Can I Give My Daughter My French Property?

Now that my husband has died, I would like to sign over our French home into my daughter’s name. She’ll be visiting me regularly anyway and plans to leave the UK to live in France sometime over the next 10 years. It seems easier to sort it all now, but what are the tax implications in France and the UK? Would she pay less inheritance tax this way? 

As you are a French resident, your worldwide assets are subject to French succession tax, and this applies whether your beneficiaries live in France or not. In France, each beneficiary is liable to pay tax on the amount they receive, with rates and allowances varying depending on their familial relationship with you.

The French succession tax rules also apply to lifetime gifts. Since the house will be classed as a lifetime gift, your daughter would need to pay succession tax calculated on the value of the house. She would be entitled to an allowance of €100,000 but, after that, tax will be applied at scale rates, starting at 5% for the value under €8,072 and rising over six bands to 45% for any amount over €1,806,677.

From a UK perspective, the gift would be seen as a potentially exempt transfer and the normal UK rules would apply if you are still considered UK-domiciled. There are also anti-avoidance rules regarding gifts, where you reserve the right to live in the property.

The position would be different if you pass the property to your daughter on your death as an inheritance. This is thanks to the UK/France double taxation treaty on inheritances, which determines that if you are a permanent resident of France at death, you are deemed French-domiciled for succession purposes, so your French home is only subject to inheritance tax in France and not in the UK.

You also need to think carefully about whether gifting your home outright to your daughter during your lifetime is the best approach for you. Besides losing control of the property, you may also lose certain tax allowances such as the main home exemption for capital gains purposes. However, one popular method of reducing the impact of French succession tax is to give the home away (or nue-propriété, the underlying freehold) to your daughter while retaining a lifetime right to remain in occupation and/ or to the income. The right to use the property and income is known as the usufruct (usufruit). The younger the donors, the more effective this technique is.

The asset value is considerably reduced by this method. It saves tax at the time, and when the usufruct ceases on the death of the parent(s), there is usually no further succession tax to pay. The usufruct holders have the right to occupy the property during their lifetime and the nue-propriété holders cannot force a sale during this period. There may also be UK inheritance implications if you remain UK-domiciled; in this case take professional personalised advice.

You did not mention if you have other children. Under French succession law, they should receive equal proportions of your overall estate. If you did gift the house entirely to one daughter, you would need to have enough other assets to cover your other children. This is a very basic summary of a complex legal regime. You need to take specialist advice on how the rules affect your family and how you could gain more freedom to divide your estate up as you wish.

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Blevins Franks are experts at helping British expatriates make the most of their wealth in the most tax-efficient way possible. Their overriding aim is to give you peace of mind that your financial affairs are in order, for today and the future, for yourself and your family and heirs. They can help you if you are already living in France, planning to move there, or returning back to the UK.