Transfer duties (droits de mutation à titre gratuit) are payable on all transfers of assets upon gift or death, regardless of whether the transmission results from intestate succession or from testamentary dispositions granted by the deceased.

The applicable rate is calculated according to a progressive scale, based on the net value of the estate (or of the gifts and legacies), as determined under French civil law, and the degree of kinship between the deceased (or donor) and the heir (or donee). The closer the familial relationship, the lower the applicable rate ‒ as provided by Article 777 of the French Tax Code (for instance, up to 45% in direct line and 60% between unrelated persons). This rate applies to the net share received by each heir or donee, after the deduction of any applicable tax allowances.

In addition, the division of an estate, whether it involves movable or immovable property, is subject to a registration duty or land registration tax ‒ referred to as partition duty ‒ generally levied at a rate of 2.5% on the net value of the assets divided (Articles 746 and 747 of the French Tax Code).

Taxation of trusts, foundations, and similar estate planning instruments are addressed in the sections that follow.

With respect to transfer duties (droits de mutation à titre gratuit),there are four main categories of exemptions.

• Exemptions based on the status of the deceased or the beneficiary, whether natural or legal persons. These include:
1. the surviving spouse or civil partner (PACS) (Article 796-0 bis of the French Tax Code);
2. siblings who lived with the deceased and suffer from a disability (Article 796-0 ter of the French Tax Code); and
3. public or public-interest bodies with a recognised general interest mission, particularly with respect to donations or bequests made to them (Article 795, 2° of the French Tax Code).
• Partial exemptions granted based on the nature of the assets transferred, such as works of art, books, collectibles, and historically or artistically significant documents, as well as woodland and forestry assets.
• Partial exemptions applicable in the event of the transfer of a sole proprietorship or family business.
• Special regimes linked to the legal nature of the testamentary disposition, including:
1. gradual and residual gifts (Article 784 C of the French Tax Code);
2. renunciation of succession (Article 756 bis);
3. limited acceptance or partial allocation of the estate (cantonnement) (Article 788 bis); and
4. reversion of usufruct clauses (Article 796-0 quater).

Additional exemptions may apply in specific cases. For example, the statutory right of reversion (droit de retour légal) in favour of the deceased’s parents is fully exempt from transfer duties, regardless of whether it is exercised in kind or in value (Article 763 of the French Tax Code).

Furthermore, tax allowances (abattements) apply depending on the degree of kinship (Article 779 of the French Tax Code):

• direct-line heirs (ascendants and descendants, including representation in cases of predecease or renunciation) benefit from an allowance of EUR100,000 per beneficiary;
• in the collateral line:
1. transfers between siblings benefit from an allowance of EUR15,932; and
2. transfers to nephews and nieces benefit from an allowance of EUR7,967;
• beneficiaries who are unable to work under normal conditions of profitability due to a physical or mental disability, whether congenital or acquired, are entitled to a special allowance of EUR159,325; and
• in the absence of any other allowance, a residual allowance of EUR1,594 applies to each heir or legatee for successions opened since 1 January 2011.

With respect to partition duties (droits de partage), the following are exempt:

• the redemption of units in mutual funds and real estate investment funds (fonds communs de placement, fonds de placement immobilier) (Article 749 of the French Tax Code);
• the division of jointly owned buildings (copropriété) and redistribution of common areas (Article 749 A); and
• partition arising from the winding-up of a business (Article 749 B).

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Non-residents holding real estate in France are subject to various tax obligations, including property tax, inheritance and gift duties (DMTG), income tax and social contributions on rental income, as well as capital gains tax on real estate disposals. These rules may be adjusted or supplemented by international tax treaties, particularly to avoid double taxation.

Property Tax and Rental Income

Non-residents are liable for property tax on real estate they own in France, in accordance with ordinary law. Rental income derived from French-situated properties is subject to French income tax (IR), and, since 2012, to social contributions at the applicable rate.

Inheritance and DMTG

In the absence of an applicable international tax treaty, the mere location of the property in France triggers liability for inheritance or DMTG, even if neither the donor/deceased nor the beneficiary/heir is tax resident in France (Article 750 ter of the French Tax Code).

Capital Gains Tax on Real Estate

Capital gains realised by non-residents upon the sale of real estate located in France are subject to a withholding tax at a flat rate of 19% for individuals, in addition to social contributions at a rate of 17.2%.

Certain exemptions from the standard capital gains regime may apply to non-residents under specific conditions.

• Full exemption for former main residence: full exemption may apply where the property sold was the seller’s former main residence in France, provided the property has remained at the seller’s free disposal (not rented or loaned) since their departure from France and the sale occurs no later than 31 December of the year following the transfer of tax residence outside France. The seller must be resident in an EU member state or a country having concluded an administrative assistance and mutual recovery agreement with France.
• Partial exemption capped at EUR150,000: a partial exemption, up to a maximum of EUR150,000 of net capital gain, is available to non-resident individuals who are nationals of the EU or EEA and who were tax resident in France for at least two consecutive years at any time prior to the sale. The sale must occur within ten years of the transfer of tax residence, or without time limitation if the property has remained at the seller’s free disposal since 1 January of the year preceding the sale. This exemption is limited to a single property per taxpayer.

In France, wealth taxation is governed by the French Tax Code (Code général des impôts), but revised annually through the Finance Act, adopted at the end of each calendar year. This yearly legislative review introduces potential instability, particularly in the areas of inheritance and gift taxation, as well as the real estate wealth tax (Impôt sur la fortune immobilière – IFI).

Several reforms – though not yet enacted – are recurrent topics in parliamentary debates.

• The Dutreil regime could be restricted, with proposals to tighten holding period requirements or the conditions for effective management; and
• a reform of inheritance tax is under discussion, including reductions in current allowances, a more progressive rate structure for high net worth estates, and a shorter look-back period for prior gifts (currently 15 years).

In this context, high net worth individuals increasingly seek to anticipate wealth transfers (eg, lifetime gifts, dismemberment of ownership, use of holding companies), explore cross-border structuring options (trusts, expatriation, foundations), and implement robust legal safeguards for international estate planning through tailored estate and governance instruments.

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In France, several notable cultural and legal factors significantly shape succession planning. These factors include family structure, attitudes toward inheritance, and the influence of the civil law system.

The Concept of Property

First of all, in France property is a fundamental liberty and French people are deeply attached to this notion.

Strong Tradition of Family Continuity and Legal Framework

France has a deep-rooted civil law tradition, which tightly regulates succession through the forced heirship rules (réserve héréditaire).

The Issue of Taxation

Inheritance tax has a real impact on inheritance in France. France is a country with relatively high inheritance tax rates. Many French people therefore try to organise their estate and the transfer of their assets with this in mind.

These factors make succession planning a highly structured yet emotionally charged process, where law and family dynamics intersect closely.

In France, international estate planning is governed by specific rules of private international law, in particular Regulation (EU) No 650/2012, which aims to harmonise international successions within the EU. This response examines the legal mechanisms available under French law to address the challenges posed by tax laws, rules of inheritance, and international treaties.

The Legal Framework for International Successions in France

Regulation (EU) No 650/2012 is the main legal instrument applicable to international successions opened on or after 17 August 2015. It introduced several key innovations, including the following.

• Unity of succession: the law applicable to the succession is that of the deceased’s habitual residence at the time of death, unless the deceased expressly chose otherwise (professio juris),
• The deceased may choose the applicable law of the country with which they have a substantial connection (national law).
• The EU Regulation provides for the European Certificate of Succession (ECS). This tool facilitates the recognition and enforcement of decisions and authentic instruments relating to succession matters across EU member states.

These provisions significantly simplify the management of international estates by reducing conflicts of law and fostering a harmonised approach.

Fundamental Principles of International Succession Law

French law favours the application of a single succession law to govern the transfer of hereditary assets, regardless of their location. This principle is reinforced by the EU Regulation, which ensures a unitary approach to succession and permits the calculation of reserved portions and disposable shares on each distinct asset pool.

Tax Questions

As regards taxation, the situation is somewhat different. France has nevertheless entered into numerous bilateral treaties, in particular to avoid the heavy burden of double taxation that may arise under French law.

French legislation provides for various mechanisms to anticipate one’s succession and gradually transfer assets during one’s lifetime, which inevitably has a fiscal impact at the time of death.

Examples include holding property through a family-owned real estate company (SCI) or gifting the bare ownership (nue-propriété) of assets while retaining the usufruct.

However, limitations persist, especially in cases involving non-EU countries or international conventions not ratified by France. In such instances, the general principles of French private international law continue to apply.

French jurisdiction has a forced heirship system, which is a core principle of French succession law. It ensures that certain heirs ‒ primarily children ‒ receive a mandatory share of the deceased’s estate, regardless of the deceased’s personal wishes. The children of the deceased are always forced heirs. The spouse can also be a forced heir when there are no children.

If there are children, the réserve (reserved portion) depends on their number:

• with one child, the reserved portion is 1/2 and the freely disposable portion is 1/2;
• with two children, the reserved portion is 2/3 (1/3 each) and the freely disposable portion is 1/3; and
• with three or more children, the reserved portion is 3/4, divided equally between them, and the freely disposable portion is 1/4.

French law also provides a right allowing each child or their heirs to claim from the deceased’s assets located in France at the time of death, in order to restore the reserved rights granted to them by French law, up to the limit of those rights, if the deceased is French and their estate is governed by the law of a country that does not recognise the forced heirship (prélèvementcompensatoire).

While the system is rigid, some flexibility exists through consensual arrangements, including the following.

• Donation-partage (Family Gift Partition):
1. allows a parent to distribute assets during their lifetime among children and/or grandchildren;
2. helps avoid disputes and freeze asset values; and
3. all children should be involved to ensure equality and avoid future litigation
• Will planning within limits:

1. a person can freely dispose of the disposable quotity via a will; and
2. with careful planning, this allows some tailoring of the succession.
• Renonciation anticipée à l’action en réduction (RAAR):
1. if a testator gives too much by will and it is more than the disposable quotity, forced heirs can request a reduction of the legatee’s share. However, since 2006, French law allows a child to renounce in advance their right to challenge an excessive gift or legacy that infringes their reserved share. This advanced waiver must comply with strict the formalities.
• Assurance-vie (life insurance):
1. amounts paid via a properly structured assurance-vie are not part of the estate and can exceed the disposable portion, provided they are not “manifestly excessive”; and
2. offers a practical tool to bypass forced heirship in a limited, lawful way.

Under French law, the matrimonial regime determines the rules applicable to the management and distribution of the spouses’ property during the marriage and in the event of its dissolution. The issue concerns the classification of marital property, the conditions under which a spouse may dispose of joint property, and the recognition and validity of marriage agreements (prenuptial and postnuptial). In the context of an estate, the liquidation of the matrimonial regime will always precede the liquidation of the estate itself. Only the deceased’s share will be included in the estate’s assets.

The Default Matrimonial Regime and Available Alternatives

In the absence of a marriage contract, the default matrimonial regime under French law is that of community property reduced to acquisitions, as defined by the Civil Code and the laws in force. This regime implies that assets acquired by the spouses during the marriage (acquêts) are considered joint property, while assets owned before the marriage or received by gift or inheritance remain separate property.

However, the spouses may opt for another matrimonial regime by drawing up a marriage contract, such as the regime of separate property or the regime of participation in acquisitions. 

Rules Relating to the Management and Disposal of Matrimonial Property

Under the community property regime, joint property is subject to specific management rules each spouse may administer the joint property alone, except for significant acts of disposal, such as sale or donation, which require the consent of the other spouse.

Acts of disposal carried out without the consent of the spouse may be annulled if they are considered fraudulent. For example, a transfer subject to a life annuity or at a loss is presumed to be fraudulent if it is carried out without the consent of the spouse. 

Recognition and Conditions of Validity of Marriage Agreements

Marriage agreements, whether prenuptial or postnuptial, are recognised under French law, subject to certain conditions.

• Choice of applicable law: spouses may choose the law applicable to their matrimonial regime, provided that this law has a direct link to their situation (eg, nationality or habitual residence) and that it is not contrary to French public policy (eg, a foreign contract that does not provide for alimony in the event of divorce could be set aside by a French judge).
• Form and content: marriage contracts must comply with formal requirements, such as the authentic form (notarised deed) under French law. If the contract was drawn up abroad, a notarised deed is not required. However, it must comply with the formal requirements of the country in which it was drawn up.
• Determining the law applicable to the matrimonial regime in an international context: since 29 January 2019, Regulation (EU) No 2016/1103 has more strictly regulated the freedom of spouses to choose the applicable law, limiting this freedom to laws that have a direct link to their situation. 

Under French law, the transfer of ownership always incurs a cost.

Sale of Property During Lifetime

• Sell real estate: if the fees and taxes are payable by the buyer, the seller, if it is not their primary residence (which is fully exempt), will have to pay capital gains tax, the basis for which varies depending on the number of years the property has been owned.
• Sell securities: the basis for calculating French and foreign securities admitted to trading on a regulated market is determined by their average price on the day of transfer.

Transfer of Ownership by Donation or Inheritance

Determination of the basis for calculating securities

In accordance with Article 759 of the General Tax Code (CGI), the basis for calculating French and foreign securities admitted to trading on a regulated market is determined by their average price on the date of transfer. In the case of inheritance, this basis may also be calculated on the average of the last 30 prices preceding the transfer. 

Thus, the value of the securities at the time of their transfer is determined according to objective criteria related to their market price, which forms the basis for calculating transfer duties on a gratuitous basis.

Determination of the basis for calculation for real estate

For real estate, the basis for calculation depends on the value declared at the time of transfer, after application of any tax allowances. For example, in the case of a principal residence, Article 764 bis of the CGI provides for a specific allowance that can reduce the declared value. This declared value, plus inheritance taxes and fees, constitutes the acquisition price for calculating the capital gain in the event of a subsequent resale.

However, it is important to note that the application of certain allowances, such as the 20% allowance for the primary residence, may have a negative impact on the taxation of the capital gain realised upon resale. A reduced declared value leads to an increase in the taxable capital gain if the property is resold at a price higher than this value.

In France, the transfer of assets to younger generations is governed by specific tax rules, particularly with regard to gift tax. Certain mechanisms allow these taxes to be reduced or eliminated, thereby facilitating the transfer of wealth.

In the case of a gift, a tax allowance is applied based on the relationship between the donor and the beneficiary. Thus, each parent can give up to EUR100,000 to each of their children free of gift tax every 15 years. For a grandchild, the allowance is EUR31,865, and for a great-grandchild, EUR5,310.

Between spouses or civil union partners, the allowance is EIR80,724. In the case of gifts between siblings, it is EUR15,932, and between uncles/aunts and nephews/nieces, EUR7,967. For all other persons, a single flat-rate allowance of EUR1,594 applies.

In addition, a family gift of money may benefit from an additional allowance of EUR31,865 if the donor is under 80 years of age and the beneficiary is of legal age or emancipated. This benefit can be combined with the standard allowances and is renewable every 15 years.

The Mechanism for Allocating Gift Tax in the Event of the Return of Property to the Donor

Article 791 ter of the CGI, introduced by the Amended Finance Law for 2007, provides for a mechanism to avoid double taxation when the same property is transferred in a direct line of succession. This mechanism applies in situations where: 

• an asset has been transferred through a direct line gift (for example, from a parent to a child); 
• this asset subsequently returns to the donor’s estate, in accordance with Articles 738-2, 951, and 952 of the Civil Code (in particular in the event of legal or contractual return of the assets); or
• a new gift of the same asset is made by the donor to another direct descendant within five years of the return of the asset.

In this case, the gift tax paid on the first transfer is offset against the tax due on the second donation. This mechanism aims to avoid double taxation on the same property, while encouraging the rapid transfer of assets to younger generations.

In French law, digital assets, such as cryptocurrencies and tokens, constitute a relatively recent category of property, introduced by the PACTE Law of 2019. Their legal treatment in the context of inheritance raises specific issues, particularly regarding their qualification, transfer, and the associated tax obligations.

Legal Qualification of Digital Assets

Digital assets are defined by Article L. 54-10-1 of the Monetary and Financial Code as including two main categories:

• tokens defined in Article L. 552-2, excluding those that meet the characteristics of financial instruments or bearer bonds; and
• any digital representation of value that is not issued or guaranteed by a central bank or public authority but is accepted as a means of exchange and can be transferred, stored or exchanged electronically.

These assets, including cryptocurrencies, do not have the legal status of legal tender. They are considered movable property, which is important for their treatment in the context of inheritance.

Treatment of Digital Assets in Inheritance

In inheritance law, digital assets are treated as movable property. As such, they are included in the taxable base for inheritance taxes when transferred without consideration. This means that their value must be declared and taken into account for the calculation of inheritance or gift taxes, in accordance with the rules applicable to movable property.

Digital assets held abroad must be declared by individuals domiciled in France, under Article 1649 bis C of the CGI. This reporting obligation aims to allow the tax administration to control these assets in the context of inheritance.

Tax Implications of Transmitting Digital Assets

The transmission of digital assets is subject to inheritance or gift taxes, depending on the nature of the transfer. However, digital assets are not subject to the wealth tax on real estate, as they do not fall under the category of real property.

It should also be noted that exchanges between digital assets are excluded from the capital gains tax regime, in accordance with Article 150 VH bis of the CGI. However, if the transmission involves the sale of cryptocurrencies, any capital gains realised may be taxed under the category of non-commercial profits (BNC) or industrial and commercial profits (BIC), depending on whether the activity is regular or not.

To address the lack of civil recognition of trusts while still acknowledging their potential advantages, France introduced in 2007 a legal mechanism that shares certain features with a trust ‒ particularly the tripartite relationship between three parties and a structure designed to withstand the settlor’s insolvency. Law No 2007-211 of 19 February 2007 established the fiducie under French law, defining it as “an operation by which one or more settlors transfer assets, rights or securities, or a set thereof, present or future, to one or more fiduciaries who, keeping them separate from their own estate, act for a specific purpose for the benefit of one or more beneficiaries.” This agreement, governed by Articles 2011 to 2030 of the French Civil Code, can notably be used for asset management on behalf of a vulnerable adult, or for administering corporate assets to facilitate intergenerational wealth transfer.

An entrepreneur, for instance, may use it to safeguard professional assets by anticipating personal vulnerability and avoiding the appointment of an inexperienced court-appointed guardian. The entrepreneur can appoint a fiduciary who will manage the assets and ensure they are transferred under more favourable conditions. However, gratuitous transfers (fiducie-libéralité) are expressly prohibited.

Unlike the trust, which is governed by the rules of equity, the fiducie is a contract subject to the law of obligations, allowing for greater contractual freedom within the limits of what is legally permissible. Nevertheless, it must comply with mandatory provisions, and where community property or jointly held assets are involved, it must be executed by notarised deed under penalty of nullity.

As for foundations, these are legal arrangements whereby individuals or legal entities irrevocably dedicate assets, rights, or resources to the pursuit of a not-for-profit public-interest purpose (Article 18 of Law No 87-571 of 23 July 1987 on philanthropy). Therefore, they are not typically used as estate planning tools in France. However, foundations may allow a testator to allocate part of their estate to designated legatees under a more favourable tax regime by naming the foundation as universal legatee ‒ subject to the disposable portion if there are forced heirs ‒ with the obligation for the foundation to subsequently pass on part of the estate to a specified third party. Foundations can thus be used for estate transmission purposes.

France has never ratified the Hague Convention of 1 July 1985 on the Law Applicable to Trusts and on their Recognition, and consequently, trusts are not formally recognised under French civil law. However, due to the growing prevalence of trusts and increasingly porous borders, France eventually acknowledged their existence for tax purposes, to avoid their use in tax evasion schemes. A definition of a trust was incorporated into the French Tax Code by the Amended Finance Law for 2011 (Article 792-0 bis of the CGI). This legislation established a specific regime for foreign trusts that generates taxable events. This regime does not apply to French fiducies, which are subject to a separate legal framework. On the civil law side, French courts, invoking the principle of party autonomy, now recognise foreign trusts under strict conditions:

• the trust must be validly constituted under the laws of the jurisdiction concerned;
• it must not contravene French public policy; and
• it must not infringe:
1. rules of inalienability, where assets located in France are subject to French law.
2. the forced heirship regime; or
3. rules on gifts to unborn people.

French legal resistance to the trust stems not only from concerns about tax avoidance but also from conceptual differences. For example, the trust relies on notions foreign to French civil law, such as legal and equitable ownership, which conflict with the foundational principle in French law that all property belongs to a single legal owner. In a trust, the trustee is merely the nominal owner, while the beneficiary holds beneficial interest. This distinction between apparent ownership and equitable ownership has no equivalent in French law. Although comparisons are often drawn between the trust and the fiducie, they remain distinct mechanisms. For example, a testamentary trust cannot be equated with a fiducie-libéralité, as such arrangements are currently prohibited under French internal law (French Civil Code, Article 2013).

Law No 2011-900 of 29 July 2011 (Amended Finance Law for 2011) introduced a specific tax framework applicable to foreign trusts.

• The trustee is subject to a dual reporting obligation to the French tax authorities when the trust has any link with France (even a tenuous one): an annual asset declaration, and an event-driven declaration at the time of the trust’s creation, modification, or termination. Additionally, fees paid to French-resident trustees managing movable or immovable assets are taxed under the business profits (BIC) category.
• The settlor is either the natural person who created the trust or, if created by a professional or legal entity, the individual who contributed the assets (French Tax Code, Article 792-0 bis, I-2). If the settlor is a French resident, they are subject to gift or inheritance tax and to the real estate wealth tax, since the French tax authorities consider the trust assets to remain part of the settlor’s estate. They may also be liable for the 3% annual tax, except in cases specifically excluded by Article 990 E of the French Tax Code.
• A French-resident beneficiary must report income derived from foreign trusts as foreign investment income for income tax purposes, regardless of the nature of the trust assets.

Thus, any connection between a trust and France significantly reduces the benefits otherwise offered by trusts in jurisdictions where they are fully recognised. The French authorities are generally suspicious of trusts and apply a transparency principle. The fiducie does not escape this scrutiny either, as it is also subject to transparency rules and cannot be used for gratuitous transfers. Nonetheless, these mechanisms can offer some planning opportunities, provided all tax obligations are scrupulously observed.

A trust is deemed irrevocable when the settlor permanently relinquishes control over the assets or rights transferred. If this relinquishment is not effective, the assets are deemed to remain within the settlor’s estate for tax purposes, even if the trust deed characterises the trust as irrevocable and discretionary (French Supreme Court, Criminal Chamber, 6 January 2021, case no 18-84.570). Case law increasingly tends to assimilate irrevocable trusts to gifts, a trend that has been criticised in legal scholarship. Some scholars argue that trusts do not meet the classical definition of a donation, and should instead be seen as a distinct form of gratuitous transfer. For a transfer to qualify as a donation under French law, it must involve both the settlor’s irrevocable divestment, a donative intent, and the formal acceptance by the done (French Civil Code, Articles 894 and 932).

Donative intent can be inferred from the identification of the beneficiary in the trust deed. However, in certain types of trusts, the trustee may unilaterally alter the beneficiary, undermining the settlor’s donative intent. Furthermore, since the beneficiary does not sign the trust instrument, formal acceptance is problematic. To address this, the French Supreme Court (Cour de cassation) has ruled that acceptance can be implied, even without the beneficiary’s signature (Commercial Chamber, 6 November 2019, case no 17-26.985). The 2011 reform of the French trust taxation regime aims to address and reduce these qualification issues. Still, as previously discussed, the recognition of trusts by French courts remains exceptional and subject to stringent conditions, which often make their use legally uncertain in France.

It is therefore more prudent to rely on the fiducie contract, despite its current limitations in gratuitous transfers. Under existing law, the fiducie is revocable by the settlor if the beneficiary has not accepted it. After acceptance, it may only be amended or revoked with the beneficiary’s consent or by court order. However, it automatically terminates upon the settlor’s death and cannot be extended beyond this point, even by agreement.

In a family business, protecting the assets of the business owner is a key issue. Risks related to business creditors, family disputes or separation/divorce can jeopardise the long-term viability of the business if they are not anticipated. Several legal tools are available to protect both personal assets and business assets.

Protecting Assets From Professional Creditors

Under French law, there are various mechanisms for limiting the exposure of personal assets to professional debts.

• Separation of personal and professional assets: the Law of 14 February 2022 introduced a single status for sole traders, abolishing the EIRL regime and establishing an automatic separation between personal and professional assets. This separation, provided for in Article L. 526-22 of the Commercial Code, protects the entrepreneur’s personal assets from professional creditors, except in the event of voluntary assignment or if the assets are necessary for professional activity.
• Creation of a corporate structure: the use of a limited liability company (SARL, SAS, etc) remains an effective tool for protecting the personal assets of the director. The director’s liability is limited to the amount of their contributions, except in the event of mismanagement engaging their personal liability.

Protection of Assets in the Event of Family Disputes

In the event of separation or divorce, there are several legal levers that can be used to protect the family business and the director’s professional assets.

• Choice of matrimonial regime: the separate property regime is the most suitable for ensuring that the spouses’ assets remain separate. However, for couples who have opted for a community property regime, specific clauses in the marriage contract may also offer protection:
1. a clause stipulating separate property (stipulation de propres), allowing company shares to remain part of the personal estate; and
2. a clause excluding professional assets from a participation in acquisition regime (participation aux acquêts).
• Statutory clauses: in addition to the marriage contract, company law allows interference in governance to be anticipated and limited though specific clauses:
1. the spouse in a community property regime may sign a waiver of partnership status or a spousal agreement, preventing the spouse from automatically becoming a shareholder; and
2. statutory pre-emption or approval clauses can be included to control the identity of shareholders and prevent any unwanted interference in the management or shareholding of the company.

The Dutreil Pact

The Dutreil Pact (Articles 787 B and 787 C of the CGI) is the primary strategy for family business transfers in France. It allows a 75% reduction on the value of securities transferred free of charge (through donation or inheritance), subject to strict conditions:

• a collective commitment to retain the securities for at least two years;
• an individual commitment by each beneficiary to retain the securities for an additional four years; and
• at least one of the signatories must hold a management position for the duration of the collective commitment and for the three years following the transfer.

This mechanism is applicable to companies engaged in operational activities or holding companies. It requires rigorous planning and comprehensive documentation, including annual certificates to be provided to the tax authorities.

Additional transfer and governance mechanisms exist to ensure an optimised transfer and prevent conflicts.

Shared Donation (Donation Partage)

Shared donation is often used in conjunction with the Dutreil Pact. It allows:

• values to be fixed at the time of transfer, thus avoiding future conflicts;
• a fair distribution of securities and other assets among the heirs; and
• the tax benefits of the Dutreil Pact to be applied when securities are transferred under this scheme.

Family Buy-Out (FBO)

An FBO is a hybrid strategy that combines donation and transfer for consideration:

• the director gives part of their securities to the buyer (often one of their children);
• the buyer pays a cash adjustment to their co-heirs via a family holding company created for this purpose; and
• the holding company can finance this cash payment through debt (LBO), allowing for a gradual transfer financed by the company’s future results.

Statutory Arrangements

Specific statutory clauses make it possible to secure governance, including:

• approval, temporary inalienability or exclusion clauses; and
• clauses strengthening the powers of the designated manager or establishing family majority control.

Posthumous Mandate (Mandat à Effet Posthume)

This mandate allows a representative to be appointed to manage the securities or the company after the founder’s death, for a period of two to five years. It prevents disorganised management by the heirs and secures the transition. This mechanism is particularly relevant for sole proprietorships.

The market value, which forms the basis for calculating transfer duties, is defined by Articles 666 and 761 of the CGI and Article L. 17 of the Tax Procedures Book (LPF). According to these provisions, the actual market value corresponds to the price that could be obtained through the interplay of supply and demand on a real market on the date of the taxable event, ie, generally on the date of death.

For unlisted securities, the market value may be established by a combination of relevant methods, such as the mathematical value or the yield value, in order to approximate the market value as closely as possible (Court of Cassation, Commercial, Financial and Economic Chamber, 6 November 2012, No 11-25.878).

This valuation may include adjustments, such as discounts for lack of liquidity or control.

• Discount for lack of liquidity: lack of liquidity may justify a discount on the market value, particularly for unlisted securities. This discount reflects the difficulty of trading these securities on a regulated market. For example, a 30% discount was approved for unlisted securities due to their absence from the market and their low turnover compared to comparable companies (Paris Administrative Court, 1st section, 1st chamber, 1 July 2025, No 2315396, No 213064).

However, the tax authorities may challenge the amount of the discount if it is not sufficiently justified or if it exceeds the reasonable limits established by case law. The valuation method must be rigorous and based on relevant comparisons.

• Discount for lack of control: the discount for lack of control applies to minority shareholdings to reflect the lack of decision-making power associated with these shareholdings. This discount is justified by the fact that minority shareholders cannot influence the company’s strategic decisions.

The most common disputes concerning inheritance are those relating to:

• the nullity of a will or a gift and therefore to the distribution of the estate assets;
• disagreements between heirs over the composition and valuation of the estate assets;
• the existence of a life insurance policy that benefits an heir or a third party; or
• the existence of gifts made by the deceased during their lifetime to the detriment of certain heirs who feel they have been wronged.

Where trusts are concerned, disputes may arise as to their validity and recognition in France. This is because there can be a conflict between the law governing an estate, for example French law, and the concept of a trust, which does not exist in French law. If French law applies to the succession, a trust cannot override the heirs’ reserved portion; whereas if the applicable law does not recognise the reserved portion, but does recognise trusts, then the latter will be recognised and applied in France.

Like all contracts, fiduciaries often give rise to disputes relating to the interpretation of the terms and conditions of the contract, its performance, particularly as regards the fiduciary’s obligations, and its termination. Thus, unless mediated, disputes involving foundations most often result in legal actions based on contractual liability. In addition, the parties to the fiduciary contract may be exposed to criminal and tax penalties if they commit offences (tax fraud, bankruptcy, money laundering, etc).

Lastly, disputes involving foundations mainly concern their recognition as being in the public interest in terms of meeting the non-profit-making public interest requirement.

In wealth disputes or disputes involving trusts, fiduciaries or foundations, the harm caused to an injured party is made good by awarding damages, either on the grounds of extra-contractual liability, or on the grounds of contractual liability, particularly relating to fiduciary or foundation contracts.

In principle, all losses, whether material or moral, are eligible for compensation.

In the case of an inheritance dispute, damages may, for example, be awarded for the commission of an inheritance fraud or the abusive exercise of usufruct rights to the detriment of the bare owner (squandering of funds) or the concealment of an heir.

In the event of a dispute involving a fiduciary or foundation, damages may be awarded in the event of mismanagement and/or misappropriation of funds or breach of contract.

Generally, in a wealth dispute, the loss is primarily economic, but moral damages may also be awarded in some cases.

The amount of damages is set according to the sovereign judgment of the trial judges. Under the principle of full reparation, common to both contractual and extra-contractual liability, damages must cover the entire loss without exceeding it.

The legal framework is particularly strict regarding fiduciaries, subjecting them to enhanced transparency requirements, including:

• registration in the national register of fiducies (French Civil Code, Article 2020);
• tax registration within one month of the establishment of the fiducie (French Civil Code, Article 2019); and
• reporting obligations as part of anti-money laundering and counter-terrorism financing regulations (French Monetary and Financial Code, Article L561-2-2).

Fiduciaries are also bound by strict conduct obligations, notably the duty to act in the best interests of the settlor and must provide periodic reports on the management of the trust property (French Civil Code, Article 2022).

Furthermore, fiduciaries are personally liable for any misconduct in the performance of their duties and are required to carry specialised professional liability insurance (French Civil Code, Article 2026).

Under the principle of estate segregation, assets held in the fiducie may only be claimed by creditors whose claims arise from the preservation or management of the fiduciary estate. If the fiduciary estate proves insufficient, the settlor’s personal assets may serve as collateral for those debts ‒ unless the fiducie contract stipulates otherwise, transferring all or part of the liability to the fiduciary. The contract may also limit the fiduciary’s liability strictly to the fiduciary estate. However, such a clause is only enforceable against creditors who have expressly accepted it (French Civil Code, Article 2025)

Although the fiduciary estate is legally distinct, the fiduciary incurs personal liability for any misconduct, even absent fraudulent intent (French Civil Code, Article 2026). As a general rule, under French contract law, clauses that exonerate or limit liability are allowed. However, this is restricted by Articles 1170 and 1231-3 of the French Civil Code. Article 1170 provides that any clause depriving a party’s essential obligation of its substance is deemed unwritten. Therefore, any clause that fully exempts a fiduciary from liability, particularly for poor asset management, could be considered contrary to the fiduciary’s essential obligations and declared unenforceable. Article 1231-3 invalidates any clause limiting the number of damages in cases of gross negligence or wilful misconduct.

Under French law, fiduciary asset management is strictly regulated to ensure prudent, stable and settlor-aligned management. As noted at 6.1 Prevalence of Corporate Fiduciaries, the fiducie is subject to reinforced tax transparency and numerous reporting obligations to combat tax evasion and money laundering.

Only authorised professionals may act as fiduciaries, ensuring that the arrangement is carried out within a rigorous legal framework. Due to their regulated status, these professionals have a duty to provide proper advice and must act prudently and in the settlor’s best interests. Failure to do so may result in their personal liability being engaged.

Furthermore, since a fiducie can be established for a maximum duration of 99 years (French Civil Code, Article 2018), it inherently promotes long-term asset management, which naturally discourages high-risk strategies.

Lastly, if the settlor has doubts or concerns, they may appoint a third-party monitor to ensure their interests are protected during the execution of the contract. This third party may exercise the powers attributed by law to the settlor. If the settlor is a natural person, this right cannot be waived, and the fiduciary must be notified of the appointment.

According to modern portfolio theory, developed by Harry Markowitz in the 1950s, financial risk is reduced when income sources are numerous and uncorrelated. This theory promotes diversification by selecting securities based on their correlation with other assets in the portfolio, with the goal of maximising returns.

In France, however, fiduciary investment is guided by the principle of independent asset management, prioritising capital preservation and prudence over performance. There is no legal requirement for diversification, although it is often recommended as a precautionary measure, where feasible. Diversification may not be practical where the transferred assets consist of a single real estate property or equity interest in a company.

In such cases, the fiduciary may effectively manage the business, but only within the limits of the powers transferred by the settlor. There are no specific legal prohibitions on holding or managing active businesses within a fiducie, but the fiduciary must always act in accordance with the fiduciary purpose and under the same obligations of prudence and accountability.

Domicile is a legal concept that corresponds to the place of a person’s principal establishment. It is defined by Article 102 of the Civil Code as being unique and obligatory. It is determined subjectively, based on the individual’s desire to fix the centre of their interests in a given place, even if they are not physically present there.

Residence, on the other hand, is a material and de facto concept. It refers to the place where a person actually and habitually lives on a stable basis.

Domicile is a legal concept based on a legal relationship, whereas residence is a concrete reality based on facts. Domicile is determined by the individual’s will, whereas residence is determined by the person’s actual and habitual location. A person can have only one domicile but can have several residences.

In France, French citizenship is the same as French nationality. It is acquired at birth as of right by virtue of birth or residence in France:

• when a child is born to French parents; or
• when a child is born in France to foreign parents they may acquire French nationality on reaching the age of majority, provided that they are resident in France on that date and have had their usual residence in France for a continuous or discontinuous period of at least five years since the age of 11.

Residence is taken to mean actual place where a person lives in a stable and permanent manner, coinciding with the centre of the person’s attachments and daily activities.

People born abroad can acquire French nationality either by declaration or by naturalisation.

The declaration procedure is open to people who are related to a French national.

• Acquisition of French nationality by marriage to a French national:
1. the spouses must have been married for a period of four years from the date of marriage;
2. the spouses must have lived together both emotionally and materially from the date of marriage until the declaration; and
3. the spouse must have sufficient knowledge of the French language.
• Acquisition of French nationality in the event of simple adoption:
1. when a child is adopted and raised in France.
• Acquisition of French nationality by family ties:
1. if the person is the ascendant (parent or grandparent) of a French national or the sibling of a French national.

The naturalisation procedure is a discretionary procedure subject to the discretion of the administration. To qualify for naturalisation, foreign nationals who have reached the age of majority must prove that they have been habitually resident in France for the five years preceding the application. In addition to the residence condition, other criteria are required, such as integration into the French Republic, absence of criminal convictions incompatible with the acquisition of French nationality, and financial stability.

The naturalisation procedure and the declaration procedure generally take between 12 and 18 months.

In France, there are no special estate planning mechanisms for minors or disabled adults. All acts of disposal or administration of their assets are highly regulated: they must be carried out with the assistance or representation of a guardian, failing which they are null and void. For minors, this means their parents, who are their legal representatives, and for protected adults, the rules vary depending on the type of measure in place (guardianship, curatorship, legal protection).

As a result, the transfer of their assets into a fiduciary is very limited. In the case of minors, their assets or rights cannot be transferred to a fiduciary, unless the minor has been emancipated.

In the case of protected adults, the regime differs depending on the protection measure ordered. The following may be parties to a fiduciary contract:

• an adult under court protection;
• an adult under curatorship with the assistance of their curator; and
• an adult under family supervision alone or with the assistance of the authorised person if the act is covered by the protective measure.

In the case of guardianship, neither the protected adult nor the guardian may transfer the adult’s rights or wealth into a fiduciary.

Lastly, the mandatary for future protection only has the power to create a fiduciary arrangement where the mandate has been executed by private deed (under private seal).

The appointment of a tutor or any other similar party as part of a protective measure for a protected adult necessarily requires the involvement of a judge known as a protection litigation judge. By contrast, the procedure for establishing a mandate for future protection is not a court process.

The protection litigation judge and the public prosecutor exercise general supervision of protection measures within their jurisdiction. They may, at any time and regardless of the measure, visit protected adults and summon the persons responsible for their protection.

In the case of guardianship and reinforced guardianship, the guardian or curator is required to draw up an annual management account for the protected adult. The management accounts are checked and approved, where applicable, by the tutor or subrogated curator if one has been appointed, the family council or, failing this, by an expert appointed by the judge.

In response to the growing increase in the number of legal protection measures due to the ageing population, Act No 2007-308 of 5 March 2007 introduced the future protection mandate, which allows the appointment of a trusted person to represent the mandator in the event that they are unable to look after their own interests due to an impairment of their faculties. As indicated in 8.2 Appointment of a Guardian, the protection measure has the advantage of being subject to an out-of-court procedure.

In addition, descendants and ascendants are bound by a reciprocal maintenance obligation. As this obligation is legal, the assistance provided to parents is deductible from taxable income, with no ceiling.

In addition, Act No 2006-728 of 23 June 2006 introduced a right of return for fathers and mothers in respect of wealth they have passed on to their predeceased child by way of a gift, up to a limit of one quarter of the estate. However, this right is limited in that it does not apply where there are descendants, so that its application is restricted to cases where there are only collaterals and/or a surviving spouse.

Lastly, in France, there are several benefits paid to elderly people with limited resources to help them at the end of their lives. However, some of these allowances are advances and can therefore be recovered from the net assets of the estate. This is particularly the case with social assistance for the elderly and social assistance for accommodation. In the event of an action for recovery by the State, the claim may be deferred, and, in some cases, the heirs may be exempt if they can prove that they were effectively and continuously dependent on the deceased.

In France, since 2004, all the children for whom parental rights are established have equal inheritance rights. Regardless of whether a child was born out of a wedlock, in an extra-marital relationship or was adopted, they are entitled to the same share of the forced heirship as children born within a marriage. The only key requirement is the establishment of a parental link.

It is possible to establish parentage after the death of the parent, but this remains very limited. In civil matters, identification by genetic fingerprinting can only be carried out after the death of the person if they gave their express consent during their lifetime (Civil Code, Article 16-11). In the absence of such consent, parentage can only be established through possession of status, which is subject to strict time limits.

Surrogacy is prohibited both legally and ethically in France (Civil Code, Article 16-7)

This means that:

• it is illegal to enter into a contract with a woman to carry a child for someone else;
• surrogacy is considered contrary to public policy because it undermines the dignity of women and children; and
• a surrogacy agreement has no effect under French law.

However, there has been an evolution under the influence of the European court of Human Rights, which has condemned France for refusing to recognise the parentage of children born through surrogacy abroad, ruling that this violated the children’s right to a normal family life.

In 2024, the Court of Cassation (Supreme Court in France) issued a number of very important decisions in 2024 concerning the issue of surrogacy. The Court ruled on the recognition of parentage of a child born abroad through surrogacy with respect to a parent with no biological link to the child. The Court also clarified the practical arrangements for transcribing foreign judgments that establish the parentage of children born through surrogacy.

In conclusion, French law now provides for:

• the recognition of paternal parentage if the father is the biological father; and
• the possibility for the other parent (usually the father’s partner) to adopt the child, under certain conditions, including in same-sex couples.

French jurisdiction has recognise same-sex marriage since Law No 2013-404 of 17 May 2013, (Article 143 of the French Civil Code) and domestic partnerships since Law 99-944 of 15 November 1999). Domestic partnerships have been open to same-sex persons since their inception.

This legal provision ended all distinctions between marriages of same-sex and opposite-sex couples by establishing a single institution open to all couples, regardless of their sexual orientation.

Furthermore, in private international law, Article 202-1, paragraph 2 of the Civil Code allows two persons of the same sex to marry when, for at least one of them, either their personal law or the law of the State in which they reside or are domiciled permits such a marriage.

The Court of Cassation has also ruled that Moroccan law prohibiting same-sex marriage is contrary to French international public policy.

Marriage or partnerships grant the same rights to same-sex or opposite-sex couples.

French law actively encourages charitable donations by offering significant tax benefits. These incentives, established in the CGI, aim to support public-interest organisations while allowing donors to benefit from tax reductions.

Tax Incentives for Individuals

Article 200 of the CGI provides for a personal income tax reduction for donations made by individuals domiciled in France. This reduction amounts to 66% of the donation value, up to 20% of the donor’s taxable income.

Eligible donations include those made to:

• organisations or initiatives of public interest with a philanthropic, educational, scientific, social, humanitarian, sporting, family-oriented, or cultural purpose; and
• organisations that promote artistic heritage, environmental protection, or the dissemination of French culture and scientific knowledge (as supported by the case law and legal provisions).

These provisions enable individuals to reduce their tax burden while supporting causes of general interest.

Impact on Estate Planning

Charitable giving has no direct impact on the donor’s estate. However, it can have a significant impact on the organisation receiving the gift.

In France, inheritance tax is generally payable by the beneficiaries of an estate. However, certain associations may be exempt from these duties, provided they meet specific conditions set out in the CGI.

Legal framework for inheritance tax exemptions for associations

Articles 794 and 795 of the CGI provide an exemption from transfer duties for most legatee charities and non-profit organisations. These exemptions mainly apply to associations or foundations recognised as serving the public interest and engaging in philanthropic, educational, scientific, social, humanitarian, sporting, family-oriented, or cultural activities, or in the protection of the natural environment or the promotion of French culture and scientific knowledge.

However, it is important to note that not all associations automatically qualify for this exemption. The ability to receive assets free of charge and benefit from this favourable regime depends on the nature of the association’s activities and their compliance with the criteria laid out in the above-mentioned articles. For example, some gifts made to organisations covered under subparagraph (b) of paragraph 1 of Article 200 of the CGI may not qualify for exemption, even if they are eligible for income tax deductions for donors.

Distinction between eligible and non-eligible associations

The list of qualifying activities for inheritance tax exemption under Articles 794 and 795 of the CGI does not entirely overlap with the types of organisations mentioned in Article 200 of the CGI. As a result, some declared associations, even if recognised as being of public interest and authorised to receive tax-deductible donations or membership fees, may still be subject to inheritance tax.

In practice, for an association to benefit from exemption, it must demonstrate that its activities fall within the specific categories identified by Articles 794 and 795 of the CGI. Associations whose activities do not align with these criteria will be required to pay inheritance tax on the assets they receive through a legacy.

Under French law, the most commonly used structures for philanthropic planning are foundations, associations and endowment funds. Foundations are distinguished by their permanence and favourable tax treatment, while associations offer greater flexibility. Endowment funds, although recent, are a modern and effective alternative for mobilising private resources. The choice between these structures will depend on the specific objectives of the philanthropic project, the resources available, and legal and tax constraints.