Under French law, although there is no automatic right of inheritance to those in a civil partnership there is an exemption from inheritance tax on the death of the first partner.
In a recent case, a tax audit of an inheritance between two civil partners was undertake by the tax authority.
An 81-year-old man, severely disabled since 2012, entered into a civil partnership (Pacte Civil de Solidarité - PACS) in July 2019 with his carer.
On the same day, he named this individual as his universal heir.
Upon his death in January 2021, the surviving partner claimed the exemption provided under French law, which allows full inheritance tax exemption between PACS partners, provided the union is genuine.
However, during the audit, the tax authorities identified several inconsistencies:
No shared residence, a key requirement for a valid PACS;
Bills and administrative documents of the caregiver remained at a different address;
Stable energy consumption at the deceased’s home, despite the supposed arrival of a second occupant;
Ongoing paid employment for the partner, even though the PACS includes a mutual assistance obligation that could cover the caregiver’s duties.
These converging factors led the tax authority to conclude that the partners never intended to share a life together, and that the PACS was solely aimed at achieving a fiscal benefit.
The PACS was deemed fictitious and classified as an abusive arrangement. Consequently, the inheritance tax exemption no longer applied.
The surviving partner was liable for 60% inheritance tax, the standard rate for unrelated heirs, totalling €489,000 in this case, as well as an 80% penalty for abusive practices.
Since 2019, reforms of the abuse-of-law framework have expanded the scope of control. The tax authority can now challenge arrangements whose main purpose is to obtain a fiscal benefit, even if they comply formally with the law.
Therefore, any PACS primarily concluded to avoid inheritance taxes or optimise wealth is at risk of reclassification, especially when there is a professional relationship between partners or a clear imbalance.
Related Reading:
