105: French succession law changes: estate planning arrangements may need review
The EU Succession Regulation (Brussels IV) came into force in 2015. There are many aspects to the regulation, but one key part is that it allows a testator to elect that the law of their nationality will apply to the whole of their estate. In this way it is possible to override forced heirship rules in the country of residence or where assets are located.
Almost all countries in the EU opted in to Brussels IV (apart from Denmark, Ireland and the UK). While the UK is no longer in the EU, Brussels IV is still relevant to estates with a connection to both the UK and to an EU member state that is bound by the regulation.
Under the regulation, the country of habitual residence at the time of death governs succession to the estate unless the person has made a choice for the law of their nationality to apply to the whole estate instead.
For those used to the concept of testamentary freedom, finding that the law in another jurisdiction dictates how they must leave their assets can come as something of a surprise.
The French Civil Code provides that an individual with children must leave a specific proportion of their estate to them. This is known as ‘the hereditary reserve’. A person with one child can only dispose of half their estate as they wish, the remainder is reserved for their child. If they have two children, the reserved proportion will be two thirds of the estate with only the remaining one third freely available to dispose of as they wish.
As an example, under the regulation an English national living in France with French assets can elect for English law to apply to their Will and thus avoid the forced heirship provisions. This would allow them to provide for their family in the way that worked best for them rather than being constricted by the rules applicable in France.
France has however introduced a new law which comes into effect from 1 November 2021 to bolster French succession law which essentially undermines the effect of the regulation. It applies if the testator, or at least one of their children, is at the time of death a national of a member state or has their habitual residence there, and the foreign succession law applicable to the estate does not have a mechanism for protecting the children’s share of the estate.
Where the rule apples, if the children do not receive their appropriate shares they are entitled to claim compensation from the assets which are located in France in order to benefit from the forced heirship rights which they have under French law. French notaries will be required to notify all beneficiaries (whether or not they are living in France) of their rights to make such a claim.
Even if no relevant beneficiary wishes to make a claim, this will undoubtedly make the probate process more cumbersome with the prospect of delays and associated additional costs.
It is likely that the provision will be challenged by the EU but, for now, those with assets in France must plan on the new law being in force and potentially applying to their estate. Those who have already made Wills intending for an outcome that is not in line with French succession rules will want to consider a review of their testamentary arrangements.