However, the treaty also says that UK inheritance tax would apply to assets passing in accordance with UK inheritance law. So if clients opt for UK succession law to apply to their estate, then their assets could be liable to UK tax as well as French tax. Clients get credit for tax paid in one country, but the 40% UK tax may be higher than that due in France.
If clients have carefully set up French arrangements to reduce succession tax for their heirs, this could all be undone if these assets become liable to 40% UK tax.
Brussels IV is such a new law this is untested, but it is definitely a possibility. Is it worth the risk?
Clients need to understand all the possible consequences for opting for UK law, and consider alternative arrangements for avoiding forced heirship.
For example, when buying a property a ‘tontine’ clause ensures it will pass to the surviving tontine holder. This option is only available at the time of purchase.
There are tax efficient investments available in France that fall outside French succession law. These are excellent vehicles to enable clients to leave assets to your choice of beneficiaries.
To make life more complicated, there are various types of marriage contracts in France.
‘Séparation de biens’ is considered the equivalent of the UK marriage contract. PACS partners also fall into this regime. Each spouse is treated as owning the assets acquired by them personally, and owning 50% of jointly held assets.
Generally, the default position for those married in France is the community marriage regime. There are different versions where all assets could be considered common estate; or all assets except real estate; or (the default position) where assets acquired before the marriage remain the property of the original owner.
Once clients have been resident in France for 10 years, and there are no children from previous relationships, they will automatically default to this regime, unless they take steps to prevent this.