How the Law Must Adapt to Social Evolution
The Notaries of France, at their meeting in Paris last November, felt that they had at last achieved something.
For on the 1st January 2007 some of the changes to the law of succession and inheritance first proposed by them over thirty years ago were shortly to be implemented by the Loi No. 2006-728 passed on 23rd June 2006.
Entitled “a Law to reform inheritance and gifts”, it is regarded by the profession as a “bouleversement juridique” – a legal upheaval.
Certain rights have been enhanced, others created and some modified. Almost every aspect of the law has been affected.
What had brought this about?
In their debates in 1975 the Notarial profession, in contact with the daily lives and problems of their clients recognised the changes which were taking place in society. There was a need to change and adapt the law to to take in to account the social and economic evolution.
Family life as they saw it in 1975 bore no relation to that of the year 1900 for which the laws were appropiate. Figures showed that in 2006 France had some 700,000 restructured families, one in ten children belonged to such a family following the divorce and remarriage of a parent. 32% of couples marrying already had children.
Donations
Until the reform children could inherit assets from their parent but not from their parent’s new partner. The legal relationship between the two was classed as strangers and gifts were taxed at 60%.
Marriage, divorce, remarriage, partnerships both formal and informal, all have now taken different forms. There is no longer a standard relationship. Children, issue of such different relationships, live and grow up together. This has now been recognised and in order to meet the requirements of these restructured families, the intervivos transmission of family assets by way of “donation-partage” ( deed of family arrangement) has been extended to include all the children of a couple whether or not they are children of that relationship.
Thus a child of divorced and remarried parents will be able to benefit from this tax saving device and take not only from his natural mother and father but also from the joint estate of his natural parent and his or her new wife or husband.
The major importance of this reform is to enable restructured families to effect in one transaction the handing down of their assets, sharing them between all their children as mentioned above and not just to the joint children of the second marriage.
As the value of more estates in England and Wales now exceeds the threshold, IHT planning is a subject of worry and concern here. Similarly the concerns of French families and their legal advisors have brought pressure on the legislators to enact these reforms.
There seems no reason why a similarly restructured British family cannot take like action in respect of family assets in France. The proper route is to consult a Notary and obtain advice. An initial written outline of the problem should be submitted to him first, and a request for an estimate of the fees and costs payable. This is best done in French – legal French – which is where your bi-lingual English lawyer may assist.
The "Pacte Successoral"
A disappointed heir deprived of part or all of his reserved inheritance has the right to bring proceedings in France by way of an action to set aside the gift or bequest which is alleged to be the cause of the diminuation of his expectancy. There may have been lifetime gifts of which he was not aware and the beneficiary may have been another reserved heir or a stranger.
Previously it was impossible for such a reserved heir to renounce that right of action before the death of the donor or testator.
The husband and wife in a restructured family with children on both sides face this problem if they wish to change their matrimonial regime to enable the surviving spouse to inherit their estate. British couples have also found Notaries unwilling to give effect to such a Deed of change of regime.
The occasional Notary has been known to proceed on obtaining an informal letter from the reserved heir agreeing to the deed of change and confirming knowledge of the consequences.
Henceforth the new law permits a reserved heir to renounce all or part of his reserved interest before the demise of the donor. The heir nevertheless retains his quality as such. This implements the decisions and recommendations of the Deauville conference of Notaries in 1975. The renunciation may be as to the totality or a proportion of the entitlement or it may be restricted to a particular identified asset. The beneficiary of the renunciation must be identified. It may be a stranger or a fellow heir. Examples given are of a son renouncing his share in his parents estate in favour of his handicapped brother or his stepmother.
The English law practitioner needs to understand how best to proceed to take advantage of the opportunities now offered under these new provisions. Clearly for the British couple who own a property in France with children from previous marriages the following are prerequisites :
- The children from the previous marriages must be of age,
- They must consent to the renunciation of their reserved interest in the house in favour of their step parent,
- Each must attend in France before two French Notaries ( they do not have to be there together but the fees will be less if they can all manage to be there at the same time).
- Each must sign the deed, the “Pacte Successoral”, in the presence of two notaries no other person being present at the time of such signature.
- The donor must execute the deed, but not I think necessarily before two notaries, giving his consent to the proposed renunciation.
- An assessment of the possible risk of action being taken to set aside the renunciation of which more below.
The logistics are somewhat formidable. From practical experience it is often the case that the young people concerned are abroad or are leaving the following week to spend a gap year in New Zealand.
Furthemore the Notary who is instructed to prepare the Deed has to find another Notary to witness the execution. His partner in the same office is not acceptable and application has to be made to the Chambre des Notaires to nominate the second Notary. Practitioners with experience of obtaining the appointment of a valuer by the President of the Local FRICS will understand.
In view of the gravity of the step being taken there is no queston of giving a Power of Attorney to a clerk in the Notaries office to sign for you. The document is one requiring “super authenticity”.
However it is not obligatory to instruct the Notary who acted for the clients when they purchased their property in France. If they live in the south of England, for example, it will be much easier for all the family to go to Calais or Lille for the day rather than to Morzine or Chamonix. One client whose home is high up on the cliffs above Dover is going to Bailleul with his son to have the papers signed. For other families where the childen are really far-flung they will have to wait until their circumstances permit them to go to France.
Is the Renunciation Absolute?
As mentioned above the risk of the heir applying to set aside the renunciation must be assessed. The likelihood of the conditions existing which would support such an application is fairly remote. Nevertheless the prudent practitioner will consider them when the proposed renunciation is being prepared.
An application to have the renunciation anulled can be made by the reserved heir within a year of the death in the following circumstances :
- if the donor did not comply with his legal obligation to maintain him. This is similar to the covenant included in Donation-Partage agreements where the children agree to look after and care for the surviving parent and allow the parent to live in the family house ownership of which has been transfered to those children. If they do not look after their ageing parent the gift of the house to them can be set aside. However the new law prohibits any duty being imposed on the party from whom the inheritance is expected,
- if at the date of death the heir who had renounced is “in a state of need” which condition would be removed had he inherited rather than renounced, and
- if the beneficiary of the renunciation has been convicted of a criminal offence against the heirs person.
Finally some technical details
If the amount the heir renounces is exceeded by the value of the asset in the succession the heir will be entitled to the excess under the original reserved interest.
Again if the renunciation is limited to a specific item of real or personal estate and the gift or bequest made by the donor does not include that item then the renunciation is anulled.
Likewise if the named beneficiary of such gift or bequest is not the person in whose favour the renunciation had been made.
We shall see how the Notaries cope and how many families take advantage of the reforms. They have waited long enough for their labours to come to fruition.
Graham PLATT is a partner of The International Law Partnership
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