Tax reform: Merci, Monsieur le Président!

Written by Phil Heinlein

Phil Heinlein explains why home owners should welcome Nicolas Sarkozy's changes in inheritance tax

Whether you're a permanent resident of France or a second home owner living outside the country the reform of inheritance tax pushed through by Nicolas Sarkozy is likely to be of benefit to you. Most important is the new ruling that there is no inheritance tax to pay when property passes to one spouse on the death of the other. Surviving husbands or wives under the old system were often faced with crippling tax bills - and in some cases had to sell up and leave.

Also under the reforms the amounts that other legatees can receive tax free have been increased. As these are treated cumulatively if property is bequeathed to several individuals the overall tax liability is reduced. The tax free ceiling for children has been raised from €50,000 to €150,000. Other allowances have been increased by three times: that applying to siblings goes up from €5000 to €15,000 and that relating to nephews and nieces from €2500 to €7500.In cases where inheritance tax is payable it is charged on a barème of up to 40 per cent.

Before anyone asks there's no change in French inheritance laws as such which depend on the common European principle of "the reserved portion" and limits the way in which an individual can dispose of his or her estate. My colleague Damian Elwes discussed this point recently (see Reporter 121, and our website). This principle is unlikely to be modified and it's not out of the question could be incorporated into UK law in the interests of legal "harmonisation".

For detailed advice on tax and inheritance matters consult our financial services advertisers.

From Riviera Reporter 124, Dec 2007/Jan 2008

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