Transferring assets

Transferring assets raises many questions, because the law determines the heirs, except in the case of testamentary provisions, for which freedom is relative.

Taxation is a major question when a person deceases but also when anticipating death.

The management of the estate can also be anticipated.

Who can inherit ?

In the absence of a will or donation between spouses, the sequence and the share of each heir is set by the law :

If the deceased is married and only has children who were born within the bonds of his marriage with the surviving spouse : will be entitled to the estate : the surviving spouse and children. The share of each will be determined according to the rights granted by the law to the surviving spouse. The surviving spouse will have the choice between : either having the usufruct (i.e. : beneficial interest) of all the assets, and the children will inherit the bare ownership of the same assets; or the surviving spouse can choose sole ownership of one quarter of the estate, and the tree quarters left then go to the children.
If the deceased is married and has children from different unions : will be entitled to the estate : the surviving spouse and children. The surviving spouse will be granted sole ownership of one quarter of the estate and the remaining three quarters will go to the children.
If the deceased is not married and has children : the totality of the assets will be divided into equal shares and will go to the children.
If the deceased is married but has no children and still has his mother and his father or one of them : each parent will receive one quarter of the estate. The surviving spouse will receive half of the estate, but the parents of the deceased will take back half of the property that their child had received by donation or inheritance.
If the deceased is married but has no children and has one father and/or mother still alive : the parent will receive one quarter of the estate. The surviving spouse will receive three quarters of the estate.
If the deceased is married but has no children, no longer has a father and mother, but has brothers and sisters : the surviving spouse will receive all of the estate. But the brothers and sisters of the deceased or their descendants will take back half of the property that the deceased received by gift or inheritance.
If the deceased is not married and has no children : each parent will receive one quarter of the estate. The surplus goes in equal shares to the brothers and sisters, or, if failing that to the nieces and nephews; if none, the heirs inherit up to the sixth degree.

What can be transferred by way of will or by donation?

You can give during your lifetime to the person of your choice, all or part of your estate. You can also write a will to change the sequence and the shares of the heirs as stipulated by the law. But children (and their descendants), and if none, the surviving spouse, are called « rightful heirs « : these heirs are entitled by law to a minimum share of the estate. This share is calculated by taking into account the assets left by the deceased as well as donations and benefits previously granted that will be collected and counted with the assets left by the deceased. If, as a result of a donation prior to the death, the rightful heirs do not get their minimum share, the recipient of the donation will, at their request, have to reimburse the heirs the amount they are entitled to. Similarly, a will or a donation between spouses can only be executed if the share of the rightful heirs is respected. Therefore, you can only dispose of a certain portion of your estate called “freely disposable portion”. By taking assets out of the disposable portion of your estate, through a donation or a will, you can favour the person you want even if this person is not one of your heirs. After death, the heirs may, however, give their consent in order to fully execute the donation or the will.

Since the 1st of January 2007, they can also give their consent during the lifetime of the one who agrees to give by way of donation or will. It is then necessary to establish a specific act which must be made by two notaries: this is the “anticipated waiving to the action by reduction”, called « family pact ». But if the waivers are in need at the deceased’s death, the waivers can challenge this waiving. If there are children or other heirs, the spouse must deduct from his/her legal rights what he or she has received by way of donation or will (see above "Who can inherit ?").

What is the disposable part of your estate?

You can give or bequeath the disposable part of your estate to the person of your choice. The size of this portion of your estate depends on your family situation. Be careful : if one of your children dies before you, his children will inherit in his name and share the assets your child would have inherited.

If you have a child (legitimate, natural or adopted) : this child will receive at least half of your estate. You are free to dispose of the other half.
If you have two children : they must receive two thirds of your estate divided equally between the two of them. You are free to dispose of the remaining third.
If you have three or more children : they must get three quarters of your estate, divided equally between all of them. You are free to dispose of the remaining quarter.
If you do not have children but you are married : your spouse must receive at least one quarter of your estate. You are free to dispose of the remaining three quarters.
If you do not have children, and you are not married : you are free to dispose of all of your assets.

What does the surviving spouse receive?

The law of the 3rd of December 2001 has significantly improved the situation of the surviving spouse. (See above « Who can inherit ? »). However, in many cases, it will be necessary to draft a will or to make a donation in order to give as much as possible to the spouse and in order to ensure greater security for the survivor. A prenuptial agreement or a deed of amendment to your matrimonial system can help to pass on to the surviving spouse more rights in relation to the common assets than a donation to the « last survivor » between the spouses. The estate is reduced accordingly, especially from a fiscal point of view. However, the effect of these provisions may be limited at the request of the stepchildren. They can then file for an action called “retrenchment ». It is therefore not recommended to prepare such an act when children are not common heirs.

The law provides :

If you have children. The surviving spouse may receive at the most either the freely disposable portion in full ownership, which varies according to the number of children (see above “What is the disposable part of your estate ?”), or the entire usufruct (i.e.: beneficial interest), or three quarters in usufruct and one quarter in full ownership.
If you have no children. The spouse is the sole heir and can receive all the assets of the estate.

Since the 1st of January 2007, the spouse must deduct from his/her legal rights what he or she has received by way of donation or will (see above « Who can inherit ? »). The more the spouse will have received by way of donation or will, the less he or she will receive according to the law.

If there are children or other heirs, the spouse must deduct from his/her legal rights what he or she has received by way of donation or will (see above « Who can inherit? »).

Our law office can help you to transferring assets.
Seineo is located in Boulogne-Billancourt (92) near to Paris (75).

The right to the family house and its furniture
to the benefit of the surviving spouse and civil partner

The law recognizes the surviving spouse and civil partner a right on the family house. During the year following the death, and without having to perform any formalities, the survivor can stay in the family house for free. If the house is rented, rent will be paid by the estate. After one year, and if the house belongs to the two spouses or to the deceased spouse or partner alone, the survivor can apply to receive a lifetime right on the family house and the right to use furniture. The survivor has to indicate his desire to do so during the year following of death.

How to draft a will?

A will is a way to favour one of the heirs, to ensure the future of the surviving spouse, to bequeath property to a third party, to distribute accurately the different assets between the heirs. You can state provisions in your will that are not related to your estate: for example, you can appoint a guardian for your minor children.

Holograph wills

Any adult can write a will on his own : the will must be entirely handwritten, dated and signed. The will cannot be a joint will, which means that each person must write a separate will, even if it contains the same provisions, for example for the supervision of common minor children. This holograph will is legally valid and gives rise to no cost. But it is exposed to the risks of loss, destruction or litigation if the deceased did not respect the legal conditions of form and substance.

Holograph wills entrusted to a notary

It is safer to seek advice from a notary who will help the testator write the will and who will make sure of the validity of the will. Entrusting a will to a notary avoids any risk of loss or destruction, it is almost always registered in the Central File of Last Wills Provisions (without its content) that all notaries always interrogate when someone dies.

Wills made by deed

The safest way to draft a will is by deed: in this case, you dictate your « last wills » to a notary in the presence of two witnesses or of another notary. This form of will is the only option for people who cannot write themselves. It is also recommended for the very elderly in order to avoid any challenge of the validity of the will by evicted heirs. The will made by deed is a guarantee of security because it is very difficult to contest. It has a definite date and is registered at the Central File of Last Wills Provisions.

Bequests

You can leave a specific asset (Table, real property, money, etc.) to a designated person : this is called « specific bequest”.
You can leave a portion of your assets, specifying only the portion of the whole or the nature of the assets : this is a “universal bequest” (for example, a quarter of your assets or all of your furniture or all of your real estate).
You can also leave all of your assets, without more details, to one or more people: this is the « universal legacy ».

Changing the provisions of a will

A will may be amended or supplemented at any time by additional provisions (« codicil »).
You can also write a new will that cancels the previous one. Only your « last » wishes matter, but only if they cancel the previous ones; hence, the importance of the drafting of a will.
A will can also be simply cancelled: you can destroy it yourself or you can contact your depository notary.

Litigation over the will

Heirs who deem the will to be unfair may initiate a legal action to request the cancellation of the will or to request a partial enforcement. The reasons may be various : the will does not fulfil the formal requirements of the law, the deceased was not sane when drafting the will, the will does not respect the share of rightful heirs.

The estate settlement

When someone dies, the heirs have six months to pay the inheritance tax. In order to avoid penalties, they should contact a notary as soon as possible to settle the estate.

The acceptance of the succession

The deceased’s estate consists of his or her property (assets) but also of his or her debts (liabilities). If the liabilities exceed the assets, the estate is in deficit: this is a burden for the heirs. They can either accept or renounce to inherit. « The acceptance up to the net assets » is a compulsory-intermediate formula when the heir is a minor or protected adult. They collect the assets without risk : the heirs will pay the deceased’s debts only to the extent of the value of the assets they have received. A notary must establish the inventory of the estate within two months of the date of acceptance. The inventory will then be published, which gives creditors fifteen months to submit their claim. Those who declare their claim are paid within the limit of the value of the estate; and the rights of those who do not declare their claim will extinguish. As of the 1st of January 2007, this formality no longer requires the heir to auction off the assets it even allows the heirs to keep a few. Be careful : certain acts, such as selling an asset from the estate (but not the act of paying urgent debts such as funeral expenses, rent, taxes, etc.) can be considered as an acceptance of the estate.

Taxation

The transfer of assets by gift or inheritance is subject to transfer taxes.

The amount of these taxes depends on the extent of the estate and on the relationship between the beneficiary and the grantor. Distant relatives, cohabitants or third parties are heavily taxed: up to 60% of the value of the assets. The spouse and the surviving civil partner are fully exempt of taxes.
Each child benefits from a fiscal allowance on the value of assets transferred by his mother or his father.
Therefore, it is possible for parents to transfer assets to each one of their children tax-free to the extent of this allowance (See below).
This discount can be applied once every fifteen years. Upon the parent’s death, a child cannot benefit from the discount if he or she has already used it for a donation less than fifteen years ago.
Each grandchild receives a allowance of € 31,865 on the assets transferred by each of his/her grandfather and grandmother. This discount applies only to donations.
Furthermore, special deductions and allowances exist in certain cases. They are related to the quality of the beneficiary (a handicapped person…) or the nature of the assets (new buildings, woods and forests, etc.).

The tax benefits of donations

The scale of fees to be paid and the amount of allowances that can be deducted are the same (with some exceptions) that are applied for inheritance and gifts. But the latter have several advantages that can significantly reduce taxation.

Very incentive legal dispositions have been taken so as to reduce donation fees considerably.
The grantor may transfer the bare ownership and retain the usufruct. The tax value of the asset will be reduced depending on the grantor’s age by applying a scale of the value of the usufruct.
The fees will be more or less reduced depending on the grantor’s age and whether the donation occurs in bare ownership or in full ownership. Be careful, some measures may be temporary.
The grantor can decide to support the costs and fees of the donation. This additional « gift » is not considered as a donation and is not taxable. This is a considerable saving when the percentage of fees is high.
It is possible to benefit from tax allowances every fifteen years.
When a grantor dies, donations made over fifteen years ago are not taken into account for tax purposes.

Allowances and exemptions (applicable as of the 1st of January 2010 and changed every year)

Allowances for donations and legacies (they are the same) :

Children (living or represented) : €100,000
Brothers and sisters : € 15,932
Nieces and nephews : € 7,967
A handicapped heir : € 159,325 (it is possible to add this allowance to the other ones)
General deduction (for legacies only) : € 1,594
Specific provisions related to legacies :
Surviving spouse or partner : exemption
Specific provisions related to donations :
Spouse or partner : € 80,724
Grandchild : € 31,865
Great grandchild : € 5,310

N.B.: It is possible to benefit from tax allowances every fifteen years.

The mandate with posthumous effects (applicable since the 1st of January 2007)

This mandate is intended to prevent any management difficulties of the estate after one’s death. This power of attorney is highly recommended, especially when a business is involved in the estate or when certain heirs are under 18, or if some are very young, inexperienced or vulnerable adults. This provision allows you to entrust the management of all or part of your estate to one or several agents acting in the interest of your heirs for a period of two to five years. While establishing this mandate, a notary’s advice will make it easier to anticipate the potential difficulties in the management of the estate.

What are the formalities to establish a mandate with posthumous effects?

The mandate with posthumous effects must be established by deed. The presence of the authorised representative is not mandatory but is recommended in order to ensure that he or she accepts his/her mission. It is essential to ensure good grounds for establishing the mandate, i.e. to explain that the heirs do not fulfil the requirements or cannot perform the agent’s mission (lack of experience, incapacity, vulnerability…).

What are the agent’s powers?

The scope of powers of the agent and the object of his mission must be defined in the mandate; they may be limited to one asset (business management only) or to a specific mission (sale of the company or a defined asset) but this mission can be much more general. The agent administers and manages all or part of the estate in accordance with the provisions defined in the mandate. The agent can also sell some of the assets in the interest of the estate, if this possibility is provided. This mission can be free or paid (by the heirs). It depends on the scope of the mission entrusted, on the agent himself, on the duration and the time it takes. The judge may be referred to and can control the agent’s mission. The judge is also enabled to revoke the power of attorney in certain cases.