Intervivos gifts - English vs. French Property Law
Living gifts of land under English law
Although ownership of land in England can lead to complex dismemberment by virtue of equity and the existence of the law on trusts, by the same token it is open to the owner of such land to make it over by way of gift to a third party of his choice,be it a stranger, spouse, relative or charity with a minimum of formality. All that is generally required is the completing of a transfer form lodged at the central land Registry office together with the payment a small fixed fee. As for the tax implication of such a gratuitous transfer, it may escape inheritance tax (or any related impost) altogether if certain conditions are met and the donor of the gift survives for seven years the making of the gift. This is known as a PET (i.e. a potentially exempt transfer).
Gifts of land under French Law
In France by contrast a gift of land is never simple in that it automatically involves the same formalities as if the land were sold for a price in a "at arm's length" transaction and may also attract the imposition of substantial inheritance tax. Such gift in any event will also be subject to some form of ad valorem stamp duty. Hence, such transfer of land by inter vivos gift will always require in France the intervention of a notaire, who will execute a deed of transfer. The legal explanation behind this approach is that a gift in France is treated as a contract, albeit one where the concept of consideration (contrepartie) found in commercial transactions is replaced by the concept of "intent to give" (animus donandi). Hence a gift of land is subject to the same formalities as a contract for the sale of land and requires "completion" in the same way. Furthermore, as a result of being classified as a contract an inter vivos gift of land in order to take effect must be accepted by the donee in the same manner as the offer of the offeror in a contract must be accepted by the acceptor. There are departures from this rule in relation to gifts not involving land but not so far as land is concerned.
Inheritance tax and English and French succession laws
The prime consideration, on such gifts, in France, however, is not formalities, but potential liability to a French lifetime gifts tax similar to inheritance tax. In the United Kingdom a donor wanting to grant in Britainan inter vivos gift of land is afforded a generous scheme of exemption from inheritance tax known as PET (potentially exempt transfer) provided certain conditions are satisfied by the gift. In addition the scheme is "back loaded", that is to say, that inheritance tax will only become due if the scheme fails, rather than "front loaded" with inheritance tax having to be settle at the time of transfer subject to its ultimate refund if the scheme is over time properly fulfilled.
Although French Revenue law also offers schemes of exemption on such inter vivos gifts of land,these are nevertheless more limited and complex than PET. In fact these schemes are bound up with French Law of Succession, whose watchword was until recently, and remains to a degree today, the protection of the financial interests of the nuclear family against encroachment by outsiders. Put shortly (the matter is examined more extensively under the heading "law of succession"), exemptions only favour spouses, partners who have entered into a civil partnership instrument and descendants (ie children, grandchildren). Even in relation to these preferred classes the exemption only operates to a certain maximum amount. In September 2007 this bracket has been lifted away totally in respect of spouses and partially in respect of civil partners.
A second example of the differences which exist between English and French Law is to be found in the conduct of litigation in the English and French Courts, about which there is more information elsewhere on this website.