Dave_in_Paris

St. Cirq,

It depends on what portion of the inheritance laws you want to "get around," and perhaps on your nationality. As Americans, under treaty terms, we were able for approximately 500 euros to modify our matimonial regime (determined in the absence of a prenuptual agreement by the law of the U.S. state in which we first resided after marriage) so that whichever of us survives will not have our joint estate probated. That will come when the second of us dies. This is no small matter in France, where inheritance taxes, even for spouses, are impressively higher than they are in United States. French people who want to similarly modify the legal structure of their marriage must go to court, and pay a tax on their net worth (and if they have children, a court is unlikely to grant their request). The notaire who "authenticated" the act under which we did this gently pointed out to us that French citizens were pretty jealous that folks like us could do it so easily, and I understand perfectly.

If you are thinking rather of the inheritance rights of children, or of their expossure to inheritance tax, I have a colleague who arranged for his children to purchase the Paris apartment he longed for, resolving the inheritance tax issue, but of course, potentially raising other in-family issues.

Much of this could be troubling, but I find it interesting.

Dave_in_Paris

Ken,

Are you sure that shares in the SCI won't be treated, in you or your fellow shareholder's estate, in the same manner that real estate or other assets would be treated ?

Dave_in_Paris

111op,

In France, you inherit debts as well as assets, and you may not know until after you've accepted the inheritance whether the estate's in the black or the red!

ckenb

St Cirq,

Unless there is some horrible surprise waiting for me, I don't think there is any annual fee or tax to pay on the SCI. My notaire explained that as long as the SCI has no revenues, there is no tax to pay. And that's been my experience so far.

StCirq

As I think I previously mentioned, de Particulier à Partculier publishes a series of booklets called Collection des Guides Pratiques du Logement - anyone planning to purchase property in France should read these or at least get pertinent parts stranslated if you can't read them. There is an entire booklet called Les Sociétés Civiles Immobilières (I think I should reread it).

It says, in the opening paragraph:

"Bien des idées fausses circulent au sujet de ces fameues sociétés civiles immobilières. On vous a peut-être conseillé de constituer votre propre SCI. Mais lorsqu'il s'agit d'envisager les raisons précises d'utiliser ce montage juridique plutôt qu'un autre, les plus convaincus deviennent moins convaincants.

Certes, la SCI a sa raison d'être; mais en réalité, c'est une formule trop souvent utilisée. Elle a aussi ses contraintes, qu'il vaut mieux ne pas sous-estimer.

La SCI n'est pas une formule miracle qui permettrait d'éluder droits de succession ou droits de mutation...."

It then provices 65 pages of highly specific advice about use of this instrument, which I'd want to read thoroughly before purchasing a property in that manner.

ckenb

Dave,

The notaire told me that if one of the partners in the SCI dies, the other one inherits his or her shares. But my understanding is that the SCI must be owned by at least two individuals, so the suriving partner would most likely have to take on a new business partner.

My understanding is that the shares are not considered personal property and are not subject to inheritance laws.

A French friend of mine has three children. She told me that those three will automatically inherit 3/4 of her estate -- 1/4 each. She said she can't change that, but she can leave the remaining 1/4 to whomever.

ckenb

I've also been told that if, for example, a niece or a nephew is a person's only heir, the inheritance tax is equal to 60% of the value of the property inherited.

111op

This discussion is all very interesting, I must say -- wish I could contribute in a more intelligent manner, but I know nothing about French inheritance laws.

What happens in the US? Are debts inherited too? (What a horrible thought.)

ckenb

Children do not inherit their parents' debts in the U.S. -- at least not in states I'm familiar with. I don't know about in France, but Dave says so and I don't doubt him.

Dave_in_Paris

Ken,

I did some reading on the SCI matter, My recollection is dim, but the mention of inheritance raised a small red flag. I do know that tontines don't help unrelated people -- at least did not in the case of a colleague of mine. At the least, an SCI should make the proportions of ownership perfectly clear, and that could be vital in case of any legal contest.

ckenb

The point about a surviving partner "inheriting" a deceased partner's shares in an SCI is not really a matter of inheritance. It is a clause that can be written into the by-laws of the société (corporation).

111op

I guess the next obvious question is -- if someone is a dual citizen (say French and American), which laws govern?

Dave_in_Paris

You can renounce an inheritance in France. But you may not know whether you are turning down a fortune or saving yourself from crushing debt.

ckenb

I believe that the laws of the country where the property is located would apply to inheritance of that property. In other words, if I owned property in France and died without spouse or child, my mother would inherit it. Or my sister. For example. If I owned a house directly with a partner (not as part of an SCI), that partner would have to buy out or rent from my heir or heirs.

111op

I don't understand that, Dave -- well, I guess it depends on how well you know the person who's leaving the inheritance, no? If everything is "public," more or less, surely an accountant can figure if the end result has a net surplus?

Dave_in_Paris

111op

In our case, French laws govern, even with regard to U.S. assets, because we exercised those treaty rights to our advantage in France. At least, France fervently believes that's the case. God knows what various U.S. jurisdictions may claim!

ckenb

Not much about an individual's assets is "public" in France. Spouses don't automatically inherit from each other, and can be married under absolute "séparation des biens". I've known couples where one spouse had money in the bank or owned property that the other spouse didn't know anything about (supposedly).

What I said about my mother, say, or my sister inheriting my privately owned property under French family law would apply even though my relatives live in the U.S. I think the SCI would prevent that from happening and protect two partners who want to property to each other even though they are not married or blood relatives.

ckenb

"... who want to LEAVE property to each other ..."

Dave_in_Paris

Unless things have changed since I last read and discussed the business of inheriting debts, the problem is that there is a drop-dead time for accepting or rejecting the inheritance, which practically can be before a full accounting of the estate. (Even in the case of U.S. estates, it may take quite some time for debts to become evident.)

There are even more delicious complications in France. Imagine the case of a couple with one or both spouses having children by previous marriage(s). In the unlikely event of their death in a "common" auto accident, an "expert" judgement must be delivered as to who died first -- by a nano-second, if necessary -- to determine the inheritance rights of the children. It's all Napolean's fault!

Dave_in_Paris

Ken,

Here's my musing, with the answer perhaps buried in those 60-odd pages of St.Cirq's PAP pamphlet. If the SCI "charter" provides that shares will be inherited by the surviving partner, does this mean there's no inheritance tax, or does it simply mean that no one else related to the deceased can claim those shares as part of the estate?