Could France be reforming inheritance and gift taxation?

A proposed law aims to modify inheritance tax rates to encourage the French to transfer their assets.

Several senators have introduced a bill to reform the taxation of inheritances and gifts/donations. According to these elected officials, the transmission of assets in France should be raised in line with the demands of modern life

The objective of this bill is to rebalance a system that currently benefits the very wealthy at the expense of other taxpayers. By simplifying inheritance taxes and making the system fairer the bill’s authors think it would be possible to move towards laws that are simpler and more equitable.

Debated in public session on the 23rd of October 2019, the text considers in particular:

• To make the sacrosanct children’s hereditary reserve more flexible (i.e. by reducing its amount) thus enabling one to make more donations
• To promote inter-generational transmissions by significantly increasing the allowance, by gift or inheritance between grandparents and grandchildren, from €1,594 in the event of death, and €31,865 for a gift to €150,000. Similarly, in the case of succession to a nephew or niece, the allowance would be increased to €50,000 (currently €7,967)
• To improve the deadline for the remittance of previous donations for tax purposes from 15 to 10 years (the period necessary to fully restore the amount of the allowances), provided that the donor is under 40 years of age at the time of the transfer
• To introduce a new scale of progressivity in the taxation of inheritances, to limit existing threshold effects
• To include the proceeds of Assurance-vie to the taxable element of one’s estate “thus to minimize today’s widely observed tax avoidance habits, due to the excessively advantageous taxation of this asset.”

The proposed law to adapt inheritance and gift taxation to the demographic, societal and economic challenges of the 21st century, was registered by the French Senate on the 9th of September 2019.

Published on the 19th of November 2019 by Daniel Butcher, estate planning attorney at DTB Wealth Management, associate Partner of VIA La Plateforme Patrimoniale.