In France, you cannot disinherit your children and you must pay inheritance fees. But, did you know that there are ways to legally remove certain assets from inheritance?
According to French laws, no one can disinherit their offspring because of hereditary reserve. It is a rule that allows the estate of the deceased to be split fairly and to transmit a minimum to the reserved heirs (descendants) or the surviving partner if there are no children. Depending on your situation, mandatory inheritance fees will apply to the inheritance. And, they can weigh heavily in the balance! Did you know that although you cannot disinherit your children, you can legally exclude real estate from the estate?
What is the hereditary reserve?
According to Article 912 of the Civil Code, when a parent dies, the law requires that a part of the deceased’s assets be transmitted to his or her descendants. This part is called the hereditary reserve. The goal is to pass on a minimum of inheritance to one’s children so that they are neither harmed nor excluded, particularly in the event of family conflicts. The rest of the assets can be freely transferred to other people. Therefore, with the principle of hereditary reserve, it is prohibited to disinherit a child in France.
However, there are three legal systems to circumvent this hereditary reserve as long as you know the rules well. Since taxation is complex, you can also seek help from a wealth manager to avoid any abuse or fraud.
The 3 solutions to exclude real estate from inheritance
Life annuity sale the property disappears from the inheritance
According to articles 1968 to 1983 of the Civil Code, when you sell real estate under the life annuity system, you transfer the right of ownership to a third party purchaser, the deliberator. The latter must pay an annuity to the seller, the annuitant, until his death. Regarding the amount of the annuity, it corresponds in full to the sale price of the property. Depending on the negotiations, it can also be accompanied by a part paid in cash called the “bouquet”. This second option is very regularly used
The life annuity allows real estate to disappear from inheritance since there is a transfer of ownership
The life annuity is an interesting solution, but uncertain, since you do not know the date of death of the annuitant. The longer he lives, the more the debtor will have to pay annuities. On the other hand, if the annuitant dies quickly, the annuitant will obtain full ownership of the real estate quickly. And, he will therefore have paid much less than its real value. It’s a bold bet on the future. The annuitant retains a right of use and habitation to be able to find accommodation until his death. In addition, this allows him to receive a retirement supplement.
In all cases, an annuitant may also wish to transfer ownership of his main residence via life annuity to remove it from his inheritance. This real estate will not appear in the assets upon his death. Thus, this can be more advantageous in the calculation of the hereditary reserve.
SCI is the creation of a real estate company for the rights of partners
You can circumvent the rules of the hereditary reserve by creating a Real Estate Company (SCI). This prevents any request for sharing, particularly if there is disagreement because the company belongs to the partners. The latter can incorporate real estate into the company. When creating an SCI, the partners must include a tontine clause on the shares for the surviving partner. He will become the owner of almost all of the shares in the event of the death of the other partner.
So, when a partner dies, the shares cannot be contributed to the estate. The real estate concerned will not be considered in the calculation of the estate assets of the inheritance. On the other hand, be careful! If the sole purpose of the SCI is to circumvent the hereditary reserve, the SCI can be canceled.
The tontine to transfer full ownership to the surviving spouse
Also called an increase clause, a tontine clause can be integrated into the authentic deed when a couple buys real estate jointly. Indeed, with this protective clause, the surviving co-purchaser will obtain full ownership of the property retroactively. This means that he will be considered the sole owner of the property upon purchase. The descendants of the deceased co-purchaser will receive nothing. The real estate will belong to the surviving spouse and the hereditary reserve will not take it into account for the heirs.
This tontine clause is a solution regularly used when unmarried couples buy and there are already children from a first union
This helps protect the inheritance if one of the partners were to die. Complete ownership of the real estate transfers automatically to the survivor. The marital status of the couple or the existence, or not, of descendants on the deceased’s side will not be taken into account in the calculation of the hereditary reserve.
