Can we switch to ‘universal’ marriage regime in France?

Reader Question: My wife and I have lived in France for 12 years and have three children together (no other children outside of our marriage). We jointly own a house ‘en indivision’ worth about €300,000. We had originally intended to have a universal marriage regime so the survivor would inherit, but a friend told me it is no longer possible for British people to do this. I know France won’t allow me to use UK law in my will to do this. Can I just gift my wife my half of the property in my lifetime?

Your friend is partly right, and partly wrong. 

The communauté universelle marriage regime was frequently used as a way to ensure the surviving spouse inherited a French property, rather than it going to children, where there were only children from the marriage. 

However, as of January 20, 2019, this is no longer possible for Britons who live in the UK (unless one partner is French). 

Thankfully, in your scenario as you are French resident, you can adopt this marriage regime and it would apply to your worldwide estate. 

You can exclude some assets if you wish. If the property is owned in equal halves, the notaire fees are quite reasonable.

If you have assets in the UK, we recommend a carefully drafted UK will to deal with those, as the UK does not recognise French marriage regimes. 

You should also have French wills so it is clear who inherits the French estate on the second death.

Read more: Is making a French will the right choice for multiple property owners?

While leaving the estate to the spouse is great for protecting the surviving spouse (and it is tax-free), it does create a tax disadvantage for the children, as children would only benefit from their tax-free allowance of €100,000 each on the second death, not on both deaths.

Regarding a lifetime gift to your spouse of half of your house, or other assets, there are two warnings. 

Firstly, the gift has to comply with the reserved inheritance rights of children (so as you have three children, they have a right to three quarters between them, you can only gift the quotité disponible – the free share, being a quarter.

Secondly, and this is a big shock to most Britons, while inheritance to a spouse is tax-free, a lifetime gift is not. 

There is a tax-free allowance of €80,724. It is taxed on the sliding scale of tax (as for inheritance tax) above that. Then, for it to fall outside of the estate for inheritance tax, the donor would need to survive the gift by 15 years.

Read more: What will happen to our holiday home in France when we die?