French property ownership and Inheritance: Indivision, Tontine, and SCI

Should you own your property ‘indivision’, ‘en tontine’, or as a ‘société civile immobilière (SCI)’? What effect do these ownership options have on inheritance rights and taxes, and when do you need to decide? Here’s what you need to know about French property ownership.

French Property Ownership: The Basics

The buying procedure in France is relatively simple, but one common pitfall for French property buyers is not taking the time to understand the different ownership options. If you are married or buying a home with a partner or other joint owners, how you choose to own the property will have implications on your inheritance rights and inheritance taxes further down the line.

Most importantly, this decision can only be made when you purchase the house and cannot be amended later, so it’s imperative to be informed before you complete the purchase. This must be decided upon and included in the final Acte de Vente.

Under French property law, there are three ways in which two or more people can own a property together—En Indivision, En Tontine, and Société Civile Immobilière (SCI)—each of which we will look at in more detail later. Which one to choose depends upon several factors, most notably the relationship between the owners (whether you are married, in a French Civil Partnership or PACS, in a free union, or unrelated), whether or not you have (or plan to have) children, and your plans and preferences regarding your inheritance.

French Property Inheritance and Taxes

How you choose to own your French property will affect who inherits the property upon the death of one party. Under French law, if you have children, a set percentage of your assets will go to them upon your death—it is not possible to leave all your assets solely to your spouse or to elect for them to go to another person of your choosing. This includes children from previous marriages for both parties.

In situations where this is not desired, you may wish to purchase your property ‘En Tontine’ or as an SCI (more on this below). Under EU regulation 650/2012, it is also possible for non-French nationals to elect for the law of their nationality to apply to the succession of their estate in France. For example, a UK national with a home in France could elect in their Will for their French property to fall under UK law and therefore leave it to the person of their choosing. However, this does not allow you to opt out of French inheritance tax laws, so it may not be as simple an option as it sounds.

All of these things mean that it’s highly recommended to seek specialist advice on property ownership and inheritance before you purchase a property in France.

The Different Options for French Property Ownership

There are three ways in which two or more persons buying a property in France can hold the property. Let’s take a closer look at each one.

Owning a French Property En Indivision

“En indivision” is the most common way to purchase a property in France, and it’s the option that the notaire will generally choose to insert in the purchase deed unless specifically instructed otherwise by the buyers.

Essentially it’s a joint ownership, equivalent to a ‘tenacy in common’ under English law. Two or more people can own the property, each holding a set share of the property—for example, a married couple paying equal shares may opt to own the property 50%-50%, while another couple, contributing different sums to the property purchase might split the property purchase 60%-40%. (Note that this percentage will also affect the resulting percentage of the property that would be passed down to each spouse’s children, including those from previous marriages).

Inheritance laws concerning ‘En Indivision’ properties

Owning a French house ‘En Indivision’ means that on the death of one of the parties, a percentage of their share of the French property will pass to the deceased’s children, who will then become joint owners with the surviving party. Historically, this has led to situations in which inheritors have forced a surviving spouse to sell the property in order to claim their inheritance. Even in more amicable situations, it still means that all joint owners can have a say in decisions regarding the property, including if and when to sell.

Thankfully, there are rules in place now that serve to protect the surviving spouse, but this can still cause problems, especially in larger families or those including multiple children from previous marriages. In cases where a couple wish for the entire property to pass to the surviving spouse, the couple can also enter into a French Marriage Contract or Régime de communauté universelle, which is drawn up by a notaire.

This means that the children will still be entitled to their inheritance, but only when both parents are deceased. It does not, however, make provisions for children outside of the current marriage, and while not impossible, many notaires will not allow a marriage contract in these circumstances.

There are two other ways to protect the surviving spouse. One is to make provisions for this in your Will, as previously mentioned. Another is to purchase the property “En Tontine” (as detailed below).

Buying “En indivision” is not only an option for married couples or those in a civil agreement or PACS. However, under French law, inheritance tax is not applicable to assets passing between spouses. For this reason, many couples purchasing ‘En Indivision’ do opt to marry or enter into a PACS.

Owning a French Property En Tontine

The second way of owning a French property is “en tontine”. That is approximately the same as persons owning a property as “joint owners” under English law (where the English property passes on the first death automatically to the survivor). Under tontine ownership the entire property passes on the first death to the survivor absolutely.

The disadvantage of owning the property “en tontine” is in relation to the amount of French inheritance tax (“droits de succession”) payable on the deaths of the owners. On occasion, this type of ownership can significantly increase the amount of droits de succession depending on the personal circumstances of the owning couple (as high as 60% in some cases). This is particularly the case with high-value properties and where either or both of the parties have a child or children from a previous marriage.

Owning a French Property Société civile immobilière (SCI)

The third way of owning a property in France is through a French property-owning “partnership” called a “Société civile immobilière” or SCI.

This structure is not appropriate for people who plan to live in the French property as their main residence. It’s usually recommended for persons buying more expensive properties due to the increased annual costs and bureaucracy associated with such a structure.

French Property Ownership: What You Need To Know

If all this sounds complicated, it’s because it is! French inheritance law and inheritance taxes can be a minefield, and it’s essential that you fully understand the implications of the ownership option that you choose.

This is especially true in situations where an unmarried couple or group of individuals wish to purchase a property, where substansial assets are concerned, or in marriages where one or both parties have children from previous marriages.

When purchasing your French property, your notaire will be able to advise you on your options. However, they are unlikely to be able to advise on aspects relating to international property ownership and inheritance laws. That’s why it’s highly recommended to seek advice from a legal professional before moving ahead with your property purchase. See our directory for Legal Advisors that specialise in French law.

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