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Tontine and Unmarried Couples Buying in FranceFrench succession law has a system of forced heirship whereby certain family members have a right to inherit part of your estate. This means that your children will automatically inherit a share of any part of your estate which is subject to French law, even in presence of a spouse. There are ways to deal with this, and a tontine clause is one of them.
A tontine clause is the French equivalent to a joint tenancy in the UK: on the first death, the deceased’s share of the property passes to the surviving tontine holder. The person who dies first is deemed never to have been an owner , and the surviving owner is considered to have been the sole owner from the start. Whilst it can be used in relation to any assets, it is most commonly used when acquiring real estate.
Tontine ownership may have adverse consequences and, depending on your specific family circumstances, may not be appropriate. You should bear in mind that the surviving owner may have to pay French inheritance tax on the first death. Whilst there is a full exemption for inheritance between married couples and civil partners, assets passing to cohabiting partners are taxable at 60% above a small allowance of €1,594.
As an exception to this rule, when the property makes up the main residence of the purchasers at the time of death and its value is less than €76,000, the survivor only pays transfer duties at a rate of 5.81%.
Importantly, the decisions regarding properties bought under a tontine arrangement require unanimity. Even if the owners no longer get along or wish to separate, unanimity is required to sell the property or agree that one of them will buy the other's share.
For the above reasons, it is generally recommended that unmarried couples to avoid purchasing using a tontine clause. If you are interested in purchasing with a tontine arrangement then you should remember that the clause must be inserted directly into the deed of purchase; afterwards it is too late!
Our UK based French tax experts specialise in such French/UK issues; including taxation, wealth tax, succession, etc. They have extensive knowledge of French tax and the system there, please contact us for more details. We can also assist with competitive fx rates and French insurance.