Editor: the following text recaps an oral presentation given by Tim Ramier, well worth watching (42 minutes). It's on YouTube, and can be found on the AARO site, link is below, just scroll to the bottom of the text. (The following text summarises his presentation).
Surviving Death in France as a US Citizen
The Tim Ramier presented inheritance issues for US citizens in France. The key, no matter where you live, is to organize and plan, while you are alive.Residency
Both the US and France are interested in our estates, even if we are residents in France. For both countries your estate is based on your worldwide assets. Furthermore, if the estate (the “succession”) is handled in France, there is still an obligation to report to the US. Which country handles it depends on your residence status. Be aware that France determines residency on more than just presence in the country. If you have attachments in France (children in school, for example) you can still be considered a French resident even if you maintain your tax residence in the US, or elsewhere.Who inherits?
In the US you get to decide via a will. Probate is handled on the state level, not the Federal level. Generally, the surviving spouse is tax exempt and can inherit the total amount. The US is not interested in who inherits and will tax the estate before distribution. For 2013, only estates over $5,250,000 are taxable. The lifetime distribution of gifts is added back to the estate to determine the total.In France, there are forced heirs by law. The share of the surviving spouse or civil union partner is tax exempt and the amount you can leave by will is determined by the number of children. If there is one child, you can will up to 50% of your estate; two children, they will inherit 2/3 of your estate; and three or more children take ¾ of your estate. Each child has a €100,000 deduction and then pays tax on a progressive scale according to how much taxable estate is left. Other heirs (brothers and sisters, parents, nieces and nephews) have fewer tax exemptions and higher tax rates. Unrelated heirs pay 60% in tax and have only a €1,500 deduction.
The Process
In France, the concept of the estate is different; the “succession” is an automatic transfer of ownership at the moment of death. In France it is a notaire who manages the succession. In the US, on the other hand, the estate is an entity that exists from the moment of death until the settlement. The estate is managed by an executor or administrator, approved and empowered by a probate court, in accordance with your will or by petition to the court if intestate (no will).In France the family will receive a death certificate from the mairie (mayor’s office). The notaire will create the deed of heirship and will take care of all the official declarations to banks and the government.
In France, the heirs or legatees have 6 months to file an inheritance tax return and pay any taxes. In the US, taxes are due after 9 months, but there are extensions. When inheriting from a US resident estate, Tim recommended filing form 706 with the IRS, even if there is no US tax due, to avoid confusion in France.
What you inherit from someone resident and a US citizen in the US this falls under the US-France Estate Tax Treaty and the estate is not subject to double taxation. So if you fulfill the tax requirement in the US (even if nothing is due) you have fulfilled the requirements under the tax treaty and by virtue of the treaty provisions no tax on such gifts and legacies is payable to France. This treaty overrides local French tax law.
Some tips:
- Take inventory of your worldwide assets.
- Create an estate file including what you own, what accounts you have, who to contact. (A worksheet for this file will be made available to members on the AARO website.)
- Create a will – for France and the US
- Create a Health Care Proxy and a living will in
case you are incapacitated or have a terminal illness and you need to
name someone who will make healthcare decisions for you.
(Note: a living will, as Americans think of it, does not exist in France. In France there is the “Mandat de protection futur” wherein you can name a person to make financial and healthcare decisions in case of verified incapacity. It must be set up by a notaire.) You can also do French and American Powers of Attorney or Procuration to appoint someone to act on your behalf.
http://www.aaro.org/banking/424-fatca-update-and-french-inheritance-law
Here are the full-length videos of these two presentations.
FATCA with J. Fredenberger and T. Ramier:
Inheritance in France with T. Ramier and J. Fredenberger:
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