Protecting your loved ones: a story of yesterday, today and tomorrow
Article up to date at 1 August 2022, drafted in accordance with French legislation in force, and applicable to individuals whose tax residence is in France.
Behind wealth there is a story; the story of a business, or of wealth built over many generations. As with other personal parameters, each story comes with a goal on how best to protect those close to you, be it today, tomorrow, or both. Other than the provisions of French law, what other the measures that you can take for your spouse, your children... and yourself?
For spouses, there are several possibilities
The first step is to take care when choosing your matrimonial regime. It has a bearing on the rules for administering a couple’s assets upon succession, and on the calculation of the pool of assets.
Today in France the default regime is community of acquests. These are shared property: property acquired onerously by the couple during the course of the marriage, but also capital-gains, wages, as well as income from the individual property of each spouse. Upon death, the estate of the deceased spouse comprises in principle their own property, and half of the shared property.
Under the separation of property matrimonial regime, drawn up as a marriage contract prior to the marriage, there is no jointly-owned pool of assets. However, they can be property held in common, and individually-owned property.
Irrespective of the regime you choose, the spouses can sign a notarised donation to give the surviving spouse a larger portion of the estate by allowing them to choose from options that may be more favourable than those provided by law.
Also worth noting is that matrimonial regimes are not set in stone; in some instances, it is even advisable for couples to amend their chosen regime during the course of the marriage, provided that both agree and that any changes are in interest of the family. Also, since March 2019, couples no longer need to wait two years for changes to be made. The applicable fees and procedures are determined by a notary on a case-by-case basis.
Possible amendments include:
Under a separation of property regime, adding a special clause in order to ringfence an acquired property, possibly with a praecipuum clause that will allow the surviving spouse to deduct upon death, before any division, of one or more designated property: for example, the principal residence - for example, the primary residence.
The adoption of a system of universal community with full attribution clause, under which all property acquired or received by the spouses before or during the marriage is considered common. This is a very protective regime for the spouse, which must be completed with an early wealth transfer strategy in order to manage the tax burden for which the children of the deceased are liable.
Sometimes drawing up a will is a good solution for managing specific assets, like shares in a company which can have an impact on governance matters. In all cases, the chosen measures should be reviewed on a regular basis.
For children, the ‘time horizon’ is an important factor
Protecting your children can start today and continue into the future. Naturally, the options are different to those on offer for spouses.
In what ways can you help your children get a professional or real estate project off the ground?
A number of solutions exist, and they don’t all necessarily involve donations. One example is to create a company and make your children shareholders so that they can benefit as the business grows.
And what about making sure that your children will be able pay inheritance tax?
Transferring assets can be a costly affair, particularly if unplanned. In principle, an estate and the associated rights and payments must be settled within six months. If the heirs have insufficient funds, they may have to sell some of the assets in the estate, possibly in a down market. In this case, it would be advisable to appoint the children as beneficiaries of one or more insurance policies to provide them the necessary funds to pay their inheritance tax. This transfer of death benefits takes place within a limited time frame and has a reasonable tax amount.
Can you decide to gift your assets to your children in your lifetime?
Yes, it is possible, and it cannot be recommended enough if you wish to start transferring your wealth to your children during your lifetime.
Such inter vivos gifts (donation-partage in French) can be drawn up in the same deed as an early transfer of estate. The latter benefits from advantageous civil rules that considerably limit any conflicts arising out the settlement of the estate.
Remember that such protection is not only for your loved ones; it concerns you first and foremost.
What if you’re not longer able to protect your interests?
While judicial provisions (such as guardianship, curatorship…) do exist for this eventuality, they may be not be suitable either because of the deeds they provide for or their period of implementation. Here, “conventional” protection measures - that is to say, not pronounced by the judge – encompass different mandatesand namely the future protection mandate: the appointment of a person or persons of trust to ensure the protection of your personal interests as well as the administration of your estate. A true asset for protecting yesterday and today’s assets tomorrow.
Our experts at Societe Generale Private Banking work alongside your wealth advisors to assist you in making these decisions.
Would you like to discuss this subject further with us?
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