There is no escaping the requirement for inheritors to make an inheritance tax declaration in France, even though no tax may be payable.

Real estate must be valued at market value, but slightly different rules apply in relation to furniture and personal effects.

In the majority of cases, they are valued at a flat rate of 5% of the net value of the fixed assets in the estate.

However, it can be more beneficial to realise an inventory and a valuation, which is then used in lieu of the 5% flat rate.

In practice, it is not infrequently the case that net value of the effects are lower than the 5% lump sum applicable in the absence of an inventory.

Thus, if the estate consists of a property, valued at €500,000, the assets furnishing the residence will be valued, according to the 5% flat-rate scale, at €25,000, a substantial sum, which may be in excess of their actual value.

By undertaking an inventory, instead of paying inheritance tax on the fixed value of €25,000, the heirs will pay it on the lower value contained in the inventory.

Carrying out an inventory therefore makes it possible to accurately assess the assets of the estate left by the deceased on the day of their death, and the extent of the liability to inheritance tax.

It also limits the risk of disputes between heirs, by facilitating the division of the deceased's property.

Several scenarios may also require that an inventory is carried out:

• when one of the heirs is legally protected because he or she is a minor child or an adult under guardianship or curatorship;

• in the absence of an heir due to difficulties in contacting them at the time of inheritance;
• when an heir accepts the inheritance up to the amount of the net assets, i.e. they only undertake to repay the debts that accompany it up to the value of the inheritance, thus protecting their personal assets.

In addition, the tax authority have the right to discard the 5% lump sum if they consider (with proof) it materially underestimates the real value of the furniture and effects.

The 5% rule does not apply in the case of jewellery, precious stones and works of art. Paintings and other artwork having the character of works of art or collectors' items, as well as paintings kept in a safe, or simply in storage will not fall into the category of furniture. However, it is a grey area, the law is imprecise, and works of art that form part of the decoration of the property can be accepted under the 5% rule.

To obtain the net assets on which the 5% flat rate is used, the estate liabilities (debts on the day of death), funeral expenses and the various taxes to be paid are deducted from the gross sum.

The process of making an inventory is carried out through the auspices of the notaire handling the succession. They will appoint an expert (commissaire-priseur) to evaluate, room by room, the property and each object, in order to assign a value. There is a cost, which will normally be upwards of €500, as well as a small charge made by the notaire. The heirs need not be present when the inventory is taken, when their consent to the process is then arranged by the notaire.

If the valuation is undertaken by the heirs, the tax office will not accept it if it is below the 5% flat rate.

If effects are sold, then the net sale price (after costs) is used for the valuation.