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GIFTS
Introduction
Gifting
property is a method often used by French people to prepare an
inheritance, particularly as a tax saving device.
In order to gift real estate property, a deed of gift drawn up by a
notaire which is then registered will be required (there is thus a certain
cost to the arrangement). The
gift can be of the entire property with or without reserve of a life
interest or it can be a means of dividing property up between several
inheritors. It can also be
between husband and wife to maximise the interest that they leave to each
other. Gifts are irrevocable
meaning that they are a more certain means of bequeathing property than a
simple will.
Taxation
of gifts
Gifts
attract taxation on the same basis as inheritance tax.
Therefore, the amount of tax payable is determined in accordance
with the amount that each individual beneficiary receives and how he or
she is related to the donor. Therefore,
the gift tax treatment of a spouse differs from that of children which
differs from that of siblings or non-relatives.
There are the following principal tax breaks currently in force to
alleviate the gift tax burden. These
make gifts a potentially interesting wealth management tool, especially
where more than one tax break can be combined.
Tax
break linked to the donor’s age:
Gifts of the entire property: regardless of the
donor’s age, there is a temporary (gifts consented to between
25th September 2003
and
30th June 2005
) reduction of the gift tax by 50%;
Gifts of the basic property right (entire
property less life interest): for those gifts from
1st January 2004
, a reduction of the gift tax by 35% for those donors
aged below 65; reduction by 10% for those donors aged between 65 and 75;
Other gifts consented to from
25th September 2003
(in practice those gifts of a life interest):
reduction of the gift tax by 50% when the donor is aged below 65 and 30%
if he or she is aged between 65 and 75.
Tax
break when gifting to children:
If the donor makes another gift or passes away ten years after
making a gift, the children will benefit again from their tax free band.
Tax
break when gifting to grandchildren:
The grandchildren will benefit from a special tax free band of 30,000
Euros.
Vocabulary:
Gift:
donation
Deed of gift: acte de donation
Life interest: usufruit
Gift between husband and wife: donation entre époux
Inheritance tax: droits de succession
Entire property: pleine propriété
Basic property right: nue-propriété
Source:
La semaine juridique no. 6, 6 février 2004, 1082-1081
21/02/2004
- Legal update
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