Between the picturesque landscapes of France and the rolling hills of the UK lies a cultural rift as wide as the Channel when it comes to succession planning.
It is not just differences in the law, with France’s forced heirship rules, but about how each culture views the future of the next generation and deals with the tax authorities.
This difference can often cause consternation for expatriates visiting the local notaire or avocat (lawyer), who discover that they expect us to share their cultural views and advise accordingly.
Children are prioritised
The French way prioritises passing on assets to the next generation and seems obsessed with dodging the taxman at every turn, even if it is to their own, or their spouse’s, detriment.
One popular method is property gifting, either by giving it away outright or via usufruit (where parents keep the right to use the property or receive income from it while the children hold the title).
This is effectively saying: “Here, take the house, but we get to live in it rent-free until we are gone.”
In the UK, this would be seen as a gift with reservation. Not so in France, however, where it is a common solution offered by notaires.
Read more: Key financial steps to take after the death of family member in France
Giving away your home has issues
I have watched in amazement as a “child” (actually in their mid-30s) screamed at their mother for breaking a door in their own house.
Clearly, they viewed their parents as mere tenants in what they saw as their property, and not their parent’s home. Legally, they are not wrong.
For expatriates, it can be even more of a minefield. For example, what if you wish to sell and leave France?
Assurance-vie
It is difficult to offer any analysis of succession law in France without discussing assurance-vie, a financial structure that has unique tax treatment here.
Much like a trust, it is outside of the estate, and it is possible to designate your beneficiaries while adding a set of complex rules and instructions as to how its content may be divided.
Capital is paid directly to the beneficiaries without having to wait on the notaire.
Read more: Rules on assurance vie payouts between friends in France
A joint assurance-vie
A joint assurance-vie might be set up to terminate when the first partner dies or when the second partner dies.
Ending on the second death rather than the first seems like a missed opportunity to stick it to the taxman and give the kids a leg up.
This is because ending on the first death means two lots of €152,500, tax-free, per child and not just one.
However, it also leaves the surviving spouse with a complete mess to sort out. Having lost their spouse and their income, they must now deal with loss of capital as well.
The money they do keep needs re-investing as it is no longer in the assurance-vie.
Parents left thinking ‘what about us?’
If the surviving spouse is over the age of 70, nearly all succession benefits are lost for any new assurance-vie. The €152,500 per beneficiary is now just €30,500 for the entire estate.
Most people do die over the age of 70, so now that extra €152,500 per beneficiary seems elusive. There are so many better ways to set up an assurance-vie for a couple, without any of the drawbacks.
Yet notaires (those guardians of French legal wisdom) often focus solely on the children’s benefits, leaving parents to wonder: What about us?
This again highlights the different approach to legacy planning in France, where the children’s future shines brighter than the immediate needs of the parents.
The UK/US way
Jump over to the UK or the US and you will find a starkly different scene.
Here, the script flips. Parents’ financial security and needs often take centre stage, with the next generation’s inheritance being more of a ‘we’ll see what’s left’ scenario.
It is not that Britons and Americans are less generous; they just have a different playbook – one that does not involve giving away the castle quite so readily.
French roots in Napoleonic code
So, why the difference? It boils down to cultural values, legal systems, and perhaps a different view on the role of family and legacy.
The French system, with its roots in the Napoleonic code, has a strong emphasis on protecting the next generation’s inheritance, while Anglo-Saxon common law places more emphasis on individual rights and freedoms, including the right to dispose of one’s assets as one sees fit.
The bottom line
Explaining these differences to our clients is more than just a legal or financial discussion; it is a cultural bridge-building exercise.
Whether it is the French prioritising their enfants or Brits and Americans focusing on financial independence and flexibility, the key is understanding these nuances to navigate the succession planning process effectively.
The issues involved in succession planning demonstrate the importance of taking professional advice from a qualified source with an understanding of not just the tax and legal position, but also the cultural aspects of financial planning.
