By leveraging several tax tools and planning the transfer in advance.
📜 The Advantage of Early Asset Transfers
Notaries emphasize that the earlier you transfer assets, the less tax you (or your heirs) will pay. However, according to an Ifop study published in May 2024, only 14% of French people have drafted a will in advance, despite more than 60% considering the possibility of transferring assets during their lifetime.
This is exactly what a Parisian couple did when they transferred a house in the Perche region to their children. The house was purchased in 2022 for €1 million. “Our clients wanted their children to avoid financial burdens, ensuring the house wouldn’t become a ‘poisoned gift’ they might have to sell one day to cover inheritance taxes,” explains a spokesperson for the Paris Chamber of Notaries.
🏠 How Did They Do It?
The couple used two main mechanisms:
1. Property Demembrement (Division of Rights):
They retained usufruct (the right to use the property) and transferred the bare ownership to their children.
• Usufruct allows parents to live in or rent out the property until the end of their lives.
• The value of the usufruct depends on the age of the donors: the older they are, the lower the value of the usufruct.
For example, at ages 60 and 59, the usufruct is valued at 50% of the property’s value. Had they waited another year, the usufruct’s value would have dropped to 40%.
As a result, the bare ownership of the house was valued at €600,000, which was transferred to their children.
2. Tax Exemptions for Gifts:
French law allows parents to give up to €100,000 to each child every 15 years tax-free.
• In this case, the parents transferred €200,000 to each of their three children (€100,000 from each parent).
✅ The Result: Tax-Free Transfer
The children received the bare ownership of the house. Upon their parents’ deaths, they will automatically become full owners without paying any additional taxes.
“This is an excellent example of smart use of tax legislation and timely planning to preserve family assets for future generations,” concludes the notary. Contact us if you have any questions about purchasing real estate.
Notaries emphasize that the earlier you transfer assets, the less tax you (or your heirs) will pay. However, according to an Ifop study published in May 2024, only 14% of French people have drafted a will in advance, despite more than 60% considering the possibility of transferring assets during their lifetime.
This is exactly what a Parisian couple did when they transferred a house in the Perche region to their children. The house was purchased in 2022 for €1 million. “Our clients wanted their children to avoid financial burdens, ensuring the house wouldn’t become a ‘poisoned gift’ they might have to sell one day to cover inheritance taxes,” explains a spokesperson for the Paris Chamber of Notaries.
🏠 How Did They Do It?
The couple used two main mechanisms:
1. Property Demembrement (Division of Rights):
They retained usufruct (the right to use the property) and transferred the bare ownership to their children.
• Usufruct allows parents to live in or rent out the property until the end of their lives.
• The value of the usufruct depends on the age of the donors: the older they are, the lower the value of the usufruct.
For example, at ages 60 and 59, the usufruct is valued at 50% of the property’s value. Had they waited another year, the usufruct’s value would have dropped to 40%.
As a result, the bare ownership of the house was valued at €600,000, which was transferred to their children.
2. Tax Exemptions for Gifts:
French law allows parents to give up to €100,000 to each child every 15 years tax-free.
• In this case, the parents transferred €200,000 to each of their three children (€100,000 from each parent).
✅ The Result: Tax-Free Transfer
The children received the bare ownership of the house. Upon their parents’ deaths, they will automatically become full owners without paying any additional taxes.
“This is an excellent example of smart use of tax legislation and timely planning to preserve family assets for future generations,” concludes the notary. Contact us if you have any questions about purchasing real estate.