Inherited an exceptional property? Managing a prestigious estate is subject to specific rules that are important to understand before beginning the process. Drafting official documents, the rules of joint ownership, inheritance fees, donations… Here’s what you need to know about the succession of a high-end property.
Prestige Succession: The Use of a Notary is Mandatory
The succession process begins on the day of the person’s death, which must be declared within 24 hours. In the case of inheriting one or more exceptional properties, the use of a notary is mandatory. This is especially true for high-end properties where significant capital may be at stake.
Only the notary is authorized to carry out the various steps in the succession process:
- Drafting official documents, including one that lists the identity of each heir (legal or named in a will) and their share of the inheritance.
- Evaluating the property, minus any outstanding loans.
- Drafting the real estate ownership certificate, which constitutes the legal title to the inherited property.
- Transferring ownership to the heirs.
The Regime of Joint Ownership
In the absence of a surviving spouse, the property is considered to be in joint ownership, meaning it is passed on to all heirs. Unless a court ruling or agreement states otherwise, co-owners can leave joint ownership at any time by:
- Transferring or selling their share (with the other co-owners having the right of first refusal).
- Requesting a division of the property.
Who is Affected by Joint Ownership?
Joint ownership applies only to heirs with equal rights to the property. For example, a spouse inheriting the usufruct (right to use) of a property cannot be in joint ownership with their children, who inherit the bare ownership.
The management of jointly owned property is regulated by Law No. 2006-728 of June 23, 2006, which establishes three types of decisions:
- Conservatory acts: Decisions related to expenses for maintaining the property can be made by a single co-owner.
- Management acts: Require the agreement of two-thirds of the heirs for certain actions (renting the property, renovation work, selling personal property to settle debts or inheritance expenses, appointing a general manager for administration). Other co-owners must be informed of such actions as per Article 815-3-4° of the Civil Code.
- Disposition acts: Require the unanimous agreement of all co-owners to allow the sale of the property.
Inheritance Fees and Taxes
Inheriting is not free. All heirs must pay inheritance fees to compensate the notary. The property ownership certificate costs between 0.55% and 2% of the property's value. Upon division of the property, heirs must pay a tax to the notary, ranging from 0.8% to 4% of the property's value, plus 20% VAT.
Inheritance taxes are calculated in several steps:
- Valuation of the exceptional inherited property.
- Calculation of each heir's share based on the order of succession.
- Application of the tax allowance depending on the family relationship (e.g., €100,000 for direct heirs, €15,932 for siblings, €7,967 for nieces and nephews, €1,594 for others).
- Calculation of the tax scale (percentage of inheritance taxes after the deduction).
For example: Mr. Dupont inherits a beautiful Parisian apartment valued at €4 million from his mother. As a direct heir, he benefits from a €100,000 tax allowance, reducing the property's value to €3.9 million. A 45% tax rate is applied to this amount, and €237,606 is subtracted from the result. The inheritance tax would be: €3,900,000 x 45% – €237,606 = €1,517,394 in inheritance taxes.
Spouses and PACS partners are exempt from inheritance taxes, and disabled heirs receive an additional allowance of €159,325.
Properties Exempt from Inheritance Taxes
If the inherited exceptional property is classified as a historical monument, it may qualify for full tax exemption. If the property includes woods or forests, 75% of its value is exempt.
Finally, according to Article 1405 of the Civil Code, assets received during marriage through inheritance, will, or donation are considered separate property and do not fall under joint property, even if the couple is married under the legal regime of community property. However, the donor or deceased may include a clause that integrates the property into the community.
Donating an Exceptional Property
To reduce inheritance costs, it is in the owner's best interest to transfer the property through donation during their lifetime. In the case of an exceptional property subject to IFI (Wealth Tax), it is advisable to opt for a donation of full ownership. The donor completely relinquishes ownership, removing the property from their estate. The beneficiary gains the right to use the property and receive its income (e.g., rent).
This option allows heirs to benefit from significant tax allowances and advantages. However, donation limits exist: €100,000 per child, €30,000 per grandchild. For example, if a house worth €650,000 is donated by a couple to their three children during their lifetime, the property will be transferred in joint ownership and fully exempt from taxes.
Key Points to Remember:
- For prestige successions, a notary is mandatory.
- In the absence of a surviving spouse, the property is transferred to all heirs under joint ownership, with management regulated by Law No. 2006-728 of June 23, 2006.
- There are legal means to reduce inheritance fees and taxes, such as donating the property during one's lifetime.
