If you are making the move permanently to France you will come under the French taxation and inheritance regulations. Siddalls has extensive experience in providing financial solutions to make your life easier such as using a mortgage to mitigate your tax liability in France.
Here are some examples of how the Siddalls mortgage and combined investment planning can help.
To protect your property and assets from the forced succession and inheritance tax rules;
Mr and Mrs Jones wish to purchase a property in France as their main residence.
They are married and aged 58 and 56 respectively. Mr Jones has a daughter, Emma from a previous marriage and Mrs Jones has a son, Robert, from a previous marriage. They have no children from this marriage.
On first death they wish to protect the survivor and then wish for their assets to pass to their respective 2 children equally.
The house they are purchasing in France is valued at €500,000. They are each in receipt of a combined pension income of £30,000 and have a sum of £550,000 held on deposit in the UK following the sale of their UK property. They have been advised to purchase the property “en tontine” – this way they will avoid the forced succession laws on first death in respect of their property only!
Option 1 – Purchase the property outright.
Assets – French property €500,000
Cash - €270,000
Estate Value = €770,000
Mr Jones dies
- Property passes to Mrs Jones (no inheritance tax)
- Half the €270,000 is Mr Jones’s and is split according to the succession laws (€135,000/2 = €67,500 to Mrs Jones and €67,500 to his daughter Emma).
There is no IHT to pay.
Mrs Jones dies
- Half the property passes to Robert (he has an allowance of €150,000 to set against the value) resulting in an IHT liability of around €18,300.
- The other half of the property Mrs Jones can leave to whomever she wishes so in accordance with Mr Jones’s wishes leaves it to Emma, resulting in a IHT liability of €149,100.
- Of the remaining cash of €202,500 half automatically passes to Robert, who has a further €20,250 to pay on this.
- The balance is split 50:50 between Robert and Emma. Robert’s IHT liability is €10,125 and Emma’s is €60,750.
Roberts Inheritance = €401,875
Emma’s Inheritance = €368,125
Total inherited €770,000
A total IHT liability on second death of €258,525
Option 2 – Purchase the property outright and seek investment advice on €270,000
Assets - French property €500,000
€270,000 invested as advised by Siddalls
Estate Value = €770,000
Mr Jones dies first
- Property passes to Mrs Jones (no inheritance tax)
- Mr Jones share of the €270,000 passes to Mrs Jones (with €135,000 payable to Emma on Mrs Jones’s death) – no inheritance tax.
Mrs Jones dies
- Half of the property passes to Robert (he has an allowance of €150,000 to set against the value) resulting in an IHT liability of around €18,300.
- The other half of the property Mrs Jones can leave to whomever she wishes so in accordance with Mr Jones’s wishes leaves it to Emma, resulting in a IHT liability of €149,100.
- Cash of €135,000 is paid to Emma with NO IHT liability
- Cash of €135,000 is paid to Robert with NO IHT liability
Roberts Inheritance = €385,000
Emma’s Inheritance = €385,000
Total Inherited = €770,000
A total IHT liability on second death of €167,400 (a saving of over €91,125).
Option 3 – Purchase the property using a mortgage and seek investment advice
Assets – French property €500,000 (mortgage of €350,000 secured on property – interest only)
Cash available of €620,000 – invested as advised by Siddalls.
Mr Jones dies first
- Mortgage is repaid from Life cover (compulsory)
- Property passes to Mrs Jones (no IHT liability)
- Mr Jones share of €620,000 passes to Mrs Jones with €310,000 payable to Emma on Mrs Jones’ death (no IHT Liability)
Mrs Jones dies
- Half of the property passes to Robert (he has an allowance of €150,000 to set against the value) resulting in an IHT liability of around €18,300.
- The other half of the property Mrs Jones also leaves to Robert resulting in a further IHT liability of €50,000.
- €310,000 of the capital passes to Emma with no IHT liability.
- €200,000 is also left to Emma from Mrs Jones again with no IHT liability.
- The balance of €110,000 passes to Robert to cover his IHT liability on the property – he has no further liability on this capital.
Roberts Inheritance = €610,000
Emma’s Inheritance = €510,000
Total Inherited = €1,120,000
A total IHT liability on second death of €68,300.
As you can see from the last example, not only has Emma’s and Robert’s inheritance tax liability been reduced they have also inherited much more than had the property been purchased outright. This has also not affected Mr and Mrs Jones’s wishes to protect the survivor on first death.
This is just an example, based on the tax rates correct at time of going press. This example has not accounted for the costs of the mortgage repayments or associated life assurance. The affordability has been calculated using the clients income and future investment income from an approved investment structure.
For more information on this specialised service please complete an online enquiry form to receive a full information pack or email us at
mortgages@siddalls.net
Your home is at risk if you do not keep up the repayments on a mortgage or other loan secured against it.
Your mortgage must be repaid at the end of the mortgage term therefore you must ensure you have sufficient capital/savings to make the repayment.
Mortgage and Investment planning is not suitable for all clients and we will assess your individual requirements to reach the most suitable planning for your situation.
If the investment does not grow at least by the amount of the mortgage repayments you may erode the value of your original capital.