Estate planning with overseas child

aroominyork

This might be a 'take professional advice' issue, but in case it is straightforward I am posting it.

Spouse and I plan to update our wills. Everything will go to the surviving spouse and then to our two children. Possibly importantly, given the French context, they are my wife's children from her earlier marriage so are my step-children. 

Our daughter lives in London. Our son lives in France, is tax resident there, has a French wife and, later this year, will be eligible to apply for French citizenship. (It is probably not relevant that both kids are also dual nationals UK/Australia). 

The issue is whether he will be liable for French tax for droits de succession for money he inherits from us?

Keep_pedalling

I don’t know the answer to your question,  but as a blended family you should both seriously consider including an immediate post death interest trust in your wills to prevent the surviving spouse disinheriting a step child. Consult a STEP solicitor who is qualified to advise on trusts when drafting your wills. 

poseidon1

Short answer is no, on the basis that it is the tax residency of the deceased and location of the inherited assets that determine whether the inheriting French resident beneficiaries are exposed to droits de succession  see article below- 

https://www.french-property.com/guides/france/finance-taxation/inheritance/taxes#:~:text=Accordingly, even though a beneficiary,UK and other European countries.

However, as a non French residents you and your wife should avoid owning French property ( always liable to droits de succession regardless of foreign residency). 

Equally important, neither of you should slip into becoming French tax resident prior to death by breaching the 183 days residency rules. Hopefully unlikely during your lifetime, but is it possible your spouse might consider a permanent move to France to be with your son's family, on your passing?

aroominyork

poseidon1 said:

Short answer is no, on the basis that it is the tax residency of the deceased and location of the inherited assets that determine whether the inheriting French resident beneficiaries are exposed to droits de succession  see article below- 

https://www.french-property.com/guides/france/finance-taxation/inheritance/taxes#:~:text=Accordingly, even though a beneficiary,UK and other European countries.

However, as a non French residents you and your wife should avoid owning French property ( always liable to droits de succession regardless of foreign residency). 

Equally important, neither of you should slip into becoming French tax resident prior to death by breaching the 183 days residency rules. Hopefully unlikely during your lifetime, but is it possible your spouse might consider a permanent move to France to be with your son's family, on your passing?

Thanks, very helpful. And presumably there is likewise no French tax implication on us gifting to him during our lifetimes - subject to UK/IHT seven year survival?

Keep_pedalling

aroominyork said:

poseidon1 said:

Short answer is no, on the basis that it is the tax residency of the deceased and location of the inherited assets that determine whether the inheriting French resident beneficiaries are exposed to droits de succession  see article below- 

https://www.french-property.com/guides/france/finance-taxation/inheritance/taxes#:~:text=Accordingly, even though a beneficiary,UK and other European countries.

However, as a non French residents you and your wife should avoid owning French property ( always liable to droits de succession regardless of foreign residency). 

Equally important, neither of you should slip into becoming French tax resident prior to death by breaching the 183 days residency rules. Hopefully unlikely during your lifetime, but is it possible your spouse might consider a permanent move to France to be with your son's family, on your passing?

Thanks, very helpful. And presumably there is likewise no French tax implication on us gifting to him during our lifetimes - subject to UK/IHT seven year survival?

You can each gift up to €100k but over that becomes taxable.

https://www.kentingtons.com/news-blog/tax-planning/french-gift-tax/

aroominyork

Keep_pedalling said:

aroominyork said:

poseidon1 said:

Short answer is no, on the basis that it is the tax residency of the deceased and location of the inherited assets that determine whether the inheriting French resident beneficiaries are exposed to droits de succession  see article below- 

https://www.french-property.com/guides/france/finance-taxation/inheritance/taxes#:~:text=Accordingly, even though a beneficiary,UK and other European countries.

However, as a non French residents you and your wife should avoid owning French property ( always liable to droits de succession regardless of foreign residency). 

Equally important, neither of you should slip into becoming French tax resident prior to death by breaching the 183 days residency rules. Hopefully unlikely during your lifetime, but is it possible your spouse might consider a permanent move to France to be with your son's family, on your passing?

Thanks, very helpful. And presumably there is likewise no French tax implication on us gifting to him during our lifetimes - subject to UK/IHT seven year survival?

You can each gift up to €100k but over that becomes taxable.
https://www.kentingtons.com/news-blog/tax-planning/french-gift-tax/

Presumably gifts within the last 15 years but before he was a French tax resident are not relevant? 

Also, can I as a step-parent give €100,000 the same as a natural parent? From a bit of googling it looks like I cannot - all I can give is the €31,865 family gift. 

poseidon1

aroominyork said:

Keep_pedalling said:

aroominyork said:

poseidon1 said:

Short answer is no, on the basis that it is the tax residency of the deceased and location of the inherited assets that determine whether the inheriting French resident beneficiaries are exposed to droits de succession  see article below- 

https://www.french-property.com/guides/france/finance-taxation/inheritance/taxes#:~:text=Accordingly, even though a beneficiary,UK and other European countries.

However, as a non French residents you and your wife should avoid owning French property ( always liable to droits de succession regardless of foreign residency). 

Equally important, neither of you should slip into becoming French tax resident prior to death by breaching the 183 days residency rules. Hopefully unlikely during your lifetime, but is it possible your spouse might consider a permanent move to France to be with your son's family, on your passing?

Thanks, very helpful. And presumably there is likewise no French tax implication on us gifting to him during our lifetimes - subject to UK/IHT seven year survival?

You can each gift up to €100k but over that becomes taxable.
https://www.kentingtons.com/news-blog/tax-planning/french-gift-tax/

Presumably gifts within the last 15 years but before he was a French tax resident are not relevant? 

Also, can I as a step-parent give €100,000 the same as a natural parent? From a bit of googling it looks like I cannot - all I can give is the €31,865 family gift. 

It's somewhat better than that, and may encourage you ( if you have the means) to make a large gift sooner rather than later.

For foreign domicile French residents, droits de donation is avoided if the beneficiary has been French tax resident for less than 6 of the last 10 years - see article below -

https://www.frenchentree.com/french-property/law/gifting-money-from-the-uk-to-french-resident-children/#:~:text=There is a double taxation,@stoneking.co.uk.

Therefore with foresight and planning even droits de donation can be mitigated/ avoided depending on how long your son has been tax resident.

aroominyork

That's very helpful. I think he qualifies for <6/10 years, at least until the end of 2026. Interestingly (for some), his French wife's parents have just transferred their house to their children. A small amount of tax to pay, but France does not have gift with reservation of benefit restrictions. 

aroominyork

Keep_pedalling said:

I don’t know the answer to your question,  but as a blended family you should both seriously consider including an immediate post death interest trust in your wills to prevent the surviving spouse disinheriting a step child. Consult a STEP solicitor who is qualified to advise on trusts when drafting your wills. 

OH's will already has her half of our house going into trust for the kids. We saw the solictor yesterday who suggested mirroring this in my will so her half would likewise go into trust, the reason being so it is not taken into account when assessing assets for care purposes. 

aroominyork

I’m waiting to hear back from Interactive Investor about whether they will hold inherited SIPPs for non-UK tax residents (and I have just been put in touch with a UK/French lawyer who I will meet later this week). I expect ii to say they will not, and instead would distribute the funds to the beneficiary. Does anyone have knowledge/experience of this?

Also, is there any news on which assets will first be taxed with IHT post-2027 – SIPPs, non-SIPP assets, or equally across both categories?

silvercar

https://forums.moneysavingexpert.com/discussion/comment/81878964#Comment_81878964

I imagine the SIPP will be part of the estate and the estate charged, the tax people won’t care which part of the estate the money comes from.