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									                   NOTAIRES . DELAHAYE . SALEUR . DELANOË

                                      ESTATE PLANNING
                                "COMMUNAUTE A TITRE UNIVERSEL"

Where France is concerned estate planning must be examined whilst taking into account
both the legal and tax aspects of French inheritance law (See our Synopsis of French
inheritance law).

The same issues apply to structuring the purchase of French real estate. Indeed, in order
to prevent some undesirable consequences from occurring when purchasing real estate
there are various different mechanisms that may be used to potentially avoid problems
created by French law. The most efficient possibility, when applicable, is the alteration
of matrimonial regime to that of the "communauté à titre universel".

1. The main aspects to be considered in an international inheritance situation

1.1       Legal aspects of international inheritance

According to French international private law rules, French real estate is governed by
French inheritance law. As such, we need to concentrate on the following aims when
dealing with French real estate in an international situation :

-     Try to limit the applicability of French inheritance law and its restrictive nature (NB
      it is impossible to disinherit certain categories of beneficiary) which can even
      overrule a testator's intentions;

-     Anticipate any conflict of law that may arise in the application of these provisions in
      an international situation.

1.2       Tax aspects of international inheritance

According to the territoriality principle of international tax law (as confirmed by most
bilateral tax treaties) the transfer of property situated in France is governed by French
tax law.

It is therefore necessary to keep in mind the main provisions of French inheritance tax
law insofar as it is likely to apply to the transfer of French property upon death.

          294 avenue du grand champ . BP 21 . 73600 . Salins -les-Thermes
        tél. 04 79 24 62 22 . international calls +33 4 79 24 62 07 . fax : +33 4 79 24 48 7 6
          . www.dsdnotaires.f r
          SCP Charles Henri Delahaye, Gilles Saleur et Laurent Delanoë, société titulaire d'un office notarial
Unlike in other jurisdictions, inheritance tax in France is levied on each beneficiary's
share of the estate and not on the estate as a whole. The level of taxation depends on the
beneficiary's relationship with the deceased (as indicated below).

    For Inheritance Between Spouses and civil partners (having signed a French
"PActe Civil de Solidarité" or a regular foreign “partnership contract”) :

     No tax is due.

     For Inheritance by Parents or Descendants

     With an exemption of 156.974 € per child or parent.

                               from                  to              rate
                                 0€             7.953 €        5%
                            7.953 €            11.930 €        10%
                           11.930 €            15.697 €        15%
                           15.697 €           544.173 €        20%
                          544.173 €           889.514 €        30%
                          889.514 €         1.779.029 €        35%
                             above                             40%

     For Inheritance By Brothers and Sisters :

     With an exemption of 15.697 € per sibling

                               from                to                rate
                                 0€          24.069 €       35%
                              above                         45%

     For Inheritance By Nephews, Nieces, Uncles, Aunts :

     With an exemption of 7.849 € per nephew or niece

     Tax is levied at 55%

      Other Inheritance (i.e. In the case of unmarried couples except civil
       Tax is levied at 60%

As French tax law must be applied with the above consequences, it is advantageous to
consider a mechanism provided by French tax law : the "communauté à titre universel".

2. The "communauté à titre universel" ("CTU")

French law allows couples to hold their assets in various ways in the form of
matrimonial regimes. A matrimonial regime is a type of agreement between husband
and wife signed either before or during the marriage, the purpose of which is to
generally govern the status of ownership of their assets. The two most frequently used
regimes are "séparation de biens" and "communauté réduite aux acquêts".

The CTU is one of the matrimonial regimes available under French law. The main
advantage of which is that it can be limited (according to The Hague Convention), to
only the French real estate owned by the couple.

Under the CTU, married couples hold all of their French real estate jointly (it can be
likened to a joint tenancy under common law), and following the death of one of the
spouses, the French assets pass directly to the survivor.

2.1.    Advantages of the "communauté à titre universel"

This matrimonial regime is often used in France as a method of estate planning, as it
prepares the settlement of a married couple's estate and has certain advantages in
relation to French tax and inheritance law.

(i) Tax advantages:

When a married person dies, there are two stages to the transfer of the estate. The first
is that the "common" assets are divided between the surviving spouse and the deceased's
estate according to their Matrimonial Regime; The second is that the deceased's estate
(including their share of the "common" assets) is distributed to the relevant

However, with the CTU, the deceased spouse's French real estate passes by survivorship
directly to the survivor in its entirety (including debts). In such a case, through the
concept of "avantages matrimoniaux", French law considers that this transfer of
property does not give rise to any tax or duties.

(ii) Legal advantages:
-   The main legal advantage is that this provides the surviving spouse with full legal
    title to the estate, and supplements the small share otherwise granted to the survivor
    under French law.

-   Another legal advantage is that the remainder of the estate only passes to the
    remaining beneficiaries following the death of the surviving spouse. This may
    therefore avoid the problems of legal capacity which may exist for those who have
    minor children following the first death of a parent, and accordingly avoid any
    conflict of law.

2.2.   Disadvantages of the "communauté à titre universel"

However, we should also consider possible disadvantages that could occur in a
international inheritance situation.

(i) Tax disadvantages:

-   As is often the case in tax matters, there is no absolute guarantee that the above
    advantages will remain in the future.

-   The CTU postpones the distribution of the couple's assets in favour of their children
    until the death of both spouses and accordingly the tax-free allowances afforded in
    favour of children only apply once.

(ii) Legal disadvantages:

 The CTU is particular to France and may have to be justified, particularly in
  common law countries. Specific problems may arise for example should creditors
  exist within a common law country.

 A matrimonial regime generally governs all of the assets owned by spouses,
  whereas in this case and according to The Hague Convention it would only apply to
  French real estate (excluding all the personals owned by the spouses).

 We would recommend that the CTU route should not be followed if one or both
  spouses have children from a previous marriage. As this would result in a possible
  "action en retranchement" (i.e. it may be contested) against the surviving spouse by
  the child or children of the previous marriage. Subsequently, the advantages of the
  CTU would be reduced.

2.3.   Practical aspects of the "communauté universelle de biens"
Should a couple wish to enter into a CTU, a deed of "changement de régime
matrimonial" (alteration of matrimonial regime), should be drafted, limiting the scope
of the new regime to real estate situated in France.

It should be noted that this deed, which must be signed before a notaire, requires the
simultaneous and physical presence of both spouses.

      If you will not be present to sign this deed, we could send you a power of attorney
to be signed by both of you at a notary public's office (list available on request) to
enable a clerk of our firm to sign the deed on your behalf.

     Please bear in mind that once it has been signed at a notary public's, it must
then be sent to the Foreign Office to be legalised with an apostille.

      For your information, if you go to the foreign office in Milton Keynes directly, the
formality of the apostille can be done immediately, thus avoiding the long delay
(sometimes up to 3 weeks) incurred if sent by post. Furthermore, your notary public can
also send a request by DX which should be treated within 72 hours.

In relation to costs, fees and disbursements, these are likely to amount to approximately
750.00 Euros (plus VAT).

Once the alteration has been made, any further purchase of property would not incur
any additional costs (outside the standard conveyance costs).

However, should one of the spouses already own property in France at the time of the
alteration (insofar as the alteration relates to the properties situated in France), the
additional costs would be incurred:

- A land registry fee of 0,10 % of the value of the property transferred (usually one
- A notarial fee of 0,275 % of the value of the property + VAT (in this case the above
750.00 Euros would not be charged),

Finally, it must be noted that once the above change has been made, any disposal of
property held under the CTU requires joint signatures.

For further details, please do not hesitate to contact Laurent Delanoë at the above
Maj LD Jan 2010


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