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Lifetime gifts
In France there are 2 types of lifetime gifts:
- ‘la donation simple’: in France, ‘la donation simple’ or lifetime gift is any gift that you give away to another person whilst you are still alive. A gift is a transfer of anything such as item, property or money.
The individual can be an heir, a friend or a charity. Please note that if the individual is an heir, the gift(s) that you have made can still make up part of the value of your estate and either can be challenged by the other beneficiaries or heirs and taxed.
- ‘la donation partage’: in France, ‘la donation-partage’ or lifetime gift as well is any gift that you give way to beneficiaries whilst you are still alive. Gifts of lands, estates must be formally recorded by a deed and with a Notary. Each heir will then receive a unit.
With ‘la donation-partage’, the value of the assets transferred is frozen by the time of the gift. Upon death, if the value of the assets transferred has increased, this will not be taken into account.
Lifetime gifts
La ‘donation-simple’ in France
Why making a lifetime gift?
A lifetime gift allows the donor to:
- Give away cash or assets when they are still alive
- Reduce disputes within beneficiaries: for example, disputes between brothers and sisters can come up following their father’s inheritance because of unequal distribution.
Lifetime gifts can also reduce the amount of inheritance tax due. We will look into further below.
Who can make a lifetime gift?
For a lifetime gift to be valid there are conditions. These conditions apply for all types of lifetime gifts.
A donor must fill up the following conditions:
- Aged 18 or over
- Be sound of mind
- Legally capable of managing their assets and property. It means that the testator is the owner and has the rights and responsibilities to do so.
How to make a lifetime gift in France?
In France to make a lifetime gift and to be valid, the donor must:
- Document the gift formally by deed with a Notary. The executor must be present when drafting the deed.
- The donor and the beneficiary must meet.
- The beneficiary must document and agree receiving the gift by deed with a Notary to be valid.
As long as the donor hasn’t received the agreement, they can remove their offer.
If the lifetime gift is a bequest, the gift must have been estimated. This estimate must be signed by the donor and the beneficiary.
What are the types of lifetime gifts?
Depending on your circumtances, different types of lifetime gifts exist in France and each has its advantages and disadvantages.
| Type of lifetime gift | Definition | Example |
| Matrimonial exempt transfers | Exempt transfers apply when you transfer assets to an exempt beneficiary | An exempt beneficiary is when you transfer assets to your spouse or partner. |
| GROB | A grob is a gift with reservation of benefit. A grob is a gift of an asset made but you retain some benefit in the asset that has been gifted. | A gift of company shares for example and the donor continues to receive an allowance on these shares or when someone gifts a home but continues to live in it without paying a rent. |
| Legacies | Legacies, also called bequests, are gifts that an individual creates when they are alive that take effect upon their death. | This type of gift is when both donor and beneficiary have a similar life expectancy. |
| Donations de biens présents | Donation de biens qui sont dans le patrimoine du donateur au moment où il dispose. Elle s’oppose à la donation de bien à venir. | La donation est faite sur un bien immeuble dont le donateur est propriétaire. |
| Transfers of future gifts | Gifts from non-disposable income | Transfers are made based on future disposable income. |
| Transfers of gift to a third party | Gifts to a third party who is in charge then to transfer the gifts to the beneficiary. | |
In France, what can be qualified as ‘don manuel’ or direct gift?
In France, a ‘don manuel’ is a gift that is not legally binding and is used to avoid paying tax inheritance. A direct gift is also used for transferring small amount of cash or money.
We strongly advise you not to use this type of gift. Indeed, you can face severe consequences from the French tax system as proceedings upon the donor’s death.
In France, what is qualified as ‘donation indirecte’ or ‘undirect gift’?
In France, a ‘donation indirecte’ or undirect gift is:
- When a beneficiary refuses a gift, the beneficiary indirectly gives away their assets to the other beneficiaries.
- When a donor sells their house to a child for less than it’s worth, the difference in value counts as a gift.
In France what is qualified as ‘donation déguisée’ or suspicious transaction?
In France, a suspicious transaction can become a gift when a donor is officially selling an asset to a beneficiary throughout a legally binding contract where both parties stipulate in writing that the amount should not be paid.
Therefore, in such circumstances a ‘donation déguisée’ is legal.
Lifetime gifts
Inheritance tax on lifetime gifts
How inheritance tax works?
Inheritance tax may have to be paid on some gifts you’ve given and is based on the value of the gifts.
You can also give away money or properties free of inheritance tax.
Leaving money to charity, cash or physical asset is exempt from inheritance tax.
How inheritance tax works on gifts in money or cash?
Inheritance tax must be paid depending on the amount of money or cash received. The gift must be reported to the French tax system to avoid penalties within a month after receiving the gift.
Exemptions:
- Family gifts: amount of money or cash given away between family member are exempt up to €31,865.
- Gifts to victims of terrorist attack charities only during the year following the terrorist attack.
How inheritance tax works on gifted properties or lands?
Inheritance tax must be paid on devises. However, there is no inheritance tax on gift such as nationally protected historic buildings.
How inheritance tax works on gifted bequests?
Bequests are typically:
- Pieces of Art
- Books
- Historic documents
The French tax system will choose to tax them or not.
In France, is there a tax relief depending on the type of beneficiary receiving the gift?
Yes!
- Tax relief for spouse or civil partner up to €80,724.
- Tax relief for a donor’s child up to €100k.
- Tax relief for a donor’s grandchild up to €31,865.
- Tax relief for a donor’s great grandchild up to €5,310.
- Tax relief for a donor’s brother or sister up to €15,932.
- Tax relief for a donor’s nephew up to €7,967.
Lifetime gifts
The ‘donation-partage’ rules
Why making a ‘donation-partage’?
A ‘donation-partage’ or lifetime giving, you have more control over how your assets are distributed as to choose your beneficiaries. It can reduce disputes as beneficiaries are all aware of the process and must agree on how the assets are shared.
The donor is free to transfer assets and properties if the legal reserve is applied.
Despite a ‘donation-partage’ can create inequality between the beneficiaries, it can not be challenged or contested.
Who can make a ‘donation-partage’?
For a lifetime gift to be valid there are conditions. These conditions apply for all types of lifetime gifts.
A testator must fill up the following conditions:
– Aged 18 or over
– Be sound of mind
– Legally capable of managing their assets and property. It means that the testator is the owner and has the rights and responsibilities to do so.
How to make a ‘donation-partage’ in France?
In France to make a ‘donation-partage’ and to be valid, the donor must:
– Document the gift formally by deed with a Notary. The executor must be present when drafting the deed or to have a representative.
– The donor and the beneficiaries must physically meet.
What is the value of the assets with a ‘donation-partage’?
The value of the assets that you have gifted will be taken into account when your estate is assessed so by the time of the transfer.
It will avoid disputes between beneficiaries. This is the final allocation.
The main difference between a ‘donation-partage’ in France and a ‘normal’ inheritance process upon death is that your assets are not assessed when you die but when the ‘donation-partage’ occurs. Most of the time, within a ‘normal’ inheritance process, disputes arise because all assets must be reassessed.
Lifetime gifts
Inheritance tax on ‘donation-partage’
What are the rules for inheritance tax on ‘donation-partage’?
In France, is there a tax relief depending on the type of beneficiary receiving the gift?
Yes!
– Tax relief for spouse or civil partner up to €80,724.
– Tax relief for a donor’s child up to €100k.
– Tax relief for a donor’s grandchild up to €31,865.
– Tax relief for a donor’s great grandchild up to €5,310.
– Tax relief for a donor’s brother or sister up to €15,932.
– Tax relief for a donor’s nephew up to €7,967.
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