The debate over inheritance rights has poisoned the presidential campaign. The report on the rich in France published by the Observatory of inequalities puts a coin in the machine by pointing out that 13% of inheritances are greater than 100,000 euros. Inheritances which are therefore most often totally exempt from taxes.
If the French are so unfamiliar with inheritance tax, it is because a very small portion of the population is subject to it.: this is why the Observatory of Inequalities decided to devote an entire chapter to inheritance in its report on the rich in France, 2022 edition, unveiled on June 1. This observatory bases its analysis on the observation made by the Economic Analysis Council (CAE): The lack of understanding, which undermines the social acceptability of inheritance rights, is unfortunately fueled by the absence of reliable information on the part of tax administration, regrets the CAE in its report Rethinking Heritage, published in December 2021.
So, specifically, how many inheritances are subject to tax? Mystery. There is no exact answer to this question in the INSEE statistics or in the CAE report. But there are important clues. Starting with the amount of inheritance in France…
Very precisely, according to INSEE, 12.9% of inheritances exceed the 100,000 euro mark. A bar which has nothing symbolic since it corresponds to the inheritance tax reduction for a direct line inheritance: a reduction valid for each child on the death of one of his parents, or for grandchildren who inherit of their grandparents by representation (if the father or the mother, who should have inherited from this grandfather, is already dead).
| Parent link | Abatement | Scale after reduction |
|---|---|---|
| Between lice or pacss | Exemption | |
| Child | 100000 | Scale of rights in direct line |
| Brother or on | 15392 | 35% up to 24430 of taxable share 45% beyond |
| nephew or nice | 7967 | 55% |
| Grandchild | 1594 | Scale of rights in direct line |
| Other heir or legatee (including parents beyond the 4th degree) | 1594 | 60% |
Note: in the event of inheritance by representation, the scales and reductions are more advantageous.
Inheritance: who pays these controversial inheritance taxes, and how much?
The famous transfer taxes – nicknamed inheritance tax – therefore concern a small part of the inheritance going to the children: approximately one estate in eight in this case. And parent-child successions constitute the vast majority of cases, as the Observatory of Inequalities reminds us in its report.
But, more specifically, how many legacies accrue from other family members? Or people outside the family? Because the deduction is actually much lower and therefore the payment of inheritance tax much more frequent. Problem: there are no statistics on these inheritances… The parcel data from INSEE on the subject nevertheless show that inheritances from grandparents or other family members are mostly limited to less than 8,000 euros.
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The recipe for transmitting 1 million euros tax-free
Inheritances of 100,000 euros and more are much more frequent among the rich, supports the Observatory of Inequalities in its 2022 report: The sums received by wealthy households (more than 500,000 euros in net wealth) are for 28.4% of them of an amount greater than 100,000 euros. While only 13% of inheritances exceed this strategic and symbolic amount for households just below in terms of heritage (between 275,000 euros and 500,000 euros). Below the median wealth of 115,000 euros, only 4.8% of inheritances exceed the 100,000 euro mark.
However, the wealthiest know how to optimize their succession, supports this observatory composed in particular of economists and sociologists. Here is the ultimate demonstration provided in this report to illustrate the mechanisms for circumventing inheritance tax: the authors detail the example of a couple accumulating all the possible tax advantages over the course of their life and with a view to their succession to give more than a million euros to their two children… without having to pay inheritance tax.
| Fiscal advantages | Amount of the cumulative tax benefit |
|---|---|
| Estate allowances | 400000 (the inheritance tax deduction of 100,000 used by each parent and for each of the two children) |
| Deductions on donations | 400000 (the gift tax deduction of 100,000 used by each parent and for each of the two children) |
| Exemption from family gifts of money | 128000 (nearly 32,000 in cash donations exempt every 15 years for each child) |
| Exemption from gifts | 100000 (all customary presents that have not been declared) |
| Deductions on life insurance | 300000 (deduction of 152,500 per life insurance beneficiary) |
| Total | 1328000 (schematic and maximum amount) |
Simulation produced by the Inequalities Observatory.
Key figures on heritage in France
- 37% of households have received an inheritance, once in their life (including 13% among those under 30, 19% for those in their thirties and 26% for those in their forties).
- 87% of legacies are less than 100,000 euros (threshold of exemption from inheritance tax in the event of direct line inheritance, in children for example).
- In 2006, money transmissions took place near 45% via donations during the lifetime of the donor. These donations are made in the vast majority in direct line (therefore to children most often). Around 55% of transmissions are inheritances, for almost 40% direct line inheritances, around 10% to spouses (exemption from inheritance tax) and less than 8% to collaterals or non-relatives.
- Under the median wealth, of 115,000 euros (half the population has more, the other less), less than 5% of inheritances received exceed the 100,000 euro mark.
Sources: Inequalities Observatory, Insee (2018 data), and Economic Analysis Council (CAE)
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