Outline of French succession rules

The rule of "enforced Heirship" which appears to permeate the whole of French Succession Law holds many terrors for British nationals buying French residential properties, as they are disconcerted by the restrictions placed by French law on their right to freely dispose of these properties by gift or will whenever they have children. This of course is a far cry from what obtains in England where the right of free disposition of one's assets in one's lifetime or at death is the rule. Before commenting on this rule of "enforced heirship" a few preliminary observations need to be made.

Three points regarding the French Law of enforced heirship

Firstly, this rule does not apply in the event of a person dying intestate. In the absence of a valid will, the law steps in and determines in prescriptive fashion, who is to inherit the estate of the intestate, and to what extent. The rule of "enforced heirship" which seeks to ensure that children are not altogether cut out of the estate of their parents by a will in favour of less worthy recipients (as understood by French law), but get a minimum share of such estate come what may, ceases to have any relevance in the event of intestacy, as French rules of intestacy give children the "lion's share" of the estate of their deceased parent.

Secondly, French rules of succession apply only to immovable property (land) situated in France. As far as movables are concerned French rules of succession only come into play if the deceased was domiciled in France at the time of death. Otherwise the devolution of his movables will be governed by the law of succession of the country (other than France where he happened to be domiciled at death.

Thirdly, French rules of succession must be viewed in conjunction with those governing the matrimonial regime of the deceased, as there may be an interplay between these two sets of rules. The rule of "enforced heirship" gives children whether they be legitimate or illegitimate an indefeasible statutory right to a minimum portion of the estate of their parents (ie father and mother). This is a right which is based on blood ties and consequently does not operate between "step-parents" and "step-children", unless the former have adopted the latter by a formal adoption process, know to French law as "plenary adoption" (adoption pléniere). As a result of this rule a person with children cannot give away in his lifetime or at death by way of a will more than a certain proportion of his estate to persons other than his children, this proportion varying according to the number of children.

Thus if a person has one child, only 50% can be given away by him to third parties, the other 50% going as a matter of law to the child. The statutory portion of the child is known as his "reserved share" (part réservataire), whereas the discretionary share that may go to a third party or parties is known as the "freely disposable share" (quotité disponible).

A person with two children can freely dispose of only one third of his estate, each child having a "reserved share" of one third. A person with three children has a discretionary right of disposal over only one quarter of his estate, each of the three children, being entitled to a quarter of the estate by virtue of their right to a "reserved share".

The freely disposable share (quotité disponible), does, however, have an incompressible minimum, which is set at one quarter of the estate and which will operate regardless of the number of children which a person may have. Thus, if a person has five children, the freely disposable share remains set at one quarter of his estate, the reserved share of the children being fifteen per cent for each one of them. A testator leaving six children will have the free disposal of a quarter of his estate, each of the six children having a "reserved share" of 12.5% (ie 75% : 6 =12.5%). An so on and so forth.

If a child predeceases his parents without leaving issue, his "reserved share" will go on to swell that of his remaining siblings. If on the other he leaves issue behind, his reserved share will go to his own children, who form a "stock" and who will in due course inherit the reserved share that would have gone to their deceased parent, equally, if he died intestate, or otherwise according to the tems of his will, always bearing in mind, nonetheless, that in the event of a will the "reserved share" rule will apply here as well.

The heart of French succession law

It is clear from the above, that the "reserved share" rule lies at the heart of French succession law. In order to safeguard this rule, anti-avoidance provisions have been enacted by French law, the principal one being, the right given to children to have gifts made in the lifetime of the testator abated, if, where looked at singly, or in aggregation, they exceed the "disposable share" available to the testator (action en retranchement, action en réduction). Also from the foregoing, it will have become glaringly apparent, that whereas the right of children to a minimum portion of the estate of their parent seems to be well protected, the right of a surviving spouse seems to have been completely overlooked.

The rights of the surviving Spouse:

Reality, in fact, contradicts to a degree this first impression, but the position of the surviving spouse is a complex and evolving one, which now need to be looked at. The general rule, today, as in the past, is that where the testator leaves children, the surviving spouse is not entitled in its own right to a statutory " reserved share". On the other hand, if the deceased dies intestate, the surviving spouse takes by operation of law, alongside the children, a quarter of the estate of the deceased (nota: where there are no children but the intestate leaves behind only ascendants or siblings the surviving spouse takes most of the estate). What this means in clear is that a testator (or testatrix) is free to cut his surviving spouse out of his will absolutely, and because this surviving spouse has no statutory "reserved share", this disinheriting is perfectly legal and will stand, save in respect of any children of a previous marriage, who could successfully contest this situation on the grounds that this would deprive them of their rightful reserved share of the estate of the deceased parent.

As against this rule there are certain correctives :

The right of occupation for life of the matrimonial home;

The surviving spouse, notwithstanding the dispositions contained in the will, has an absolute statutory right, on demand, to the use and enjoyment of the matrimonial home and its content for the remaining duration of its life. Pursuant to this right the surviving spouse may if the matrimonial home "ceases to meet its needs" opt to rent it out rather than stay in residence while using the proceeds to take on lease alternative accommodation. This right of use and enjoyment is automatic for the first year following the death of the deceased and thereafter in order to endure must be exercised formally by the surviving spouse, within this period of one year, by giving notice to the beneficiaries of its intention to remain in occupation.

Matrimonial Regimes

The surviving spouse, inasmuch as its marriage took place in France and thereafter the spouses resided in France, is under the statutory default matrimonial regime that governs in French law the property rights of the spouses in the absence of a "bespoke" marriage settlement, entitled to half of all property purchased during the marriage through the earned income or savings of the spouses. This property as it is acquired by the parties is impressed by a "tenancy in common" and on the death of one of the spouses (or divorce), half of it will vest automatically in the survivor, as being its share under the regime. The law of succession will not affect that share, but only the half share of the deceased.

Bespoke matrimonial regimes take the form of marriage settlements signed at the time of marriage or subsequently, whereas the legal regime is a statutory contract on terms found in the French Civil code which comes into effect automatically on marriage if the parties have not made their own arrangements through a "bespoke" marriage settlement (régimes particuliers). The bespoke regimes, roughly speaking, cover the extremes of the marriage regime spectrum, whereas the legal regime occupies the middle ground. Having said this, the bespoke regimes offer a good degree of latitude for "mixing and matching" ie. taking a bit from one regime and placing it in another.

The most protective regime for the more vulnerable party to a marriage (generally the wife) is the "communauté universelle". This regime impresses all assets belonging to the spouses, whether owned by them before marriage or vested in them, thereafter, by way of gift or inheritance or acquired through their earnings or savings, with a tenancy in common. At death the surviving spouse, on the unwinding of the "communauté universelle" regime will receive half of the assets as its share of the now defunct "tenancy in common". This division operates outside the law of succession. It is only once this division has been carried out that the law of succession will operate over the half share of the deceased in the tenancy in common.

Furthermore, it is possible for the spouses to choose either at the time of marriage or thereafter a re-inforced type of "communauté universelle" by adding to it what is known as a "attribution intégrale" provision, which turns the regime into a joint tenancy over all the assets. By the device of the "attribution intégrale" provision, the whole estate of the deceased vests automatically in the survivor by virtue of the "right of survivorship". This vesting operates outside the law of succession altogether, and the children of the deceased, therefore, cannot contest its operation, save for the exception existing in favour of children of a previous marriage who may challenge such an arrangment on the grounds that they would be deprived of their compulsory reserve at French Law.

The least protective regime is the "séparation de biens" regime, whereby the spouses specify in their marriage settlement that in the absence of an express intention to the contrary (generally expressed in the form of a gift inter vivos or a purchase in common) all property owned by each of them at the time of marriage or acquired thereafter by gift, inheritance or for consideration, shall remain their separate and independent property. In that event the surviving spouse can only look either to the rules of intestacy, or to a disposition under the will of the deceased, for any share in his estate, such share in the event of children to be conditioned by their statutory "reserved share" rule. It is noteworthy, that French courts, assimilate the default English matrimonial regime (ie in the absence of an English marriage settlement) to the French "séparation des biens" regime, an interpretation which is not very helpful to English surviving spouses who have a residential property in France or are deemed to have transferred their domicile in France.

Donation au dernier vivant:

A spouse may elect to give either by a "donation au dernier vivant", (sometimes also misleadingly referred to as a "donation entre epoux") that is to say a form of gift that is only made perfect by his death, and can be reversed until then, or by will, the freely disposable share of his estate (quotité disponible) to the other spouse. This election, enables him at his discretion, to re-draw the shape of the "quotité disponible", in a manner that is highly beneficial to the surviving spouse, and effectively ensures that the survivor has a "lifetime interest" over the whole estate, regardless of the existence of children and their statutory "reserved share".

This is achieved by specifying in the gift "au dernier vivant" or in the will that the survivor is at liberty to opt to take the freely disposable share granted to him (quotité disponible) in one of three forms. Either in the form of the "quotité disponible" in the strict sense, which it will be recollected varies in size according to the number of children, or in a broader sense, to take it by way of absolute property over a quarter of the deceased estate and a right of "usufruit " (a form of life interest) over the remainder, or to take it by way of "usufruit" over the whole of the deceased's estate. Although a "usufruit" (life interest) is not as good as absolute beneficial ownership, it nonetheless enables the surviving spouse to enjoy the income from the estate and maintain its former lifestyle. There are various ways of tweaking this right of usufruit in respect of stocks and shares in order to alleviate the fact that the "nue propriété" (bare property) is in the children.

Life Insurance:

It is always possible, for a spouse, to benefit the other spouse through the device of taking out a life insurance policy (assurance-vie), as the monies paid under the policy, to the surviving spouse, on the death of the policy holder, are deemed to stand outside the estate of the deceased spouse and are therefore not liable to the mischief of the statutory "reserved share". The question which must be addressed now is the extent, to which the rule "enforced heirship" rule affects British nationals buying residential property in France. The short answer is that it does, inasmuch as the property is owned directly by an individual or individuals. There are a number of ways, however, to circumvent or mitigate the inconvenience of the rule, as will be examined presently:

As between spouses, several succession planning options are readily available, namely:

1. Entering at the time of buying their French residential property into a "communauté universelle" matrimonial regime with an "attribution intégrale" provision. This is made possible by the Hague Convention of 1978 on "The Law applicable to matrimonial property regimes". The adoption of this regime need not affect all the assets of the couple in France, but can be specifically restricted to their residential property. As a result of entering into such a regime the spouses hold a joint tenancy over the property and on the death of one of them the property vests automatically into the survivor, under the operation of the matrimonial regime. This vesting works outside the rules of the law of succession and consequently the right of children to a statutory "reserved share" does not come into play. There is however a qualification which has become increasingly important with the growth of "folded families".If one of the spouse has a child from a previous marriage or relationship, this child cannot be kept out of his statutory reserved share by the device of his parent entering with the non-parent into "communauté universelle" matrimonial regime with an "attribution intégrale" provision. This is meant to protect the child's position in the event of the survivor being the non-parent, as in such a case, the non-parent will become the sole owner of the property and given the absence of blood ties between the child and the non-parent, the child will have no legal right to a statutory reserved share in the estate of the non-parent at death.

2. Purchasing the property through the medium of a French incorporated "civil" company. The advantage of using such a vehicle is that the shares therein have the status in law of being movable property and as such on the death of the holder will pass according to the law of succession of his domicile and not according to the law of succession of the country where the property is situated, that is to say France. Hence, insofar as the British shareholders of such company do not take up a French domicile, their shares, at their death will pass according to the law of succession of their British domicile, which does know of any statutory "reserved rights". It must be pointed out in passing that this arrangement is tax neutral in rance and from 2008 will not risk attracting tax in the UK provided certain criteria are met.

3. Purchasing the property under a "pacte tontinier", that is to say in "joint ownership". It must be borne in mind that in France property bought in common by spouses (or non-spouses for that matter) is deemed to be bought under a "tenancy in common" and not a "joint tenancy". The upshot is that at death, the share of of the deceased tenant in common will not vest automatically in the survivor (joint tenancy) but will form part of his estate and devolve according to the rules of French law of succession. In order to bring about "joint ownership" of the land the spouses, buying directly, have the choice of adopting the French matrimonial regime of "communauté universelle" with an "attribution intégrale" clause or opt for a "pacte tontinier". This "pacte" has the effect of making the "joint owners" of the property with the whole of the property vesting in the survivor at death, the whole operation taking place quite outside the rules of French law of succession and therefore being unaffected by them. Until recently this method of purchasing was often shunned at its lacked inheritance tax efficiency, but this should now change, as since September 2007 as a result of the amendments introduced to French inheritance tax by the conservative government of President Nicholas Sarkosy, inheritance tax on death has been abolished as between spouses.

4. Donation au dernier vivant : see above

5. Life Insurance : see above

As between unmarried partners:

The situation for unmarried partners is more difficult and the options available more complicated. However the situation for French residents has been significantly improved as a result of reforms introduced since September 2007.