The handing down of an estate on the owner’s death - as in the case of inheritance or by means of a donation - is subjected to certain obligations involving a declaration and payment of taxes. While taxes due on an inheritance or donation are identical, a donation made during the donor’s lifetime offers several advantages. For example, the reductions granted for this type of donation are renewable every ten years and the taxes can be paid directly by the donor. Furthermore, until June 30th, 2005, donation taxes to be paid on assets handed over in full ownership benefit from a reduction of 50 % (idem for usufruct donations, on condition that the donor is under 65 years old). Until June 2005, the French government will also exonerate from any tax all donations made by a parent to his children, up to 20,000 euros per child (subject to official declaration).

Formal declarations
When someone dies, his/her direct heirs or the surviving spouse must declare the gross amount of the inheritance if it is above 10,000 euros. This formality can be handled by a lawyer or one of the heirs, who are jointly responsible for paying the tax. Declaration forms can be obtained from the Tax Receipts Office and returned, duly completed, to the same address within the six months following the death. Donations of properties or sums of money must also be declared officially.

The right to allowances
Inheritance tax, which is identical to tax payable on donations, is calculated on the net share received by each heir after deduction of any debts and funeral expenses (up to 1,500 euros). The value of any donations made less than ten years ago is added to the value of the estate. Before calculating inheritance tax, each heir benefits from an allowance on his/her share (idem for donations) : 76,000 euros on the share attributed to the surviving spouse, 46,000 euros on each share attributed to direct-line heirs (children, grandchildren, parents, grandparents), 1,500 euros on shares received by brothers or sisters, 57,000 euros for the person related to the deceased by a PACS (civil pact of solidarity). In all other cases, the allowance is 1,500 euros. These allowances are deductible from any others from which the heirs may already have benefitted in the event of earlier donations made by the deceased in their favour, and this over the past ten years.

Taxes to be paid
Each heir or beneficiary of a donation must pay taxes on his/her fraction of the net share (following deduction of allowances). These taxes must be paid when the declaration is delivered to the Tax Receipt Office. The rate applicable varies depending on the relationship between the beneficiary and the deceased, for both inheritances and donations. Direct-line inheritance or donation : up to 7,600 euros : 5 % ; from 7,600 euros to 11,400 euros : 10 % ; from 11,400 to 15,000 euros : 15 % ; from 15,000 to 520,000 euros : 20 % ; from 520,000 to 850,000 euros : 30 % ; from 850,000 to 1,700,000 euros : 35 % ; over 1,700,000 euros : 40 %. Inheritance or donation between spouses : up to 7,600 euros : 5 % ; from 7,600 euros to 15,000 euros : 10 % ; from 15,000 to 30,000 euros : 15 % ; from 30,000 to 520.000 euros : 20 % ; from 520,000 to 850,000 : 30 % ; from 850,000 to 1,700,000 euros : 35 % ; over 1,700,000 euros : 40 %. Inheritance or donation for brothers and sisters : up to 23,000 euros : 35 % ; over 23,000 euro : 45 %. Inheritance or donation for persons linked to the deceased through a PACS : up to 15,000 euros : 40 % ; over 15,000 euros : 50 %. Inheritance or donation for relatives up to and including 4 times removed : 55 %. Inheritance or donation for relatives more than 4 times removed, or for non-related persons : 60 %.

Legacies and donations exonerated from tax
Legacies and donations made to the State, public establishments of a scientific, educational, assistance or charitable nature, regional bodies, counties, communes, hospitals, social centres, charities, public aid institutions, cultural associations, authorized congregations, the “Conservatoire de l’Espace Littoral” in applicable areas (legacies of buildings only), civic or council housing bodies, the National Office for War Veterans and War Casualties.

By Gilbert Gay-Parme