International estates: uncertainty prevails
The law reinforcing respect for the principles of the Republic introduces a new compensatory levy right (droit de prélèvement compensatoire) (new paragraph 3 of article 913 of the French Civil Code). It applies to all estates opened since 1 November 2021. It promises absurd situations as soon as a foreign element joins the dance…
The compensatory levy right: a measure for equality?
The initial aim of this levy right, according to the announcements of the Minister for Citizenship, Ms Marlène Schiappa, was to ensure equality between daughters and sons in inheritance and, in particular, to limit the application of Muslim law in this area. Muslim law, also called Sharia, divides the estate unequally between daughters and sons, for example.
The legislator therefore wished to protect female heirs from discrimination that could result from a foreign law on French territory.
This intention is in line with the fight against gender discrimination in the distribution of estates, and with the rights, values and republican principles that France upholds.
Unfortunately, on reading the text adopted, one can only note that it badly misses its target.
Far from preventing the application of Muslim law in the cases initially targeted, it also jeopardises the legal certainty of many estate plans made under a Common Law system (the law of the United Kingdom, of most US States, of Singapore or Australia, for example).
What is forced heirship?
French law prohibits disinheriting one's children or, if there are no children, one's surviving spouse. A share of the estate goes to them by right. This predetermined portion is called the "réserve héréditaire" (forced heirship share).
Conversely, anyone may do as they please with the rest of their assets. They can, for example, give it away during their lifetime, or bequeath it by will. The "quotité disponible" (disposable portion) is the portion that can be freely disposed of.
How can a foreign law come to govern an estate opened in France?
Since 17 August 2015, a law other than French law may govern an estate opened in France.
It may be the deceased's national law if they expressly chose it in a will. It may also be the law of their residence abroad (European Succession Regulation 650/2012 of 4 July 2012).
The rules of that other country (any country in the world) then apply to the distribution of all the assets in the estate, including the assets in France.
Emir is a Moroccan national living in Casablanca (Morocco).
On his death, the distribution of his assets in France will in principle be governed by Moroccan law.
However, that law must not be contrary to the fundamental principles of French law. These principles are grouped under the term "international public policy" (ordre public international).
For example, judges will regard gender discrimination, which runs counter to equality between women and men, as contrary to international public policy. It would therefore be set aside in France.
On the other hand, forced heirship was not regarded as part of international public policy. In other words, if a law that does not recognise the concept of compulsory inheritance by children (or by the surviving spouse in their absence) of at least part of the estate was designated under the European regulation, this did not in itself prevent it from governing the estate in France. The 2017 "Maurice Jarre" case law confirmed this principle. The same argument was at the heart of the estate of the famous singer Johnny Hallyday.
Why does the compensatory levy right miss its target?
The conditions for applying the compensatory levy right are as follows:
- The deceased or at least one of their children must be resident in, or a national of, the European Union at the time of death;
- The applicable law must not provide for forced heirship;
- There must be assets located in France.
Unfortunately, using the concept of forced heirship to secure equality between male and female heirs makes no sense. Whether or not the foreign law provides for forced heirship is not what ensures a fair distribution of the estate.
Here is the demonstration in two points:
A forced share half as large for a daughter as for a son is enough to rule out the compensatory levy right
For the levy right to apply, the foreign law governing the estate must not provide for any forced share in favour of the children.
Yet Muslim law prohibits disinheriting one's children. Admittedly, it does not provide the same proportions for daughters and sons (half as much for daughters). But Muslim law does recognise forced heirship!
The levy right therefore cannot be applied to the very situation for which it was created. Wide of the mark…
However, as mentioned above, French judges already regard gender discrimination in inheritance as inapplicable in France. This would be the case for foreign provisions that give a larger share to a man rather than a woman on that criterion alone.
Non-discriminatory estates may be challenged by the compensatory levy right
Not content with being off target and redundant, the new law also jeopardises all estate plans made under a Common Law system.
This large legal family includes all laws of Anglo-Saxon origin: those of the United Kingdom, the United States (for most States), Canada (outside Quebec), Australia and Singapore, for example. These laws do not recognise forced heirship.
James, an Englishman, makes a will leaving his entire estate to his wife, a fairly common situation in the United Kingdom.
James owned a holiday home in Provence. At the time of his death, his only son lives in… Greece!
The son could then ask to levy his French-style "forced share" on the property in France.
Finally, note that Common Law has other mechanisms to protect children. A child can, for example, apply to the court if they have not been "reasonably" provided for in the estate. But this seems to have no effect on the application of the new French-style levy right.
The great forgotten party of the compensatory levy right
Finally, one party largely forgotten by the new law is the surviving spouse.
Under French law, the surviving spouse is a forced heir when there are no children. Yet they are not covered by the compensatory levy right.
Given that a (large) proportion of surviving spouses are women, one still wonders how this new mechanism helps gender equality.
The compensatory levy right: an endorsement of French-style forced heirship?
The compensatory levy right imposes, in theory, forced heirship in France.
Is that commendable?
The debate on the usefulness and merits of forced heirship is endless. We will not rekindle it here.
We will simply note that the compensatory levy right is a surprising challenge to the principle of the unity of succession established in Europe. Under this principle, a citizen can choose, at least within Europe, a single law to govern their entire estate.
Ultimately, this mechanism fragments and complicates the settlement of the estate depending on the applicable law. Moreover, it introduces a high degree of legal uncertainty.
Bye-bye France?
The problems in applying this new mechanism are wide-ranging.
Above all, the estate planning of international families holding assets in France becomes harder to predict. Where a Common Law system governs the estate, there would be a risk of challenge under the compensatory levy right.
Can this be corrected by reviewing and, if necessary, amending one's estate strategy?
Yes, but:
- The levy right seems unlikely to remain in force in its current form. Strategies put in place on the basis of the mechanism as it exists today will therefore probably need to be reviewed again soon;
- A review concluding that the mechanism does not apply to your situation could nevertheless be undermined in the future. The levy right will apply as soon as the deceased or just one of their children decides to live in (or acquires the nationality of) a European Union country. One may fear that estate planners in Common Law countries will simply advise against investing in France…
Practical problems in implementation
Remember that the compensatory levy can only apply to assets in France existing on the day of death. These may be real estate (house, flat…) or movable assets (accounts, works of art…).
The person invoking the compensatory levy may then take from the French assets
up to the forced share they would have received if French law had applied.
Before any dispute, it is for the notaire to note that "the forced heirship rights of an heir are likely to be affected by the gifts made by the deceased" (article 921 of the French Civil Code).
First difficulty: to calculate the forced share the heir would have received in France, the notaire has no extensive powers of investigation. They will rely on the information obtained from foreign professionals and from the heirs themselves.
Second difficulty: in a dispute, actually implementing the mechanism will require a French court to have jurisdiction. If the deceased lived in a European Union State other than France, this will probably not be the case. The levy will then be technically ineffective.
In conclusion
Applying the compensatory levy right in its current state seems rather extravagant. This is why many commentators are calling for a priority question of constitutionality or a ruling by the Court of Justice of the European Union on this mechanism.
In the meantime, to avoid an unpleasant challenge to your estate planning in an international context, we recommend that all families in international situations with assets in France, especially those with links to Common Law countries, contact their notaire to secure or update their succession strategy.
For David Notaires – Aix en Provence, Elodie Letouche