Déjà vu? Changes to the French Civil Code and forced heirship
If you own property in France you will probably be aware that in England and Wales there is a great deal of freedom over the contents of your Will which is not replicated in many European countries, which often operate a form of “forced heirship”.
Under forced heirship rules certain family members receive by law a specified share of your estate, whatever your Will says. For example, in France if an individual dies leaving children, those children are entitled to a reserved portion of the estate. An only child is entitled to one half of the estate, two children to two thirds, and three children or more to three quarters of the estate assets. These rules have applied in the past to UK nationals owning property in France because under UK succession rules the law of the country in which a property is located determines who inherits it. For many years, as French law says that an only child receives half of the estate that was what had to happen to French property even if you were not French.
Many of the estimated 200,000 UK nationals who own French property have sought to avoid these laws. Trusts do not help as they are not recognised in France but other methods, such as owning the property “en tontine” have been used. Owning property en tontine means that the property passes to the surviving spouse on death and forced heirship will not apply to that asset on the first death.
The situation for UK French property owners was simplified somewhat by the introduction in 2015 of the EU Succession Regulation 650/2012 (often referred to as Brussels IV). Despite the UK not opting into the regulation, its effect for UK and other foreign nationals owning property in France (and indeed in any EU country) is that the owner can elect for the succession law of their nationality to apply to French property. If no election is made the succession law of their habitual residence at their death will apply.
For example, Jack bought an apartment in Cannes before his marriage to Catherine. They have two children, but Jack wishes the apartment to pass to Catherine on his death. Before the introduction of the EU Succession regulation, a gift of the apartment in Jack’s Will to Catherine would have been insufficient as English law provides that French succession law (including forced heirship) should apply to property in France.
After the introduction of the succession regulation, as Jack is a UK national, he elects in his Will that England and Wales succession law should apply to the apartment and on his death it passes under the terms of his English Will to Catherine.
So far so good, but in August the French Parliament introduced a complication to the position by incorporating a new provision into the French Civil Code. This provides that if a deceased person, or one of their children, is a EU national or habitually resident in the EU, if foreign law determines who inherits French property, and that foreign law does not provide for a “reserve” for children as incorporated in French law, each child and their heirs can claim compensation from the French property. French Notaires are given a legal obligation to contact the deceased’s children and invite them to make a claim against the estate. The amendment came into effect on 1 November 2021.
The Civil Code amendment affects Jack’s position as at the time of his death Jack and Catherine have an estranged son, Tom, living in Germany. Tom, when invited to do so, makes a claim against the French property with the ultimate consequence that Catherine is forced to pay Tom’s claim to avoid joint ownership of the property or its sale. It is important to note that if Tom had been habitually resident in the UK at the date of Jack’s death the amendment would not apply, no compensation would be due to Tom and the apartment would pass to Catherine.
At first sight these new provisions circumvent the EU Succession regulation and questions must be raised as to its compatibility with the existing regulation. There are also practical questions that have yet to be answered. For example, what is the position if there is more than one eligible child but only one makes a claim? Who decides out of which assets the compensation should be paid? How will the notaire establish the nationality and habitual residence of the deceased’s children? Will this mean a return to holding property “en tontine”?
No doubt the answers to these questions will become clearer over time, and it must be a possibility that the EU courts could refuse to recognise the Civil Code amendment because of its incompatibility with the EU Succession regulation. In the interim clients with French property should be aware of this change and its possible consequences, particularly if you have children living in the EU or you live in the EU but retain British nationality and have elected for English law to apply to your property.
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Our private client solicitors have considerable expertise in advising on high-value international Wills and estates and preparing Wills to protect overseas assets, including forced heirship considerations. For expert advice, please contact us on 0800 652 8025 or contact us online.