Should I give my French Property to my children?

The first and most important questions to ask yourself are – do you really want to give away your French home, and can you afford to?

You should ask yourself if you have enough other assets to support you into old age, should you need a high level of care towards the end of your life. If the answer is no, then perhaps selling the property and giving your children a proportion of the sale proceeds may be a better way to proceed.

You should also consider if you would like to use the property going forward and how you will feel if your children restrict your access to it or decide to sell it (either by choice or because they divorce or go bankrupt).

Finally, you should also ask yourself whether your children really want the property. Although they may have a sentimental attachment to it, do they have the time, energy and finances to keep it? If your children are thinking about buying a home in England, they should know that owning a home in France will be taken into consideration when calculating Stamp Duty Land Tax (SDLT), meaning that they will have to pay the additional ‘second’ home rate of SDLT.

If you wish to gift your property in France you will need to go via a French notaire, and there will be legal fees in connection with this.

If you are resident in the UK, you should be careful about giving part of your home away to the children. It is common in France to ‘dismember’ the ownership of your home when gifting to your children. When doing this, you keep the use of the house (the usufruit), but the underlying ownership (the nue propriété) passes to the children, and they become full owners on your death. Although this can be a tax-efficient way of gifting in France, if you are living in the UK, you may end up incurring unintended UK tax consequences.

If the property is in France, but you are in the UK, you will need to consider French gift tax and UK inheritance tax and UK capital gains tax.

In the UK, you do not pay a gift tax when giving away property, but if you die within 7 years (or longer if you keep using the property), then additional inheritance tax can be payable on your death.

If your property has risen in value since you acquired it, UK capital gain tax may also be payable at the time you give it away. This will be calculated at the open market value of the property on the date that you give it away.

Capital gains tax is not charged in France on making a gift, but if the value of the property that you are giving to your children is high enough, then your children will need to pay French gift tax.

The answer to this question is specific to each person. Your financial and personal circumstances will determine whether giving away your property is right for you, and for your children.

Sometimes there can be high amount of capital gains tax payable when giving your property away, whereas if you simply left it to your children in your Will there would be no capital gains tax payable (the gain is ‘washed out’ on death). If your inheritance tax allowances are high enough there also may be no inheritance tax payable. In these situations, holding onto the property may be the best course of action.

In other cases, if you think you will live seven years, don’t want the property anymore, your children really want the property (and can afford the property) and the capital gains tax charges are not large, it will absolutely make sense to pass the property onto your children to enjoy during your lifetime.

Each family’s situation will be different, so there is no ‘one size fits all’ piece of advice here. However, if you carefully consider the points above it will help you to reach a decision that is right for you.