In a judgement delivered on 8 July 2026, the French Supreme court (Cour de Cassation) ruled that when grandchildren inherit from a grandparent because their parent has renounced the inheritance, the tax authorities cannot take into account gifts previously made to that parent when calculating the grandchildren's inheritance tax.
The Facts
The dispute arose following the death of an elderly woman in September 2016. She left an estate worth approximately €2.9 million, to be shared equally between her son and daughter.
Several months later, the daughter decided that she did not need her share of the inheritance. Instead, she formally renounced her inheritance, allowing her three children to inherit directly from their grandmother through a long-established legal mechanism known in French law as "representation" (représentation successorale).
Civil law allows descendants to inherit by representation when their parent either predeceases the deceased or renounces the inheritance.
Each grandchild therefore inherited approximately €485,000.
However, the situation was complicated by events that had occurred before the grandmother's death.
During the previous fifteen years, the grandmother had made two substantial lifetime gifts to both of her children. The daughter had received gifts worth a combined €1,065,738.
Under the French General Tax Code (Code général des impôts), lifetime gifts made within fifteen years before death are generally brought back into account when calculating inheritance tax. This prevents families from avoiding inheritance tax simply by making large gifts shortly before death.
France's tax administration argued that because the mother had already benefited from more than €1 million in lifetime gifts, those gifts had already exhausted the lower tax bands and tax-free allowances available on her inheritance.
According to the administration, her children effectively "stepped into her shoes" not only for civil law purposes but also for tax purposes.
As a result, instead of benefiting from the lower progressive inheritance tax rates, the grandchildren were treated as if they had already used those bands. Their inheritance was therefore taxed at a much higher rate, producing an additional tax assessment of €354,556, including interest.
The case turned on should the grandchildren simply replace their mother completely (including inheriting the tax consequences of gifts made to her) or should they be treated as independent taxpayers with their own inheritance tax calculation?
Lower Courts
Both the local tribunal and the Paris Court of Appeal accepted the tax administration's reasoning.
The lower courts considered that because the grandchildren represented their mother in the succession, the previous gifts made to their mother should also be taken into account when calculating the inheritance tax payable by the grandchildren.
That interpretation effectively treated the family's tax history as transferring together with the inheritance rights.
The Supreme Court
The Cour de Cassation overturned those decisions.
The judges closely examined the wording of the relevant legislation, particularly Articles 751 and 805 of the Civil Code together with Articles 777 and 784 of the General Tax Code.
The Court noted an important distinction.
Article 784 expressly refers only to donors, heirs and legatees who personally received previous gifts.
It says nothing about the descendants of someone who later renounces an inheritance.
The Court concluded that the legislation could not be extended by implication.
Its key finding was clear:
Grandchildren inheriting by representation "must be taxed personally according to their relationship with the deceased" and previous gifts made to the parent who renounced the inheritance cannot be held against them for inheritance tax purposes.
Although highly technical, the judgement has practical importance.
Transfers between parents and children benefit from tax-free allowances and relatively favourable tax bands before reaching higher rates, which currently rise to 45% for the largest inheritances.
Had the tax administration succeeded, grandchildren would effectively have inherited not only their parent's place in the succession but also the parent's previous tax history..
Instead, under the new legal doctrine, every grandchild receives an individual tax calculation based on what they themselves received, not what their parent received years earlier.
It creates the possibility that, in some circumstances, an adult child who has already received significant lifetime gifts may choose to renounce an inheritance so that his or her own children inherit directly.
Because the previous gifts remain attached only to the parent, and not to the grandchildren, the overall inheritance tax burden on the family could be substantially reduced.
Related Reading:
