Is it possible to leave your French property to a UK charity in a will?

Is it possible to leave your French property to a UK charity in a will? Charlotte Macdonald, discusses inheritance law in France…

For many of my clients who are British expats, having moved to France for retirement, the work that charities do is important. Many will still have close ties to the British charities that they have supported throughout their lives. These people would like to continue to support their chosen British charity and many of them would like to remember them in their will. While still possible, this is more complicated now that they are living outside of the UK and own non-UK assets, especially following Brexit.

In the UK, we have ‘testamentary freedom’. Broadly speaking, this means that we can leave our assets however we like when we die. If we have fallen out with our family or believe that they are financially comfortable and don’t need any additional help, we can write a will in which we leave all our assets to a charity, and this is absolutely fine. There is no legal obligation to remember your family members in your will.

By contrast, in France there are ‘forced heirship’ rules on death. In certain circumstances you cannot simply leave all your assets to a charity. Generally, if you have children, or are married, you must leave a proportion of your assets in a certain way.

The proportion of your French assets that you must leave your family will be dependent on the number of children that you have. If you have one child, they are entitled to one-half of your assets, if you have two children they are entitled to two-thirds of your assets equally, and if you have three children or more they are entitled to three-quarters of your assets split equally between them.

The EU Succession Regulation 650/2012, also known as Brussels IV, came into force in 2015. It allows individuals to choose the law of their nationality to govern the succession of their estate on death.

Pre-November 2021 this gave British nationals, most closely associated with England and Wales, the full freedom to make a choice of English and Welsh law in their wills. So, if you were British, with children from whom who had become estranged (down to their bad behaviour or yours!) you did not have to include
them in your French will. You had complete freedom to leave your French assets to whomever you wished – this could be to the children whom you still wished to include in your will, your spouse, a friend, a different family member or a charity.

In November 2021, there was a change to French inheritance law. The consequence of this is that if you or any of your children are EU resident or an EU national at the time of your death, then any choice of British law in your French will could be undermined to an extent. The notaire in charge of your succession has to establish that either your children agree with the terms of your will (if your children agree with your will that is fine and the terms of it can be carried out), or if your children do not agree with terms of your will that they are ‘compensated’ and receive the minimum amount that they would had French law been followed.

This change of law is controversial for several reasons and the European Commission is currently considering whether a breach of EU law has taken place –
so it is possible that the law may reversed in due course. In the interim it means that if you or your children are EU nationals or EU residents, you will not be able to leave all your assets to a charity (French or British), unless all your children agree.

Assuming that you can leave all or a proportion of your assets to a charity based in the UK, there are a few things to think about.

Paperwork: On your death,the notaire dealing with your succession will need to ensure that they are paying funds to the correct organisation and that they have identified the correct individual at the charity to sign the required succession paperwork. The charity will likely need help from cross-border solicitors who can help them prepare and collate the correct documentation, allowing them to sign the necessary paperwork in France and accept the gift.

• Inheritance tax: If you are domiciled in France (under the 1963 double taxation treaty), broadly speaking your worldwide assets will be assessed for French inheritance tax. If you are domiciled in the UK, only your assets located in France will be assessable for French inheritance tax.

By contrast, if you are domiciled in the UK then broadly speaking your worldwide assets, including those in France, will be assessed for UK inheritance tax. Your assets located in France will also be assessable for French inheritance tax.

Both in France and in the UK there is 100% charitable relief to inheritance tax for qualifying charities – meaning that charities do not pay inheritance tax.
Pre-Brexit, there were rules in place to ensure that a qualifying UK charity would receive the same tax breaks as a French charity receiving an inheritance in France (and vice versa). Post-Brexit these tax breaks no longer exist, meaning that if you wish for a UK charity to inherit any of your assets based in France, they will likely pay French inheritance tax. A UK charity is now treated in France as an ‘unrelated beneficiary’ meaning that they can only inherit €1,594 free of French inheritance tax. Any amount over this amount will be subject to 60% tax.

if it is important to note that decide to simply leave your French assets to a French charity to avoid them having to pay French inheritance tax, then there may be UK inheritance tax to pay, as the UK charitable tax relief will no longer cover French charities.

In short, it is certainly possible to leave your French assets to a British charity. In most cases, you will be able to leave some of your French assets to a British charity in your will, and in some circumstances you will be able to leave all of your assets to a British charity. You may, however, wish to consider the inheritance tax consequences of leaving your French assets to a British charity, as the charity will likely need to pay 60% tax. It may be more suitable to benefit a French charity under your with similar purposes.

That said, as unfortunately the UK and France no longer recognise each other’s charities for tax relief purposes, before deciding which charity to benefit, it is sensible to consider where your assets are located, where you are located, and analysing the tax rules to ensure that your chosen charity can receive as much of your inheritance as is possible.

Charlotte Macdonald is a Partner in the international and cross border team at Stone King LLP.

Tel: 01225 337599

international@stoneking.co.uk

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