How much tax does the tax authorities deduct from an inheritance? MoneyVox offers you a series of 3 practical cases on inheritance tax produced by Maître Patrice Bonduelle, notary in Paris. Here is the example of a 67-year-old widowed woman who has an estate of more than 1 million euros. How much will she be able to pass on her 3 daughters without paying taxes? Episode 3.
According to the Inequalities Observatory, only 13% of inheritances are subject to tax. Yet the French are upwind against inheritance tax. But how are they calculated MoneyVox offers you 3 practical cases carried out with the help of Maître Patrice Bonduelle, notary in Paris. This is the last episode of this series.
The situation
Madame X, a 67-year-old widow, has three daughters and owns assets consisting of 800,000 euros in cash and securities accounts, 200,000 euros on 3 life insurance contracts and an house value 450000 euros Guidel in Morbihan.
How will the succession take place on the death of Mrs. X?
On the death of Mrs. X, who has left no will, the distribution will be as follows:
- The 200,000 euros on the three life insurances will yield 66,667 euros for each child;
- The 800,000 euros of financial assets and cash will yield 266,667 euros each;
- The house is worth 450,000 euros or 150,000 euros per child.
The sum received under the life insurance is not part of the assets of the estate and benefits from a specific reduction when the sums are paid before the insured’s 70th birthday, as is the case here. The allowance is 152,500 euros per beneficiarythe sums received by the children are therefore exempt from the specific levy under Article 990 I of the General Tax Code (CGI).
The taxation of life insurance in the event of death
The sum received by each child will therefore be 416,667 euros (266,667 + 150,000). As the amount of the allowance between a parent and his child is 100,000 euros, the tax base will be 316,667 euros (416,667 100,000). To which the direct line rate (777 CGI) should be applied, i.e. a tax of 60,147 euros per child for a total of 180,441 euros.
Does Madame X have to make a donation?
The donation of sums presented on life insurance is not recommended since they are exempt thanks to the abatement of 152,500 euros.
On the rest of the estate, the available allowances are 131,865 euros per child, the ordinary allowance of 100,000 euros (art. 779 CGI) can be combined with the allowance for donations of sums of money of 31,865 euros (art. 790 G CGI).
Taxes: this jackpot that you can give your children without paying anything
Mrs X can therefore make a donation up to the available deductions, i.e. a total donation of 395,595 euros (131,865 x 3) to the three children tax-free. At his death, he will only have to transmit around 404,405 euros (800,000 to 395,595) in cash.
Regarding the house, it would also be possible to give bare ownership to children. The dismemberment of ownership is advantageous since the reconstitution of full ownership (when the usufruct ends on death) is not taxable. The value of the usufruct is therefore never taxed. It is nevertheless not recommended to make this type of donation on the main residence. We will therefore consider that Madame X retains full ownership of her house, underlines Master Bonduelle.
If the estate of Madame intervenes less than fifteen years after the donation , the reductions will not be renewed. The base consists of the house in an amount, after legal abatement (if applicable) of 20% of its market value, i.e. 450,000 euros (the abatement not being applicable here), as well as remaining cash transmit 404405euros or 854405euros.
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Each child will therefore receive 284,802 euros. The direct line rate should be applied, ie 53,774 euros per child, therefore 161,322 euros in total. The donation anticipates a, in this situation, allowed to save 19119 euros (180441 161322) tax.
If the estate of Madame intervenes more than fifteen years after the donation, it is advisable not to redo a donation in order to keep part of one’s heritage. Assuming that the values remain the same, 404,405 euros in cash and 450,000 euros in respect of the principal residence remain to be transferred, for a total of 854,405 euros.
Each of the children will receive 284,802 euros. The reduction having been renewed, the tax base will be 184,802 euros (284,802 100,000). To which the direct line rate should be applied, ie 33,774 euros per child, and a total of 101,322 euros.
Conclusion
The anticipated donation allowed tax savings of 79,119 euros (180,441 101,322), explains Matre Bonduelle.
Episode 1: it is not necessary for the couple to anticipate transmission to the children
Episode 2: A reflex that allows you to avoid thousands of euros in inheritance tax