Inheriting French Real Estate as a US Citizen: Tax and Legal Implications

Inheriting property in France as a United States citizen brings a unique mix of legal and tax obligations that cross international borders. Whether you inherit a French vacation home, rental property, or family estate, it’s crucial to understand how French succession law applies, how inheritance tax is calculated, and how the US–France Estate Tax Treaty affects your overall tax position.

 

French Inheritance Tax Basics

In France, inheritance tax, known as droits de succession, is generally assessed on the beneficiaries who receive assets, not on the estate itself. Each heir pays tax on the portion they inherit based on their relationship to the deceased and the value of what they receive. 

Residency Matters

The way French inheritance tax applies depends first on where the deceased was resident at the time of death:

• If the deceased was tax resident in France, French law typically taxes all assets worldwide, including property and financial assets outside France. 
• If the deceased was not a French tax resident, then only assets located in France, like French real estate, fall under French inheritance tax. 

For a US citizen who lived in the United States but owned property in France, this usually means that only the French property itself would be subject to French succession tax, even though the rest of the estate may be dealt with under US rules. 

Tax Allowances and Rates in France

French inheritance tax rates are progressive and depend on the beneficiary’s relationship to the deceased:

• Spouses and PACS partners are generally fully exempt from French inheritance tax. 
• Children have a substantial personal allowance (typically around €100,000) and then pay tax on the balance at progressive rates. 
• Distant relatives and unrelated beneficiaries face much higher tax rates, sometimes approaching 60% on the portion they inherit. 

These allowances can be significant in reducing the taxable value, but French inheritance tax can still be substantial without careful planning. 

Forced Heirship and Succession Rules

France’s succession law includes forced heirship provisions, meaning that certain heirs, especially children, are entitled to a fixed portion of the deceased’s estate, regardless of the terms of a will. For instance:

• With one child, at least 50% of the estate must pass to that child.
• With two children, two-thirds must be reserved for them.
• With three or more children, up to 75% must go to the children. 

This contrasts sharply with US estate law, where you can generally distribute assets freely through a will, trust, or other mechanisms. Because trusts and similar devices common in US planning often aren’t recognized under French law, relying solely on a US-style plan can lead to outcomes you didn’t intend. 

 

 

Double Taxation and the US–France Estate Tax Treaty

The United States may also tax the worldwide estate of a US citizen, including foreign property, under US federal estate tax rules. This dual system creates the risk of being taxed twice on the same inherited property. 

To address this, the US–France Estate Tax Treaty helps determine which country has the primary right to tax certain assets and allows heirs to claim credits in one jurisdiction for taxes paid in the other. 

For example:

• French real estate is typically taxed in France first, because it’s immovable property located in French territory. 
• Under the treaty, the tax paid in France can often be used as a credit against US estate tax, reducing your US liability. 

This coordination helps prevent double taxation, but you still need to report the inheritance in both countries and claim treaty benefits correctly. 

 

Reporting Requirements

In France

When you inherit French property:

• You must declare the inheritance to French tax authorities (Service des Impôts), usually within six monthsif the death occurred in France, or twelve months if it occurred abroad. 
• This declaration includes details of the deceased’s assets and the value received by each beneficiary. 

A notaire typically prepares and files the French succession return and can assist with valuation and tax calculation. 

In the United States

As a US citizen, you’re required to report worldwide inheritances to the Internal Revenue Service (IRS). While inheritances generally aren’t taxable income in the US, you must disclose them and may have reporting obligations depending on the size of the inheritance (for example, it may trigger Form 3520 reporting if above certain thresholds). 

If the estate is large enough to be subject to US federal estate tax, you also include foreign assets and use Form 706 to calculate your US estate tax liability, claiming a credit for French inheritance tax paid under the treaty. 

Planning Strategies for US Citizens

Given the complexity of French succession laws and tax obligations, proactive planning is essential:

1. Consider Ownership Structures

Holding French property through vehicles like a Société Civile Immobilière (SCI) or through life interests (usufruct arrangements) can sometimes make transfers more predictable and tax-efficient under French law. 

2. Use French-Recognized Estate Tools

Mechanisms like assurance vie policies can help transfer assets outside the standard inheritance process and provide targeted beneficiary designations with favourable tax treatment under French rules. 

3. Understand Both Tax Systems

Because the US and France treat properties, allowances, and trusts differently, aligning your estate plan with both legal systems, and using the US–France treaty, helps avoid unexpected liabilities. 

Engaging advisors experienced in cross-border succession planning is strongly recommended to ensure compliance and tax efficiency.