Overseas Chambers of Peter Harris

Maison de la Boucterie
Rue de la Boucterie
Saint Saviour
Jersey, JE2 7ZW

Charitable bequests and the effect on Charities claiming against French successions of the new French prélèvement successoral

October 25th 2021

This is further to my other articles on the subject posted here,  on Linked In and elsewhere.

Given the pre-Brexit tax changes in France extending the equivalent of their charitable exemptions for succession duty, "under the cosh" of CJEU decisions, many English owners of property in France had sought to leave their French assets to English charities by English law wills.

The position has now changed significantly with the introduction of the prélèvement successoral, and with children taking exception to being excluded from rights in France by English law wills being applied under the EU Succession regulation. Note that charitable donations may no longer be as fiscally attractive as before,  post-Brexit.  Whther the fiscal advantages still hold good for non-EEA charities is another matter.

I am going to approach this issue and the developments in it from the testator's and then from the children and spouse's (the reserved heirs) point of view, finishing with the Charity's position:

The testator

Following the coming into force of the EU Succession regulation (EU) n° 650/2012 in 2014, there has been a great deal of interest in attempting to apply English law to French property on the death of an English (i.e. British) national or resident to deal with their French assets. I will not go into any detail on those issues here. Many international advisors have admitted that the process of using an English law will to deal with French assets within the context of the Regulation can turn out to be counterproductive in certain areas.

The situation has now changed considerably since the introduction of the prélèvement successoral which will affect deaths after 1st November, 2021. (see www.overseaschambers.com).

Whilst the new French prélèvement rule does not override the provisions or procedures in the Succession Regulation, it effectively atttempts to work around these as the succession to French assets in France cannot be dealt with otherwise than by a notaire whose rôle is to draft and sign off what is known as a certificat or attestation d'hérédité which serves to transfer the asets and liabilties directly to the heirs and legatees.

From the testator's point of view article 10 of the Succession Regulation which deals with subsidiary jurisdictions of Member State's courts might provide a way through the conflictual maze for the British testator wishing to disinherit his otherwise reserved heirs:

Article 10

Compétences subsidiaires

1. Lorsque la résidence habituelle du défunt au moment du décès n'est pas située dans un État membre, les juridictions de l'État membre dans lequel sont situés des biens successoraux sont néanmoins compétentes pour statuer sur l'ensemble de la succession dans la mesure où:

a) le défunt possédait la nationalité de cet État membre au moment du décès; ou, à défaut,FR L 201/118 Journal officiel de l'Union européenne 27.7.2012

b) le défunt avait sa résidence habituelle antérieure dans cet État membre, pour autant que, au moment de la saisine de la juridiction, il ne se soit pas écoulé plus de cinq ans depuis le changement de cette résidence habituelle.

2. Lorsque aucune juridiction d'un État membre n'est compétente en vertu du paragraphe 1, les juridictions de l'État membre dans lequel sont situés des biens successoraux sont néanmoins compétentes pour statuer sur ces biens.

It is very important therefore not to leave French assets outside the quotité disponible, for example to charities as the notaire is required to inform issue and reserved heirs of their entitlement, and it would not take much mental arithmentic to realise that any amount given to English or other charities under an English will might also be recoverable against the French assets as well.

 

The reserved heirs:

The surviving spouse is now possibly a reserved heir, and the children are reserved heirs. Whilst the amendment to article 913 Code civil was advertised in the travaux préparatoires as empowering female heirs to be compensated for their diminished share of assets under shari'ah law (where appliocable under the EU Succession regulation) from French assets otherwise passing to their male siblings, the actual scope of the legislative amendment goes much further.

Given the current interest in setting aside parent's testamentary dispositions by disgruntled children, the current English vogue for leaving property in Europe to British Charities is likely to become an expensive busineess, as French law now favours the reserved heirs, irrezpsctive of whethr they are muslim or otherwise.

All it takes is for one disgruntled heir to have EU nationality or be resident in an EU Member State for the French prélèvement option to be exerciseable.

As mentioned the notaire dealing with the French assets has to call in all persons potentially entitled under the succession, surviving non-divorced spouse, bloodline and adopted children etc. in the first instance and also those claiming rights under lifetime liberalités, which includes wills. The notaire is required to read the rights out to the reserved heirs and to ensure that they have understood their position and their potential entitlement.

Charities:

It is at that point that the matter can become conflictual. Any charity seeking to take and enforce a French legacy should by then have take or required time to obtain advice as to their position. If they are also beneficiaries of wills in England or elsewhere from the same estate, they should also have attempted to calculate or estimate the value of any excess that they have received outside France over and above any quotité disponible on the whole estate - French and foreign assets included. That might be administratively difficult.

Post-Brexit, they should also bear in mind that they are probably not entitled to the same exemptions from succession duty that they might have enjoyed prior to 31st December 2020.

In short, take advice.

 

Published by

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.
French prélèvement successoral and hashtag#charities.