kernow_c

Hello

We are thinking of buying a holiday home in France. We are UK tax resident. Rather than buy it in our own names our idea is to buy it in our names plus the names of our children, hence gifting a share to them as part of inheritance tax planning. Firstly can anyone advise on any issues with this and secondly should we do it in individual names or through a CSI. Any adcise/experience would be appreciated.
Thanks

Alfresco

Hi, I have moved this to the French forum for you.

InVinoVeritas

Welcome to the French forum.

I think you mean an SCI and yes that would seem an obvious solution. If your children hold shares in the SCI then they would only be liable to capital gains tax on a sale (which will wash out the longer they hold the shares) and not to inheritance tax. I'm not sure what the Day 1 tax situation would be when you initially purchase the property through the SCI in which your children hold shares - maybe it would be be prudent for the SCI to have a mortgage.

I'm sure others will be along with more advice.

dmu

Hi, and welcome to the forum!
We did just that when buying an appartment, but without the bother of an SCI (which the Notaire didn't suggest).
We gifted the maximum to our children over the years and they are now joint-owners; we the parents both have usufruit.
The Notaire is best placed to advise, but this worked very well for us.

cyrian

I have looked at this and decided to reject both options.
I have come across the situation where after the death of both parents, the children lost the calming influence of the parents and basically fell out over money.
Option 1 - owning a company.
One of the children wanted their money out and the other child didn't.
The second child refused to buy out the first (or agree a sale) and ended up with sole use of the property and the first got nothing.
If the property passes to the next generation then it gets more complicated.
Option 2 - shared ownership.
The same situation applies because if one child doesn't want to sell and the other one doesn't. In France, all the owners need to agree the sale.
My children get on with one another but I did not want to create potential conflict where non exists.
If you decide on either of your proposed options then you need to include a legally binding agreement (agreed by the children and the parents) which will lay down the rules for the exit by one party.
Sorry, I do not know the mechanism for that in France.

kernow_c

Thanks to all for your comments. I guess firstly we need to be sure it would not cause future family strife and worry about inheritance planning second. We may rent out all of part of the property, does the SCI have any advantages or disadvantages over individual ownership? There will be no borrowing to offset so could the SCI be both taxed and then any drawings come out as dividends, perhaps with social charges?

petitefrancaise

Is there a mechanism for for bypassing French inheritance law this easily???

If you want to avoid conflict then just sell the house before you die.....

How do you envision your last years? Falling asleep peacefully in your own bed doesn't seem to happen very often. Sorry for the cynicism/realism. Talk to the notaire about the best way to handle things for your family after you've died, it could be rather different to what you think

kernow_c

Thanks. It seems it's definitely one for the notaire. We see ourselves staying tax resident in the UK and probably ending up gaga without a clue of what's going on. I'm not really an pessimist!

dmu

OH has been advising a family member on SCIs. It sound as complicated as a normal company (AGMs, Accounts, Tax declarations, etc...) and you'd need to pay a specialised Agency to do all the paperwork. Not only that, but there is a "Droit de Succession" (as opposed to "Taxe de Succession") levied on the parents' shares of the property that the shareholder heirs inherit. Which, he says, virtually comes to the same as paying the Taxe de S. on a "normal" inheritance.
As suggested, and if you have no intention of retiring to France, why not sell your property when you get to an age when you can't cope with travelling?
Make sure you understand all the options that the Notaire proposes - French Property Laws and Procedures are so different here and sometimes impossible for "foreigners" to accept.

InVinoVeritas

There are lots of advantages in using an SCI but there are costs too so it may only be justified for a more expensive property.

I think the droit de succession tax rate is significantly less than the donation tax rate but again the abattement on an inheritance may well have a bigger impact on a cheaper property. There is also a timing consideration when it comes to paying the tax, with an SCI the payment can be deferred considerably.

The advice of a good notaire will be essential in making the right decision.

Bonnet

When we bought our first home in France we included a clause of tontine in the agreement. That effectively meant that with a will we could stipulate what happened to our property after death.
We don't have children but wanted to be sure some of our close family didn't benefit after not seeing them for half a lifetime. I am not sure if tontine still exists and whether it covers direct descendants...I seem to remember someone saying it had been replaced by another more "European friendly" law.

I might be up the gum tree but you could ask a solicitor just to be sure.

kernow_c

Aaaah. Seems like a minefield. Thanks for all your help, we will seek a notaire's advice but I feel we are trying to complicate matters, it's not a very expensive property. I guess we should just cough up our dues when the time comes but somehow it's hard to be taxed on what has already been taxed! It's the same the world over.