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66. Update on the recent French prélèvement compensatoire (article 913 Code civil), forced heirship and its potential conflict with the EU succession Regulation for "British" successions in France

September 14th 2021

I have already posted commentaries on the French prélèvement compensatoire, which is designed to extend the effect of French forced heirship rights over successions generally allowing a clawback from French assets to the extent that a child resident in France of the EU is not given an equivalent  reserved share under an applicable  foreign law.

On of the main theoretical objections to the French prélèvement compensatoire was that the Regulation overrode the application of French law where therewas either a choice of English law in the disposition under article 22, or applying the English law as the law of habitual residence of the deceased under article 21.

However, the Court of Justyice of the European Union has confirmed in a recent preliminary ruling C‑277/20 o a reference from an Austrian Court (French version available) that the Succession Regulation does not apply to liberalities made otherwise than by succession. In other words it does not apply to lifetime gifts. But that is not the end of the story as the Considerant (14) to which the Court referred has a further sentence which was not relevant to the Court's ruling and which was not cited in full.

I will set the consequences of this out here.

Were an English parent to make an inter vivos gift (technically outside the scope of the Regulation), that would not benefit from the Succession Regulation's protection, as the gift would itself fall outside its scope: by virtue of the first sentence of Considerant 14 which the CJEU set out:

(14) Property rights, interests and assets created or transferred otherwise than by succession, for instance by way of gifts, should also be excluded from the scope of this Regulation. ….

That notwithstanding, the issue does not end there.

The Considerant continues:

…. However, it should be the law specified by this Regulation as the law applicable to the succession which determines whether gifts or other forms of dispositions inter vivos giving rise to a right in rem prior to death should be restored or accounted for for the purposes of determining the shares of the beneficiaries in accordance with the law applicable to the succession."

The CJEU did not address this point in its ruling as it was not relevant to the Austrian donatio mortis causae before it.

In other words, if English law is applicable to the French succession under article 20, either through the nationality option under article 22 or by virtue of the habitual residence of the deceased under article 21, Considerant 14 states in effect that the prélèvement compensatoire (introduced after the Regulation came into force) should not be applied to any prior gifts in rem where the succession is governed by the law governing the succession to a right in rem over the immovable. In other words the only clawback permitted under the Regulation would be a clawback permitted by English law over lifetime gifts of rights in rem over immovable property, not under French law. There is no such clawback under English law, and the somewhat remote Inheritance (Provision for Family and Dependants) Act 1975 may not be applicable were the deceased to be domiciled outside the United Kingdom.

Lifetime gifts of rights in rem such as the nue-propriété of immovables with retention of a usufruit are frequent under French law on the recommendation of a notaire in wealth and succession planning. The question is, how far can a disgruntled heir go in asserting the new prélèvement against French property in the context of an international succession where they have not received the equivalent of the French reserved rights over the whole international succession? In legal terms Can France outstare the Regulation and the second sentence of Considerant 14?.

Normally, as I have pointed out elsewhere, children who are not EU nationals or who do not reside in the EU cannot take advantage of the French prélèvement successoral under article 913 Code civ. to undo their deceased parent's succession engineering in France. However, where one of their siblings does so qualify, they all can benefit from the domestic French changes.

 

The question is does the Succession Regulation provide the final answer? Contact me for advice on the issue.

Peter Harris

peter.harris@overseaschambers.com

direct line + 44 1534 625879

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Peter Harris
Barrister at Overseas Chambers. French & British national. Helping other lawyers, taxpayers and advisors in cross border law and tax issues in English and in French. Jersey, English+UK, French, EU law. and taxation.