For most foreign nationals buying property in France is a life enhancing experience, but one of the principal deliberations often also needs to be what happens to your estate on your demise.

Given the divine right of children to a share of the estate on first death, most couples give priority to steps that protect the surviving partner.

However, once the rights of partner and progeny have been squared, ideally in the most tax advantageous manner, may be the time to consider whether grandchildren can benefit from the benevolence of the French taxman.

Although France has a gift tax, there are allowances that are granted to family members, including those between grand-parents and their grand-children.

The first of these is the gift of money, up to a maximum of €31,865, from each grand-parent to each grand-child. To benefit, the grand-parents must be under 80 years of age and the grand-child over 18 years of age.

Separately, it is also possible to gift the same sum (€31,865), or assets of equal value, from each grand-parent to each grand-child, every 15 years. In this scheme, there are no age restrictions.

The two schemes are cumulative, meaning that each grand-parent can give tax-free to each of their grand-children a total of €63,730.

One limitation on the total amount that can be gifted is the entrenched rights to children under the réserve héréditaire. Only the freely disposable part of the estate can be gifted in this way, without the risk that it conflicts with this rule. However, under an inter-generational agreement (donation-partage) it is possible to get around the problem.

Although in the case of a gift to children, 15 years must have expired before death of the donor for it to be not to be integrated into the inheritance calculation, this is not the case for gifts to grand-children. Even if your life expectancy is less than 15 years, gifting to grandchildren is tax-free, up to the maximum allowance.

This is much more advantageous than the bequest of property to a grandchild through a will, when only an allowance of €1,594 is granted on the death of the grandparent concerned. A will to be benefit of grandchildren is to be avoided if the tax benefits of a gift are to be obtained. Otherwise the 15-year rule will apply.

In addition to the above schemes, there is also an exemption from tax for gifts made to celebrate

birthdays, Xmas and other important occasions. These gifts are called présent d’usage.

To qualify as a présent d’usage two conditions must apply:

• There must be a practice of making gifts on certain occasions (engagement, birthdays, anniversaries, celebrations, births...), and;

• The value of the present must not be out of proportion to the donor's resources, their wealth and annual income.

Most courts generally only consider the wealth of the donor, when the general rule is that customary gifts should not exceed 3% of their capital.

In addition to gifts it is also possible to take out a life insurance policy (assurance vie) for the benefit of your grandchildren. To optimise the level of tax relief, these policies are best taken out before the age of 70 years. There are

fees payable for opening and running such a policy.

If you seek professional advice concerning anything in this article contact our

Property/Tax Clinic and one of our advisors will get back to you.