in European legislation. As Europeans and UK nationals, you may have the option to simply opt-out of French inheritance rules and request that UK rules apply to your assets instead. This can be achieved by merely amending your French Will to reflect your wishes. This law (EU 650/201) was passed on 4th July 2012 and came into effect on 17th August 2015. However this being France, it isn’t always as cut and dried as this, for instance if one of more children are EU residents, this may impact the ruling.

It is vitally important to understand that this law does nothing at all to avoid inheritance tax in France. You still need to plan for “Inheritance tax” as Brussels IV deals only with success law. Brussels IV will not help you avoid French inheritance tax rates which can be up to 60%. And it’s no good looking up information on the internet or asking friends, to be absolutely certain in this highly complicated aspect of succession and tax, professional advice is the best way to make sure you plan effectively.

By Robert Kent is a senior partner at Kentingtons, experts in French succession law. Kentingtons offer a no-cost, no-obligation discussion about individual situations. See their website for details: kentingtons.com

The information on this page is intended only as an introduction only and is not designed to offer solutions or advice. Kentingtons can accept no responsibility whatsoever for losses incurred by acting on the information on this page.

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I always remember someone saying to me “I love France, but I have never spoken about dying quite so much as I do since I got here!” I knew just what they meant. Inheritance and succession law in France is complicated and is a frequent topic of conversation amongst expats. We asked Robert Kent at Kentingtons, the professional tax and financial advisors in France for British expats, to explain inheritance tax and the law known as Brussels IV…

Inheritance tax in France

Well, there are much more fun conversations so it’s a good idea to deal with the elephant in the room and move on. And talking about it with your friends doesn’t really help since everyone’s situation is different. So what is right for the person you are chatting with might not be a good solution for you. Their advice might lead you to disaster. I can tell you first hand, just how this can affect people’s lives after I helped the surviving spouse of a couple I served, with a very messy situation.

It can go very wrong

When we originally met, they stated that they had several children and their main objective was to protect the surviving spouse. They wanted their children to inherit their estate, but only when they had both finished with it. I suggested that they consider a change of marriage regime to communauté universelle (universal community) with a survival clause which would need to be discussed with a notaire, who would give legal guidance and draw up the contract.

A change to community meant that when one of them died, everything would automatically pass to the survivor, in full ownership, with nothing (yet) passing to their children, and with no accountability to them. Within a couple of weeks they sent me a copy of the act, confirming it had all been done.

The details are critical

Many years later, I was advised that sadly one of the couple had died.  But I was confident that all was well with their inheritance planning, or so I thought. Sadly, the couple had talked to friends about inheritance tax which led them to do something drastic without seeking professional advice or even informing their advisor (that would be me). They had been told by the friend that they should do a will using Brussels IV. The friend said it meant you can sidestep French succession law. This is true, but they interpreted it as treated under UK rules, meaning UK inheritance tax, in place of French inheritance tax – which is not the case.

Here is the big problem. They had instituted a marriage regime change which placed the joint assets into a community, which now was legally outside of the couple’s estate, leaving a UK will citing that UK law applied to the now empty estate.

If the marriage regime is universal, it usually covers the whole estate, though technically it is possible to exclude things. Normally assets are viewed as “biens propres” (cleanly owned). For the sake of sanity (I can see your eyes glazing over), let us say that everything is joint. As is common with marriage regimes, the contract said that it applied exclusively to “biens situés en France” (goods situated in France).

You can’t have it all ways

Generally speaking, UK assets that are not buildings, are treated as in France. This is  because the UK/France succession treaty states that only UK situated buildings are under UK rules, with the rest under French law. We now, however, have a conflict, because there is a UK will asking for UK law to apply, so how does that work? Spoiler alert, it does not! It’s a bit like buying two cars and then attempting to drive them both at the same time. It is simply not possible, since you can only sit in one car at a time. Had my clients left the marriage regime as the only solution, the only thing the survivor would need to provide to the notaire is a death certificate.

The technical legal reason for this is that the survivor is deemed to have always been the original owner, since they were part of the community and now there is only one person left, so it dissolves, assuming they are the full owner. The death certificate is merely to prove death, so the name can be removed, as there is no actual transfer of assets per se. My client was asked for a list of things covering several pages because the notaire needed to asses what was in the community, what was under UK law and needed evidence of each asset and value. It was a total mess. Had the client approached me or any suitable professional (one qualified and based in France) before doing a will under Brussels IV, they would have learned that they were better off as they were.

If they insisted on having Brussels IV, they should have redone their marriage regime, going back to separate estates to avoid any conflict. It can be done but it’s complicated – and expensive.

So when should I apply Brussels IV?

Brussels IV can be a good idea for some situations. If you have children from a former marriage, which makes a marriage regime change almost impossible, this can be a good option.  But every situation is different and every solution should reflect this.

You could of course go to law school and study French civil and fiscal law, UK inheritance law, Brussels IV (EU law), international tax treaties and the Hague Convention (international law). They make sure you have a good understanding as to how all these work together or conflict, so you can avoid any problems. You could take advice from someone who hasn’t done this but says they know how it all works. Or you could do nothing (this is a surprisingly popular option) and can leave a whole heap of problems for loved ones just when they don’t need them.

My advice? Get professional advice relevant to your situation.

By Robert Kent is a senior partner at Kentingtons, experts in French succession law. Kentingtons offer a no-cost, no-obligation discussion about individual situations. See their website for details: kentingtons.com

The post Guide to Inheritance tax for UK expats in France appeared first on The Good Life France.

Now is always a good time for checking your finances if you’re an expat in France. An annual tax check can really pay off.

There always seems to be something going on that can influence exchange rates, savings and financial plans. Covid, war, political instability, energy supply problems, global supply chain issues… There’s been a lot to contend with in recent years. As the economy evolves, so should your financial planning. Robert Kent of Kentingtons, tax and financial advisors, says that now more than ever expats need to think about what all these issues mean for them and, more importantly, what they can practically do about it….

If you spend in Euros, think in Euros

At Kentingtons we meet many people who think very much in the currency of their old home, such as Sterling. But, thinking in a currency that you do not live in can create risk. Brexit has shown us just how much Sterling can move versus the Euro. As a French resident, thinking in Euros does not merely reduce the currency exchange risk, it eliminates it. If you can eliminate unnecessary risk, why not do so?

“But my pensions / rental income (etc) are in Sterling!” you say. This does not prevent sensible planning, using FX companies to maximise currency moves, maintaining your savings and investments in Euros (which makes sense from a French tax perspective, by the way) and forward planning your income requirements.

If you have rental property outside of France / the Eurozone, challenge why this needs to be so. If it is purely an investment, you might be better off to consider selling and creating more Euro income.

Do you have pensions that could be cashed in? For many pensions this can be done, in France, with an effective tax rate of just 6.75%, so worth considering. Could any of your income be turned to Euro revenue?

My point is merely to prompt a rethink. What was the right course of action, when things were first done, may not be right for the way life is now.

Hope For the Best, Plan For the Worst

When it comes to income planning, it makes sense to hope for the best and plan for the worst. Good financial planning is not gambling, it is about creating as much certainty as possible. If you are living in Euros, then ensure you have sufficient Euros to see you through a crisis. A crisis could be in exchange rates, the financial markets, a slowdown in the rental markets, property prices etc. The point is to calculate how much income you might need for the next few years, ensuring that it is easily accessible and usable. A crisis, no matter what the source, should not cause you sleepless nights.

Consider Inflation

Don’t just consider what you need at today’s prices but build in inflation. In France we have seen it go to over 6% from almost nothing. The point is you just cannot guarantee what will happen. So, plan for higher inflation, which means planning on needing a rising income for the next few years, in the hope that you do not need it.

Rethink your investment Strategy

Interest rates at 0% mean that money is eroding in real terms, so a sensible investment strategy is key. Simply keeping it in the bank or under the mattress is unlikely to help. A traditional market investment strategy of 60% of your capital in the markets and 40% in bonds, is out of date. Bonds means that you may be paying them to keep your money (hopefully safely). It does not mean that they do not play a role, however, they have become less central. If you have buy-to-let properties, what happens when they are vacant and / or you need to sell when the market is bad? Property is not always ‘as safe as houses’!

With sensible financial planning, you stand a much better chance of withstand issues when they arise. And an annual tax check can save expats in France money and mean less stress.

Contact the team at Kentingtons for advice, or a free initial consultation at: kentingtons.com

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As in all aspects of life in France, the differences from the UK are numerous – and that includes marriage.

In Britain, depending on one’s faith, or lack of, one would typically get married in a church, or in a registry office. In France most couples do both! Before being married in a church, the marriage much be officially conducted in the local town hall – the mairie.

And it gets even more confusing. Because, in France there are various marriage regimes, which are effectively marriage contracts in the legal sense. It’s important to choose wisely, as the chosen regime will govern how a couple’s assets are owned. This will also affect how assets are dispersed, including inheritance, explains Robert Kent of Kentingtons, tax consultants for British expats in, or moving to, France.

A choice of marriage regimes in France

In the broadest sense, the three principal marriage regimes in France can be explained as follows:

Séparation des Biens
This is literally translated as “separation of assets”, which is fairly self-explanatory.

Communauté Réduite aux Acquêts
This is the default marriage regime in France. In short it means that everything purchased by the spouses after the marriage is owned by the community, i.e., jointly by the two spouses, even if only one of the two pays.

Communauté Universelle
Everything owned before and bought during the marriage is owned within the community, i.e., jointly by the two spouses.

Marriage problems – when it comes to inheritance in France

Most British couples, in their minds at least, would consider themselves married within a universal community, i.e., all is shared, and very often all is inherited by the surviving spouse. But here’s the issue. In France, the vast majority of couples married in the UK are considered to be married under the Séparation des Biens marriage contract. Why is that a problem? Of course, every case is different, but let us consider one relatively common example.

Mr and Mrs Smith, who have two grown up children, were married in the UK and lived there for many years before moving to France. Each wants their surviving spouse to receive all assets on first death. However, being married under the separation of assets regime means that French inheritance law takes charge.

Inheritance law reveals another notable difference. In the UK you can generally leave all your worldly goods to whoever you like, even the neighbour’s dog, if you wish! In France, however, the children have an absolute right to inherit a minimum percentage of the deceased’s estate as follows:

1 child – half
2 children –  two thirds
3 children or more – three quarters

If we go back to our example, on the passing of Mr Smith, the two children would have a right to two thirds of Mr Smith’s estate.

What can you do to ensure your assets are shared as you wish?

In the UK, you simply write a will, allocating funds to whoever you wish. In France, inheritance planning can be more complicated. However, in certain circumstances it is possible to change one’s marriage regime (contract). And, as in the UK, there are ways in France to plan for the future in a tax efficient way, offering as much protection as possible to all your loved ones, be they from a first or second marriage.

Everybody’s situation is different. Advice given to your neighbour, for example, may be totally inappropriate for you. When you’re looking at long term financial planning, it’s essential to take qualified advice that’s personal to you own specific family set-up.

By Robert Kent of Kentingtons, Tax and Investment Consultants with coverage throughout France and the UK. Find out more or get in touch for advice and support at: kentingtons.com

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