FAQ: French Inheritance tax for U.S. Citizens Resident in France

1. How does France determine who is subject to its inheritance tax laws?

French inheritance tax law (droits de succession) is primarily based on the residency (domicile) of the deceased at the time of their death. If an individual is considered a French tax resident, their entire worldwide estate, including both movable (e.g., bank accounts, stocks) and immovable (real estate) assets, regardless of their physical location, becomes subject to French inheritance tax. Residency is generally determined by criteria such as having one's principal home in France or spending more than 183 days there in a calendar year, or if France is the center of their primary economic interests. This applies regardless of the decedent's nationality or the heirs' residency. This residence-based approach is a critical departure from the U.S. system and can lead to potential double taxation for U.S. citizens resident in France.

2. What are the key differences between the French and U.S. approaches to estate and inheritance taxation?

The French and U.S. systems for taxing inherited wealth differ fundamentally:

Taxpayer: In France, the individual heir/beneficiary is the taxpayer, with tax levied on the net share they receive. In the U.S., the decedent's estate is the taxpayer, with tax imposed on the total net taxable estate before distribution.
Tax Base: France taxes each beneficiary's individual share, while the U.S. taxes the total net taxable estate.
Jurisdictional Trigger: France's jurisdiction is based on the decedent's residency (domicile) in France. The U.S. asserts jurisdiction based on U.S. citizenship or domicile.
Marital Treatment: France offers a complete tax exemption for surviving spouses and partners in a French civil union (PACS). The U.S. provides an unlimited marital deduction for transfers to a U.S. citizen spouse.
Key Exemption/Allowance: French allowances vary significantly by relationship (€100,000 for a child, €1,594 for an unrelated person). The U.S. has a large unified credit for the estate ($13.99 million in 2025).
Governing Legal Philosophy: France adheres to Civil Code principles, including forced heirship (réserve héréditaire), which limits testamentary freedom. The U.S. follows Common Law, emphasizing testamentary freedom.

These profound differences necessitate the application of the France-U.S. Estate and Gift Tax Treaty to resolve conflicts and prevent double taxation.

3. What is "forced heirship" in French law and how does it impact estate planning for U.S. citizens?

Forced heirship (réserve héréditaire) is a core principle of the French Civil Code that mandates a specific portion of a decedent's estate be reserved for their children, who are considered "protected heirs." This significantly limits a person's ability to freely dispose of their property through a will, a concept known as testamentary freedom in the U.S.

The reserved portions are:

One child: 50% of the estate.
Two children: 66.6% (two-thirds) of the estate, divided equally.
Three or more children: 75% (three-quarters) of the estate, divided equally.

The remaining portion, the "disposable portion," is the only part that can be freely bequeathed to others. This means a typical U.S. will leaving everything to a surviving spouse could be challenged in France, as French law prioritizes descendants over the surviving spouse. For U.S. citizens in France, this implies that their U.S.-drafted wills may be partially unenforceable under French law, making strategic planning tools like Assurance Vie or choice-of-law declarations essential to achieve their desired asset distribution.

4. How does the France-U.S. Estate and Gift Tax Treaty prevent double taxation?

The 1978 France-U.S. Estate and Gift Tax Treaty is crucial for reconciling the conflicting tax claims of the two nations. It achieves this through a structured process:

Resolving Domicile: A "tie-breaker" test determines a single "fiscal domicile" for treaty purposes, typically based on permanent home, center of vital interests, habitual abode, and then nationality. For a U.S. citizen making France their permanent home, France will usually be the fiscal domicile.
Assigning Primary Taxing Rights (Situs Rules): Once domicile is set, France generally has the primary right to tax the worldwide estate. However, specific "situs rules" grant primary taxing rights to the country where certain assets are located. For example, real property is taxed primarily by the country in which it is situated (e.g., U.S. real estate taxed primarily by the U.S.).
Foreign Tax Credit (FTC): This is the core mechanism. The country with the secondary taxing right (the one that doesn't have primary taxing rights or is the country of citizenship) must provide a credit for the tax paid to the country with the primary taxing right. For example, if a French-domiciled U.S. citizen owns U.S. real estate, the U.S. taxes it first, and France must then provide a credit against its inheritance tax for the U.S. estate tax paid on that property. Conversely, for French-domiciled U.S. citizens with U.S. financial assets, France taxes first, and the U.S. must provide a credit.
"Saving Clause": While the U.S. reserves the right to tax its citizens as if the treaty didn't exist, the foreign tax credit article is explicitly exempt from this clause. This ensures the U.S. maintains its citizenship-based taxation while still fulfilling its treaty obligation to provide credits, thereby preventing double taxation.

5. What are the key tax allowances and rates for French inheritance tax, particularly for different beneficiary relationships?

The French inheritance tax system is highly progressive and significantly influenced by the beneficiary's relationship to the deceased:

Surviving Spouses / PACS Partners: Complete exemption from inheritance tax (0%).
Children and Parents: Each child receives a tax-free allowance of €100,000 from each parent (and vice versa for parents inheriting from children). Amounts exceeding this are taxed at progressive rates ranging from 5% to 45%.
Siblings: Allowance of €15,932. Amounts above this are taxed at 35% (up to €24,430) and 45% thereafter.
Nieces and Nephews: Allowance of €7,967, with the excess taxed at a flat rate of 55%.
Unrelated Beneficiaries (including unmarried partners not in a PACS): A minimal allowance of €1,594. Any inheritance above this amount is subject to a punitive flat tax rate of 60%.
Disabled Beneficiaries: May receive an additional allowance of €159,325.

French law also includes a 15-year "lookback" period, meaning any lifetime gifts made to a beneficiary within 15 years of death are aggregated with the inheritance for tax purposes, reducing the available allowances at death.

6. What is the role of a "notaire" in the French inheritance process and what are the key filing obligations?

In France, a notaire (a civil law notary with public authority) plays a mandatory and central role in settling an estate, especially if it includes real estate or exceeds €5,000 in value. Their duties encompass:

Identifying and verifying legal heirs.
Determining the decedent's official domicile for tax purposes.
Preparing a comprehensive inventory of worldwide assets and liabilities.
Calculating estate division according to French law, including forced heirship rules.
Preparing the official French inheritance tax return, the Déclaration de Succession.

The Déclaration de Succession is a mandatory tax filing submitted to French tax authorities, typically prepared by the notaire, though the legal obligation rests with the heirs. It requires detailed inventory of worldwide assets, valuations at fair market value, and disclosure of lifetime gifts within the preceding 15 years. Key forms include:

Form 2705-SD: Primary declaration.
Form 2705-S-SD: Detailed list of assets and liabilities.
Form 2709-SD: For real estate in different tax districts.
Form 2705-A-SD: For Assurance Vie policy beneficiaries.

Filing deadlines are strict: six months from death if the decedent passed away in France, or twelve months if they passed away outside France. Gathering documentation for U.S.-based assets for French authorities can be complex and time-consuming.

7. What are the primary strategic planning tools for U.S. citizens in France to mitigate inheritance tax and navigate legal conflicts?

For U.S. citizens resident in France, strategic estate planning is crucial due to the conflicting legal and tax systems. Key tools and strategies include:

Lifetime Gifting: France offers tax-free allowances for gifts (e.g., €100,000 from each parent to each child, resetting every 15 years). This can significantly reduce the taxable estate. U.S. gift tax rules (reporting gifts over the annual exclusion amount on Form 709) must also be considered.
Assurance Vie: This is a powerful investment product structured as a life insurance policy, offering significant advantages:

Bypasses Forced Heirship: Proceeds are considered "hors succession" (outside the estate), allowing the policyholder to name any beneficiary and bypass forced heirship rules.
Favorable Tax Regime: For premiums paid before age 70, each beneficiary receives a special tax-free allowance of €152,500, with excess amounts taxed at significantly lower flat rates (20% then 31.25%) than standard inheritance tax, especially for non-relatives (who otherwise face 60%).

Navigating U.S. Trusts: U.S. trusts are common law concepts not native to French law. France often disregards the trust structure for tax purposes, deeming the settlor the direct owner of assets. This can trigger French inheritance tax upon the settlor's death, potentially at a punitive 60% flat rate, especially for trusts established by a French resident after May 11, 2011. Strict reporting obligations (initial and annual declarations) apply, with severe penalties for non-compliance. Therefore, existing U.S. trusts require immediate review by Franco-American legal and tax advisors.

8. Why is specialized professional advice essential for Franco-American estate planning?

Given the profound complexity and potential conflicts arising from the French residence-based inheritance tax system, U.S. citizenship-based estate tax, and the intricacies of their bilateral tax treaty, engaging qualified legal and tax professionals with specific expertise in Franco-American estate planning is absolutely necessary.

The challenges include:

Overlapping Jurisdictions: Both countries claim taxing rights over worldwide assets, requiring careful application of treaty provisions.
Divergent Tax Systems: The beneficiary-centric French tax system differs greatly from the U.S. estate tax, demanding a "bilingual" planning approach.
Conflicting Legal Philosophies: Forced heirship in France clashes with U.S. testamentary freedom, necessitating strategies like Assurance Vie or choice-of-law declarations to ensure personal wishes are met.
Complex Procedural Requirements: Navigating French notaire-led processes, specific declaration forms (e.g., Déclaration de Succession), U.S. filing obligations (e.g., Form 706, Form 8833), and foreign tax credit calculations is highly intricate.
Pitfalls with U.S. Planning Tools: Common U.S. tools like revocable living trusts can have severe and unforeseen tax liabilities and administrative burdens in France.

Specialized guidance ensures compliance, minimizes the global tax burden, protects beneficiaries, and allows for the creation of a unified, resilient cross-border estate plan that respects the imperatives of both legal systems.