5 Fully Legal Strategies to Reduce French Inheritance Tax

French inheritance tax (droits de succession) has a reputation for being one of the highest in Europe. Depending on the relationship between the deceased and the heir, tax rates can rise to 45% for children and up to 60% for non-related beneficiaries.

For non-residents, second-home owners, or families with international assets, this often comes as an unexpected shock when no succession planning has been carried out in advance.

The good news is that French law itself provides several perfectly legal mechanisms that allow you to significantly reduce, and sometimes almost eliminate, the inheritance tax burden for your heirs, provided these tools are used early and correctly.

Below are five of the most effective strategies used in French succession planning.

1. Make Lifetime Gifts Instead of Waiting for Inheritance

One of the most efficient ways to reduce future inheritance tax is simply to transfer part of your assets during your lifetime.

French tax law allows generous tax-free allowances that can be used every 15 years:

• €100,000 per parent, per child
• €31,865 per grandparent, per grandchild
• €15,932 between siblings

These allowances reset every 15 years, meaning a long-term gifting strategy can transmit substantial wealth completely tax-free over time.

In addition, specific cash gifts can be made under certain age conditions (donor under 80, recipient over 18), further increasing what can be passed on without taxation.

By progressively reducing your estate during your lifetime, you mechanically reduce the taxable base at death.

2. Hold Property Through a French SCI (Property Company)

For property owners in France, a Société Civile Immobilière (SCI) can be an extremely powerful succession tool.

Instead of owning real estate directly, you own shares in a company that holds the property. These shares can then be gifted gradually to heirs while taking advantage of the 15-year tax allowances.

This structure provides several advantages:

• Easier transmission of ownership in stages
• Avoidance of joint ownership issues between heirs
• Possible valuation discounts on company shares (lower taxable value than direct property ownership)

An SCI is not just a management tool, it is often a core element of a long-term inheritance tax mitigation strategy for French real estate.

3. Use French Life Insurance (Assurance Vie)

The French assurance vie is widely regarded as the most tax-efficient inheritance tool available under French law.

Funds paid to beneficiaries through a life insurance policy do not follow standard inheritance tax rules:

• Premiums paid before age 70 benefit from a €152,500 tax-free allowance per beneficiary
• Premiums paid after age 70 are only taxable above a global threshold of €30,500 (excluding investment gains)

This means significant amounts of capital can be transferred outside of the normal inheritance tax scale.

For many families, assurance vie is the single most effective way to pass on liquid assets to children or partners with minimal taxation.

4. Choose the Right Marital or Partnership Status

In France, married spouses and PACS partners are completely exempt from inheritance tax when inheriting from each other.

By contrast, unmarried partners who are not legally registered are treated as unrelated individuals and may be taxed at 60% with almost no allowance.

For couples who own property or assets together in France, formalizing the relationship through marriage or a PACS can make a dramatic difference to the survivor’s tax situation.

Additionally, choosing the appropriate matrimonial regime (such as a community property regime with full attribution to the surviving spouse) can further strengthen protection.

5. Take Advantage of the EU Succession Regulation (Brussels IV)

Since 2015, the EU Succession Regulation allows individuals living in France to elect the law of their nationality to govern their estate instead of French succession law.

While this choice does not remove French inheritance tax, it allows you to bypass certain restrictive French forced heirship rules and organize how your estate is distributed.

This flexibility can be crucial when combined with other tax planning strategies, particularly for international families who wish to align French assets with estate planning rules from their home country.

How French Inheritance Tax Is Calculated

French inheritance tax is paid by each beneficiary individually based on what they receive, after applying the relevant allowances.

Typical allowances include:

• Children and parents: €100,000
• Siblings: €15,932
• Nephews and nieces: €7,967
• Unrelated beneficiaries: €1,594

Tax rates then apply progressively depending on the family relationship and the amount inherited.

Without preparation, heirs can quickly face a very heavy tax bill, especially where French property is involved.

Planning Ahead Makes the Difference

French inheritance tax is not something to address after death. The real optimisation happens years in advance, by combining:

• Lifetime gifting strategies
• Property structuring through an SCI
• Assurance vie policies
• Proper marital status planning
• International succession law coordination

When these tools are used together, the tax burden for heirs can be drastically reduced while remaining fully compliant with French law.

Need Personalised Guidance?

Every family situation is different, especially when international assets and non-resident owners are involved.

Professional guidance ensures your estate is structured in the most tax-efficient way possible and that your heirs are protected from unnecessary taxation.

Contact us for tailored advice on how to legally optimise your French inheritance exposure.

This article is for informational purposes only and does not constitute personalised tax advice.

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