Tax dodge of the week: avoid French inheritance tax

Anyone buying a house in France should consider inheritance tax before they buy, says Elaine Moore in the FT. If you don't plan ahead, you may find that the surviving spouse loses out to your children.

A recent rise in IHT thresholds means that up to e76,000 of an estate can go to a surviving spouse, e150,000 to each child and e15,000 to siblings, tax-free.

Sounds generous, but French succession laws are unchanged. Under Napoleonic code, a percentage of your property has to be split equally between your children: if you have two children, say, two thirds goes to them, leaving just a third to dispose of as you wish.

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To sidestep these rules, the surviving spouse should opt for an 'usufruct', so he or she can keep living in the property, albeit with no legal rights to sell it.

Another option is to buy your home through a company so it is treated as moveable property (ie, shares), not real property. Real property is transferred under French law, but moveables transfer according to the owner's country of domicile, which means French IHT laws would no longer apply. Much depends on individual circumstances, so seek independent advice on how to proceed.