Any transfer of money or real estate, or the death of a person, is subject to a tax called inheritance tax due to the State. This tax was implemented during the French Revolution. At the time, she intended to make citizens contribute to the country’s finances in proportion to their assets. Today, it still exists. Expensive, it is interesting to look at the several cases in which exemption is possible. It all depends on the affiliation link (spouse, parent, children, third party, etc.). Maître Frédéric Teper, associate lawyer at the Arsene Taxand law firm, member of the National Bar Council (CNB) and tax referent within the CNB, takes stock.
What exemption is possible for inheritance tax?
In terms of inheritance tax, the tax depends on the filiation relationships. For example, “the spouse, husband or wife, is exempt from inheritance tax. It’s a Status very advantageous“, says Me Teper.
“All assets are subject to inheritance tax, whether movable or real estate.“, whether they are located in France or abroad, indicates the Public Service. Real estate includes land, houses, apartments, real estate rights (usufruct, bare ownership).
How can you avoid paying inheritance tax on real estate and transfer your assets free of charge?
On payment of this tax, “exceptions are provided for, in particular depending on the situation of the deceased or the type of property. The main exemptions from inheritance tax are linked to the situation of the deceased and the type of property transferred“, we still read on the Public Service website.
This is particularly the case for:
- spouses of deceased persons with special status (victim of war or act of terrorism, police officer, firefighter, gendarme, customs agent)
- assets such as those in life annuity reversion, historical monuments, real estate located in Corsica
Who can be exempt from inheritance tax? What is the ceiling for not paying any?
Depending on the affiliation with the heirs, whether children or not, the exemption from inheritance tax does not include the same rules. In detail, with or without children:
- “In the case of a couple without children, the transfer to the surviving spouse will be made without payment of inheritance tax. The same will apply in the presence of other heirs for the share due to the surviving spouse, whether it is an inheritance between spouses or between partners in a PACS,
- As for the children who inherit, they benefit from a reduction of 100,000 euros each on their share of the inheritance, if they have not already benefited from the reduction during donations made during the 15 years preceding the inheritance. death. Beyond the amount of the reduction, the net taxable portion is subject to a progressive scale ranging from 5% to 45%. The 20% bracket concerns the taxable fraction between €15,932 and €552,324.”
Direct line donation: here’s how to minimize the tax on your children’s inheritance
To reduce inheritance tax on children’s inheritance, three methods are suggested by the lawyer:
- “The simplest method, as long as the household has liquid assets, is to make monetary donations every 15 years, starting as early as possible.“
- “It is also possible to make successive donations of shares in full ownership or bare ownership every 15 years up to a limit of €100,000 in order to eliminate or reduce rights at the time of death. Of course, the establishment of these structures presupposes an agreement between parents and children and requires the advice of specialists..”
- “Another, complementary method is to take out life insurance early enough. Children are not completely exempt from inheritance tax but they can benefit from a reduction of €152,500 on the fraction of premiums paid before age 70.”
Another method: dismember the property (house, apartment, land)
In the presence of several heirs, children or not, a fairly common method consists of “dissociate bare ownership and usufruct of real estate or shares in an SCI who is the owner of the property.“
The lawyer explains: “For example, the donation of bare ownership by a parent, aged over 51 and under 60 at the time of the donation, who would retain the usufruct, benefits from a reduction based on 50 %. At the time of the death of the usufructuary, the union of the usufruct and the bare ownership in the hands of the heir is carried out with total exemption from inheritance tax..”
Donation: why it is better to exit real estate assets before age 70
There are many advantages to organizing your inheritance before the age of 70: the reduction ceilings for donations drop significantly, those made to an association are tax deductible, the value of the usufruct is higher, etc.
How to reduce inheritance tax after age 70?
After age 70, this is the age at which inheritance can start to become more present. Succession can be optimized thanks to the donation in bare ownership (transmit property during one’s lifetime). He retains the usufruct and transfers bare ownership even if the advantage will be reduced compared to a procedure carried out before the age of 70.