French property and real estate - The legal side

By Mark Russell
Be warned - The Legal situation in France regarding property ownership is very different to that in the United Kingdom. French succession law and is its provisions may come as a surprise to English buyers who are used to the idea of leaving property via wills. Family situations are often complex these days, with second marriages, step children etc and provisions usually need to be made at the time of purchase to avoid difficult circumstances later on.

Tax planning, succession laws and wills The usual method of joint ownership in France is that of indivision. This means that each spouse owns half the property, rather similar to the tenants-in-common situation in England. If a married couple want to buy a property together, they usually want the survivor to have ownership of the property after the first death. This will not automatically happen as the legal nature of the indivision method means that when the first spouse dies, at least half their French estate must go to that person’s children. The remaining spouse therefore does not have freedom to do with the property as he or she wishes.

There are alternative options for tackling the inheritance and succession rules. The important thing to bear in mind is that you need to do any planning before you purchase and not after. A French Notaire will be able to assist you with a French Will, effecting a ’Clause tontine’ if applicable, or a change of matrimonial regime if applicable. Whatever you decide to do, there is likely to be an impact upon the eventual effect of the Inheritance tax situation, so that should be taken into account as well.

Inheritance Tax is more demanding than its equivalent in the UK. There is potentially tax paid upon first death in France, unlike Great Britain where IHT does not impact upon married couples until the second death. Nil rate bands are much less generous than in the UK, although they have been improved in 2005. Tax can be payable at up to 60%, so unmarried couples especially need to plan financially for a sizeable amount of their property/estate to go to the taxman, unless proper precautions are put in place.

Those who decide to go and live in France permanently will find that their worldwide assets are then subject to French succession law as opposed to just the French real property. In these circumstances, it would almost certainly be worth adopting an appropriate marriage regime. Another useful solution to some family situations is to set up an SCI. An SCI is a company set up for the management and letting of property. If the property is bought by the SCI, the members of the SCI own shares rather than property. As shares are considered to be personal property, not real property, then English succession law applies and the shares can be left in accordance with the deceased’s wishes.

Mark Russell is founder of Limousin Homes - The specialists in real estate and property sales in the Limousin region of France. For more information visit http://www.limousinhomes.com

Article Source: http://www.ArticleBiz.com