Top Three French Law Disasters Part 2: 60% Inheritance Tax Bills
The following series of three blogs looks at the top Three French Law Disasters we have seen. These are real cases, with changed names. It goes to show that paying for the right legal advice from an expert can save your thousands of pounds and lots of stress.
Part 2
Replace Old Discretionary Trust Wills or face 60% tax and 100% headache
This could be any number of clients we see with out dated tax planning Wills. Please check and update your Wills, especially Discretionary Trust Wills. They are a ticking time bomb with massive exploding tax problems.
Mr and Mrs Stones had a UK Will from 2002. They had been advised at the time to include a tax planning arrangement in the Will, known as a Nil Rate Band Discretionary Trust Legacy, sometimes referred to as an IOU scheme, or tax planning Will.
Mr Stones owned a house in France worth 300,000 Euros. Had they taken up to date legal advice, Mrs Stones would have inherited with no tax to pay and no stress. Due to the Discretionary Trust Wills, Mrs Stones was asked to pay 180,000 Euros in French inheritance tax. We have managed to creatively reduce this tax bill due to the particular circumstances of the case, but it is very complicated and tax will still be payable, whereas no French inheritance tax would be payable if a new specialist Will had been drafted.
Unfortunately, France is suspicious of Discretionary Trusts, and where it cannot identify who inherits the estate, (because it is at the discretion of the trustee), then 60% inheritance tax applies.
Where it is possible to identify that the children or spouse are the only intended beneficiaries, then 45% inheritance tax applies.
These out of date Discretionary Trust Wills are a big problem, and they are very difficult and expensive to navigate.
Please contact us to arrange a new Will so that you don’t risk paying 60% French inheritance tax
If you have a French estate involving a Discretionary Trust Will, please contact us if you need advice on how to deal with this.