How do French inheritance and succession laws work?
Charles Purdy, currency expert at Smart Currency Exchange, discusses the minefield that is overseas inheritance, and how careful currency planning can help ease the burden.
When a loved one who lives overseas passes away, it can often create a number of financial complications for the family left behind. Inheritance is something that needs to be considered carefully by all parties, especially when an overseas estate is in question. It’s a complicated area, and France is one of the most complicated countries in this regard. We always recommend consulting an independent lawyer and financial advisor to ensure all your interests are represented and so that you are aware of all your liabilities.
UK Inheritance Tax – a question of domicile
The amount of UK Inheritance Tax that needs to be paid depends on where the deceased was domiciled. It is important to note that ‘domicile’ is not the same as ‘residence’ or ‘nationality’. Your domicile is the country where you make your permanent home. If you have left this country to live elsewhere overseas, but plan to live there again at some stage, this is your domicile.
If those living overseas are not domiciled in the UK, the taxman still treats them as such if they were domiciled there within the three years immediately before any transfer of inheritance funds is made.
Under current inheritance tax rules, if those living overseas are not domiciled in the UK, the taxman still treats them as such if they were domiciled there within the three years immediately before any transfer of inheritance funds is made. This is also the case if resident in the UK for at least 17 of the 20 income tax years of assessment, ending with the year in which any international transfer is made. If they are domiciled overseas, UK Inheritance Tax is only charged on any UK assets, but if they live abroad, yet are still domiciled in the UK, any worldwide assets are likely to be subject to UK Inheritance Tax.
Inheritance Tax thresholds
Inheritance Tax is currently payable at 40 percent on any amount you leave over £325,000 if you are single or divorced, and £650,000 if you are married, in a civil partnership, or widowed. This threshold remains frozen until at least 2019, however, we do not as yet know if this will be revised in 2019.
Transfers between spouses
Transfers between spouses are exempt from Inheritance Tax if both are domiciled in the UK. If their spouse or civil partner is not UK domiciled for Inheritance Tax purposes, there is a limit on the amount that can be transferred Inheritance Tax-free of £55,000 for individuals who wish to pass money on when they die to their spouse or civil partner.
Maximise the value of the estate through currency planning
In most inheritance cases, you will have an Inheritance Tax sum to pay, but you can maximise the value of any estate left to you by using a currency specialist to ensure you get the best available exchange rates and avoid banking and transfer fees. Currency specialists can also lock in an exchange rate that works for you using a specialist currency product called a forward contract, allowing you to forward buy currency at a set rate for up to a year. This is a good idea to protect yourself from exchange rate fluctuations when currency markets are volatile, especially if you have any large inheritance sums to transfer between countries, or ongoing regular payments needed after that. The savings all start to add up, so it is worth investigating for peace of mind at a difficult time. France Property Guides work with a trusted, qualified independent lawyer on inheritance issues in France. Get in touch with them today.