# estate planning of a US expat



## Chrissippus

So, I am reviewing my estate planning only to find what looks like a tough problem. All of my US assets are in Transfer on Death accounts at banks and brokerages, including IRAs. For that reason I do not have nor do I plan to have a US will. My US citizen wife is designated the sole beneficiary on all of my accounts. We have no children. I am considering the low probability event that she and I die together in which case my main goal is to prevent members of my birth family from inheriting so much as a nickel of my assets. But this appears difficult to achieve. I could designate contingent beneficiaries on my various accounts, but none of these would be family members. Assuming that I die outside of the US which is likely, in order to claim an inheritance from a US institution the beneficiary would need to have a copy of the Consular Report of the Death of a US Citizen Abroad which in turn requires the local death certificate. However, both of these documents are available only to a family member or the executor of my estate, which in my current plan would be no one. 

As it looks to me the only options would be to create a will and designate an executor or to create a US trust to inherit the assets, which would also require an executor. Designating an executor would be difficult since the few friends in the States whom I would trust are all about my age.

Has anyone stepped on this problem? In a couple of years we expect to be living France. Do the French inheritance laws offer any useful instruments to deal with such an eventuality?


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## Bevdeforges

Actually, the French inheritance laws kind of simplify the whole thing. If you have no "privileged heirs" (i.e. no kids and your parents are gone), you can pretty much leave the whole shebang to whoever you like. There will be French rate taxes on the amounts, but if you leave it all to recognized charities (and I think the inheritance tax treaty recognizes US charities that are recognized in the US tax code) then no problem because no tax.

And, in most cases, on the death of one spouse, everything reverts to the other spouse here - until their death. But if neither one of you has any heirs/children then either give it all to charity or to whoever you wish. Just put contact information in your will and it will be the duty of the notaire to handle the actual transfers.


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## jweihl

You might set up a trust and designate it as a contingent beneficiary. Even if the bulk of your assets are in transfer on death accounts, it can't hurt to have a US will to cover whatever unanticipated circumstances, as well as to appoint a personal representative to be sure that someone you trust will handle your affairs. Can't hurt (except financially) to hire an attorney specializing in estate planning.


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## Bevdeforges

If you do decide to set up a US will, you can have that "incorporated" into your French estate plans. It will only handle how your estate is divided - everything will still be taxed at French inheritance tax rates (which can be kind of brutal for leaving stuff to anyone outside the "privileged" heirs - basically direct ascendants and descendants). Just be careful, because French law doesn't recognize trusts - at least not the same way they are recognized in the US. Best to run things by a notaire when you get to France.


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## Chrissippus

jweihl said:


> You might set up a trust and designate it as a contingent beneficiary. Even if the bulk of your assets are in transfer on death accounts, it can't hurt to have a US will to cover whatever unanticipated circumstances, as well as to appoint a personal representative to be sure that someone you trust will handle your affairs. Can't hurt (except financially) to hire an attorney specializing in estate planning.


In my view it does indeed hurt to have a will when a will is not necessary, which is my case since I have zero assets outside of a TOD account. It means there has to be an executor who has to file the will in probate court. As I mentioned there is no one whom I would trust as an executor in the US who is younger than me. So, that's a headache. By comparison, the Transfer on Death accounts require neither probate court nor an executor. The designated beneficiary simply presents id and the death certificate or, if the death occurred outside the US, the Consular Report of the Death of a US Citizen Abroad. And it's done. 

I think a lot of people mindlessly repeat the advice that everyone needs a will without considering the actual facts indicate any such need.

So, if I did set up a trust, which would require a trustee. How would the beneficiary who is not a family member provide documentation establishing my death since he would not have access either to a death certificate or to the Consular Report? Or would it be the duty of the trustee to establish the death?


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## jweihl

My brother recently died, somewhat unexpectedly. The bulk of his assets were in POD accounts or policies that had named beneficiaries. He was not overly organized, so there were a few items for which he neglected to name beneficiaries and one that named an ex-wife (though he left instructions in his will that she wasn't to inherit) as beneficiary. Different jurisdictions have different rules, but for his state, none of the remaining assets was large enough to trigger probate. It was the value of the assets, not the existence of the will that was the determining factor. However, having a named personal representative did help expedite handling his affairs with his medical providers, his funeral expenses, and various administrative tasks such as filing his tax returns and instructing insurance providers to cancel coverage.


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## GraceS

Chrissippus said:


> So, I am reviewing my estate planning only to find what looks like a tough problem. Assuming that I die outside of the US which is likely, in order to claim an inheritance from a US institution the beneficiary would need to have a copy of the Consular Report of the Death of a US Citizen Abroad which in turn requires the local death certificate. However, both of these documents are available only to a family member or the executor of my estate, which in my current plan would be no one.
> 
> Has anyone stepped on this problem?


I recently found myself with a similar problem/question. In my case, in the event of my death, my closest living relative would simply not be up to receiving the Consular Report of Death of an American Citizen Abroad, or handling any related administrative/legal tasks. How could I get a close friend of mine designated as the contact person if I died in France?

I contacted the US Embassy in Paris, Special Consular Services Unit of the American Citizen Services Section. In a phone call and a few follow up emails, I received excellent, personalized advice. For example, they suggested I set up an account with the State Department STEP program. To oversimplify a bit, this program allowed me to designate a contact person--and it's this person who'd be notified in the case of my illness, emergency or death, and who'd receive the Consular Report of Death of an American Citizen Abroad. Death of a U.S. Citizen - U.S. Embassy & Consulates in France (usembassy.gov)

For an additional layer of certainty, plus bigger picture estate issues, I am in the process of identifying an English speaking notaire experienced with US estate issues. I have found several promising leads through the official French notaire website: Notaries of France (www.notaires.fr)


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## Chrissippus

GraceS said:


> I recently found myself with a similar problem/question. In my case, in the event of my death, my closest living relative would simply not be up to receiving the Consular Report of Death of an American Citizen Abroad, or handling any related administrative/legal tasks. How could I get a close friend of mine designated as the contact person if I died in France?
> 
> I contacted the US Embassy in Paris, Special Consular Services Unit of the American Citizen Services Section. In a phone call and a few follow up emails, I received excellent, personalized advice. For example, they suggested I set up an account with the State Department STEP program. To oversimplify a bit, this program allowed me to designate a contact person--and it's this person who'd be notified in the case of my illness, emergency or death, and who'd receive the Consular Report of Death of an American Citizen Abroad. Death of a U.S. Citizen - U.S. Embassy & Consulates in France (usembassy.gov)
> 
> For an additional layer of certainty, plus bigger picture estate issues, I am in the process of identifying an English speaking notaire experienced with US estate issues. I have found several promising leads through the official French notaire website: Notaries of France (www.notaires.fr)


This is what I am looking for. I was aware of the STEP program, but not this feature of it. Interestingly, the person designated to receive the Consular Report per STEP has fewer requirements than the next of kin, since the contact person does not have to submit the deceased person's passport in order to receive the Consular Report.

Is it possible to designate more than one such contact person? I am thinking of naming a couple of contingent beneficiaries to my TOD accounts. It would be ideal if each of them could receive the Consular Report themselves. Alternatively, if there is only one designated person she could distribute copies of the Report to the contingent beneficiaries.

How would a French notaire help in the process? It seems that avoiding involving the French at all would be better, because of the taxes.


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## tardigrade

Chrissippus said:


> How would a French notaire help in the process? It seems that avoiding involving the French at all would be better, because of the taxes.


The only way around that is to not die in France as a resident.


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## Chrissippus

One of the wrinkles in the event that my wife and I die together is how to pass assets to her Thai family, none of whom would be capable even of claiming assets as a contingent beneficiary of a US brokerage account. What I am thinking of is to have a competent and trustworthy US person be the designated beneficiary. In the case of the Roth IRA she would inherit as the sole contingent beneficiary without any tax liability. She could then make a gift to my wife's family via a wire transfer. Using her lifetime exclusion she would not have to pay any gift tax, I believe.

Still there are a lot of moving parts here.


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## Chrissippus

tardigrade said:


> The only way around that is to not die in France as a resident.


I don't believe that. If I were to die in France I would expect my US assets to pass to the designated beneficiaries outside of France without any involvement of the French government, since they would lack jurisdiction over such accounts.


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## Bevdeforges

Chrissippus said:


> I don't believe that. If I were to die in France I would expect my US assets to pass to the designated beneficiaries outside of France without any involvement of the French government, since they would lack jurisdiction over such accounts.


I don't believe that is how it works. It's only "real property" assets that pass based on the inheritance laws of the country in which the assets are located. Financial and other "movable" assets will fall under the laws of the country in which you are resident as of the time of your death.


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## Chrissippus

Bevdeforges said:


> I don't believe that is how it works. It's only "real property" assets that pass based on the inheritance laws of the country in which the assets are located. Financial and other "movable" assets will fall under the laws of the country in which you are resident as of the time of your death.


You are saying that France could seize the assets of a deceased US citizen at a US brokerage to collect an inheritance tax? I find that hard to believe. What is your basis for that claim? How could the French government claim jurisdiction over such an account?

Ok, now I have found some references that explain that indeed financial assets abroad are subject to French succession laws. However, in this case the assets are IRA account, i.e. foreign national pensions in the eyes of French law, for which the rules are more complicated. I can't find details about how they would be treated by the French fisc.


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## Bevdeforges

Chrissippus said:


> You are saying that France could seize the assets of a deceased US citizen at a US brokerage to collect an inheritance tax?


Um, that's not what I'm saying at all. Only that it is up to the notaire to try to inventory all assets of a deceased person who falls under the purview of French inheritance law. There is an inheritance tax treaty between the US and France and you'd have to review that in some detail to determine precisely who gets to tax what bits of the "estate" and what sorts of assets are exempt (like certain forms of life insurance policies). 

Things would just go more easily if you first sit down with a notaire to review what your options are and which assets are subject to what sort of treatment - maybe even give them the information about who you want to handle the various notifications outside of France when the time comes. I say that after spending a couple of years and a couple thousand $$ in legal fees in the US trying to claim various bits of "abandoned property" from my parents' estate after my mother got this clever idea to set up a "family trust" that they never told me about but which somehow turned up on an abandoned property site on the Internet. Frankly, my folks were never in the sort of bracket where setting up a trust made any sense at all. In the end, I left several smaller bits and bobs on the table, but ultimately was able to claim the major items. But it was a real nightmare to try to sort it all out from this distance.

When you get to France, it's well worth the time and fees to have a discussion with a notaire, if only to be sure you're not making things any more difficult for your heirs in far-flung parts of the world to claim and receive what you would like them to have.


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## Chrissippus

Bevdeforges said:


> Um, that's not what I'm saying at all. Only that it is up to the notaire to try to inventory all assets of a deceased person who falls under the purview of French inheritance law. There is an inheritance tax treaty between the US and France and you'd have to review that in some detail to determine precisely who gets to tax what bits of the "estate" and what sorts of assets are exempt (like certain forms of life insurance policies).
> 
> Things would just go more easily if you first sit down with a notaire to review what your options are and which assets are subject to what sort of treatment - maybe even give them the information about who you want to handle the various notifications outside of France when the time comes. I say that after spending a couple of years and a couple thousand $$ in legal fees in the US trying to claim various bits of "abandoned property" from my parents' estate after my mother got this clever idea to set up a "family trust" that they never told me about but which somehow turned up on an abandoned property site on the Internet. Frankly, my folks were never in the sort of bracket where setting up a trust made any sense at all. In the end, I left several smaller bits and bobs on the table, but ultimately was able to claim the major items. But it was a real nightmare to try to sort it all out from this distance.
> 
> When you get to France, it's well worth the time and fees to have a discussion with a notaire, if only to be sure you're not making things any more difficult for your heirs in far-flung parts of the world to claim and receive what you would like them to have.


It does seem to be quite complex since I also see references to a foreign national resident in France having choice in some cases as to whether the inheritance laws of his home country or France apply.


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## Bevdeforges

Chrissippus said:


> It does seem to be quite complex since I also see references to a foreign national resident in France having choice in some cases as to whether the inheritance laws of his home country or France apply.


Just be careful - yes, you can "choose" that your stuff be divided up under the inheritance laws of your home country, but once it is divided as you want, it is usually the French tax rates that apply. I also just saw today an article in the press here about strategies for minimizing your inheritance taxes using things like gifts, assurance vie and what's called "demembrement" which is a splitting of the ownership rights. It's another reason to start out by talking to a notaire once you get to France.


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## Chrissippus

Bevdeforges said:


> Just be careful - yes, you can "choose" that your stuff be divided up under the inheritance laws of your home country, but once it is divided as you want, it is usually the French tax rates that apply. I also just saw today an article in the press here about strategies for minimizing your inheritance taxes using things like gifts, assurance vie and what's called "demembrement" which is a splitting of the ownership rights. It's another reason to start out by talking to a notaire once you get to France.


I see that it is complicated, but in the case at hand we would be talking about the financial assets of a US expat residing in France that would be passed to others residing in the US or elsewhere, but not in France. So, if a designated beneficiary of my Transfer on Death account presents his identification and the Consular Report establishing my death to the brokerage, I would expect the brokerage to deliver the assets to him without collecting a tax for the French government. But I'll read the relevant treaty.


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## Bevdeforges

I suppose it depends on the type of financial accounts you have established in the US. For example, your IRA accounts (for retirement) have a beneficiary and often a secondary beneficiary (if the first one dies). These transfer just fine under US law and US taxes. What I'm not as sure about are simple jointly held bank accounts with rights of survivorship for the joint owners, but I suspect they may also transfer as they do under US law. Brokerage accounts are another area where there might be some variation in play - but it would depend on exactly how the accounts are set up.


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## Keri22

Any bank account or IRA/401k (and securities in general I believe, though not real property) can have pay on death arrangements and thereby avoid probate in the US. However, the issue is if, on the death of an owner who is resident in France, those accounts will be subject to French inheritance tax even if the beneficiary resides in the US. This type of arrangement in the US used to be known as Totten Trusts. So what you will need to know is whether French inheritance law permits such an arrangement to be untouched by tax. If you are tax resident in France you are required to give the tax authorities a list of ALL your foreign accounts. When you die, the notaire would have access to that list I suppose.
I have always understood that France does not recognize trusts and that Totten trust accounts will also not be recognized. You should seek legal/notaire advice on this point.


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## tardigrade

Is there a number at which inheritance tax starts in France?

In some regions of Spain; direct heirs only pay after €100000.


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## paulmlemay

I find this thread very helpful, as I wonder what happens to my 401k balance when I die while residing in France. For example, my 401K currently goes directly 50/50 to my son and my partner. My son lives in the USA. If I am living in France and pass away, will he have to pay French inheritance tax on whatever becomes his?


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## Bevdeforges

Keri22 said:


> I have always understood that France does not recognize trusts and that Totten trust accounts will also not be recognized. You should seek legal/notaire advice on this point.


IRAs, 401Ks and other government recognized retirement plans like this are considered to be "government pensions" here in France and so the trust aspect most likely isn't at all relevant here.


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## Chrissippus

Keri22 said:


> Any bank account or IRA/401k (and securities in general I believe, though not real property) can have pay on death arrangements and thereby avoid probate in the US. However, the issue is if, on the death of an owner who is resident in France, those accounts will be subject to French inheritance tax even if the beneficiary resides in the US. This type of arrangement in the US used to be known as Totten Trusts. So what you will need to know is whether French inheritance law permits such an arrangement to be untouched by tax. If you are tax resident in France you are required to give the tax authorities a list of ALL your foreign accounts. When you die, the notaire would have access to that list I suppose.
> I have always understood that France does not recognize trusts and that Totten trust accounts will also not be recognized. You should seek legal/notaire advice on this point.


One point that is confusing is that in the US it is the héritier who pays the inheritance tax, if any, not the estate. Is that not also the case in France? If so, then the French fisc is not going to be able to collect from an American who inherits an American IRA and who does not reside in France. Even if the French do tax the estate, they would have some difficulty expecting an American brokerage to honor their claim. But I suppose that depends on the terms of the relevant tax treaty.


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## tardigrade

Chrissippus said:


> One point that is confusing is that in the US it is the héritier who pays the inheritance tax, if any, not the estate. Is that not also the case in France? * If so, then the French fisc is not going to be able to collect from an American who inherits an American IRA and who does not reside in France.* Even if the French do tax the estate, they would have some difficulty expecting an American brokerage to honor their claim. But I suppose that depends on the terms of the relevant tax treaty.


Any money that moves out of France will be taxed one way or the other. If you are alive or dead as a tax resident


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## Bevdeforges

I think you're right about the French inheritance tax actually being levied against the heir - however in practice the taxes are usually paid out of the estate before everything is distributed (or from any life insurance that may have been purchased to cover the taxes on the estate). Life insurance is exempt from the estate in both the US and France. And it's possible that foreign investment accounts may be treated more or less like "assurance vie" for French purposes. 

But I would assume that a US brokerage firm or even bank would have to honor a foreign death certificate (maybe requiring a certified translation) since not all account holders are necessarily US citizens entitled to a consular declaration of death.


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## tardigrade

Chrissippus said:


> One point that is confusing is that in the US it is the héritier who pays the inheritance tax, if any, not the estate. Is that not also the case in France? If so, then the French fisc is not going to be able to collect from an American who inherits an American IRA and who does not reside in France. Even if the French do tax the estate, they would have some difficulty expecting an American brokerage to honor their claim. But I suppose that depends on the terms of the relevant tax treaty.


As a french tax resident you have to tell them about these accounts when you file your taxes each year. They know how much you are worth.

Couldn't they just take the tax before hand/ impose the tax so it is payable before/after probate? You are a resident.


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## Chrissippus

tardigrade said:


> Any money that moves out of France will be taxed one way or the other. If you are alive or dead as a tax resident


In the case I am discussing the money is never in France to begin with. As I said, it is an American IRA account custodied at an American brokerage firm. The American héritier does not reside in France. So, even though I will have reported the existence of the account to the French I don't see the opportunity for the fisc to get its hands on the money since their jurisdiction does not extend to the US.

The French by treaty do not tax any holdings or distributions from an American IRA during the lifetime of the owner.


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## Chrissippus

Bevdeforges said:


> I think you're right about the French inheritance tax actually being levied against the heir - however in practice the taxes are usually paid out of the estate before everything is distributed (or from any life insurance that may have been purchased to cover the taxes on the estate). Life insurance is exempt from the estate in both the US and France. And it's possible that foreign investment accounts may be treated more or less like "assurance vie" for French purposes.
> 
> But I would assume that a US brokerage firm or even bank would have to honor a foreign death certificate (maybe requiring a certified translation) since not all account holders are necessarily US citizens entitled to a consular declaration of death.


The US brokerage firm would honor the Consular Report of the Death of a US Citizen Abroad, not the foreign death certificate. However the French fisc would like to consider assets of a US citizen custodied at a US brokerage, they wouldn't have jurisdiction to seize the assets for taxation. If that were possible it would have been sufficiently noteworthy that we would have heard of such cases by now. So, I think those assets and the American heir are simply beyond the reach of the French fisc.


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## Chrissippus

Let me add to that. The ownership of testamentary assets is determined by the probate process and only establish upon completion of the probate process. Until that is achieved the assets are held by the estate. By contrast Transfer on Death assets do not go through probate, are not subject to the terms of any will, and are never part of the estate. Therefore, it must be the case that the upon the death of the owner of an IRA account the ownership of the assets passes immediately to the TOD beneficiaries. The brokerage will subsequently transfer possession of those assets directly upon presentation of identification and the Consular Report, but the ownership itself does not depend upon the actions of the brokerage. Therefore, the French fisc could never legally seize such assets without violating US law since they don't belong to the decedent and are not part of his estate.


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## newyorkerinparis

Chrissippus said:


> However the French fisc would like to consider assets of a US citizen custodied at a US brokerage, they wouldn't have jurisdiction to seize the assets for taxation. If that were possible it would have been sufficiently noteworthy that we would have heard of such cases by now. So, I think those assets and the American heir are simply beyond the reach of the French fisc.


I asked a tax attorney qualified in both Paris and New York about this, and he told me that the French tax authorities have joint enforcement agreements with the U.S. IRS, under which each country's tax authorities can enforce tax obligations owed to the other country. So, in theory, if an American has inherited money from a French resident and French inheritance taxes are owed, the IRS could collect the money by imposing a tax lien. However, it seems unlikely that this would happen unless a significant amount of money is at stake.


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## Bevdeforges

You're making assumptions about French law that don't seem to be valid. Yes, the French and US governments have some agreements about "joint enforcement" of certain types of obligations - but as previously said, these are rarely invoked and only when there are huge sums involved. (Notably because the US is fairly notorious in the international community for not "sharing" relevant information with the other boys and girls in the world.


Chrissippus said:


> The US brokerage firm would honor the Consular Report of the Death of a US Citizen Abroad, not the foreign death certificate. However the French fisc would like to consider assets of a US citizen custodied at a US brokerage, they wouldn't have jurisdiction to seize the assets for taxation.


In practice, the French don't seem to bother themselves about US source funds that pass to US residents directly. If they are going to jump into enforcement mode, it won't be until and unless the funds are transferred to France. (This is how they used to catch out French residents who had US accounts they had not declared on their tax forms as they are supposed to.) But even then, there have to be some significant amounts involved for the Fisc to even take notice.

And, brokerage houses had better accept a foreign death certificate in the case of a non-US citizen who dies abroad, since there won't be any Consular Report of Death available. It is entirely possible to make a non-resident non-US-citizen your beneficiary on an IRA or any other type of financial account that has designated beneficiaries. And this is where a little conversation with your local, friendly notaire could be quite useful. In France there isn't quite the "do it yourself to avoid having to pay someone who actually knows what they're doing" mentality that you find elsewhere. I know from experience that it takes "a few" years to unwind your mind from this approach to things, but it really does help you to enjoy the "simpler lifestyle" that every seems to say they are seeking here.


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## Chrissippus

newyorkerinparis said:


> I asked a tax attorney qualified in both Paris and New York about this, and he told me that the French tax authorities have joint enforcement agreements with the U.S. IRS, under which each country's tax authorities can enforce tax obligations owed to the other country. So, in theory, if an American has inherited money from a French resident and French inheritance taxes are owed, the IRS could collect the money by imposing a tax lien. However, it seems unlikely that this would happen unless a significant amount of money is at stake.


It is not clear that that would apply to the case under consideration for several reasons. First, IRA accounts are protected from many claims which is why they do not go through probate. Remember we are talking here about an inheritance tax, not an arrears of income tax, for example. If it is true that the French inheritance tax is actually applied to the heir and not the estate, then a foreign heir not resident in France would not be liable for French inheritance tax since the French government does not have worldwide jurisdiction. Also, as I postulated previously, IRA assets never become part of a decedent's estate, but instead pass instantly to the beneficiaries even before they take possession, then at no time would they be subject to French inheritance tax. Finally, US "national pensions," which includes IRAs are not subject to French income tax, so it seems unlikely that they would be subject to French inheritance tax even if the heir were resident in France, since the inherited IRA would also be a US "national pension."


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## newyorkerinparis

Bevdeforges said:


> You're making assumptions about French law that don't seem to be valid.


I'm not making any assumptions, just reporting what the lawyer I spoke with told me.


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## Chrissippus

Bevdeforges said:


> And, brokerage houses had better accept a foreign death certificate in the case of a non-US citizen who dies abroad, since there won't be any Consular Report of Death available. It is entirely possible to make a non-resident non-US-citizen your beneficiary on an IRA or any other type of financial account that has designated beneficiaries. And this is where a little conversation with your local, friendly notaire could be quite useful. In France there isn't quite the "do it yourself to avoid having to pay someone who actually knows what they're doing" mentality that you find elsewhere. I know from experience that it takes "a few" years to unwind your mind from this approach to things, but it really does help you to enjoy the "simpler lifestyle" that every seems to say they are seeking here.


That may be the case, but I haven't been able to find any reference to that situation on the websites of brokerages or banks. My guess is that the inheritor would have an uphill battle getting a US brokerage firm to accept a foreign death certificate. India, for instance, is known to have a fake death certificate industry.

During my working years I frequently had to negotiate contracts with external suppliers of goods and services. Although I am not a lawyer, before I passed the vendor's proposed contract to our firm's counsel for review I went over it in detail starting with what could possibly go wrong from the point of view of our side and proposed my own amendments to address those risks. Of course, I frequently also accepted the subsequent advice of our attorney, but I never regretted the time thinking through the problem on my own. Although the professionals know more than I do, the fact is I always care about my problem more than they do.


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## Bevdeforges

newyorkerinparis said:


> I'm not making any assumptions, just reporting what the lawyer I spoke with told me.


Comment wasn't directed at you.


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## Bevdeforges

Chrissippus said:


> , but I haven't been able to find any reference to that situation on the websites of brokerages or banks. My guess is that the inheritor would have an uphill battle getting a US brokerage firm to accept a foreign death certificate.


That may be the reason why more and more financial institutions are looking to close out accounts of " non-residents" - whether US citizen or not. But that is a completely separate matter and has been coming up only fairly recently.


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## Chrissippus

Wikipedia's summary of the French succession tax excludes US assets:

*Succession and gift taxes[edit]*
_These taxes, known as Droits de Succession et de Donation, apply to both gifts and inheritances. The taxes apply where:

(a) The donor/deceased is resident in France at the date of the gift/death;

(b) The recipient is resident in France and has been so resident for at least 6 of the 10 tax years prior to the year in which the gift/inheritance is received; or

(c)* The asset is a French asset*.__[4]_

Which makes sense since the French have no jurisdiction over US assets. Although the French income tax may indeed tax income earned in the US the French can do that because they have jurisdiction over the French resident, not the US asset. Once that resident dies those US assets are beyond the reach of the French fisc. 



https://en.wikipedia.org/wiki/Taxation_in_France


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## newyorkerinparis

Chrissippus said:


> Wikipedia's summary of the French succession tax excludes US assets:
> 
> *Succession and gift taxes[edit]*
> _These taxes, known as Droits de Succession et de Donation, apply to both gifts and inheritances. The taxes apply where:
> 
> (a) The donor/deceased is resident in France at the date of the gift/death;
> 
> (b) The recipient is resident in France and has been so resident for at least 6 of the 10 tax years prior to the year in which the gift/inheritance is received; or
> 
> (c)* The asset is a French asset*.__[4]_
> 
> Which makes sense since the French have no jurisdiction over US assets. Although the French income tax may indeed tax income earned in the US the French can do that because they have jurisdiction over the French resident, not the US asset. Once that resident dies those US assets are beyond the reach of the French fisc.
> 
> 
> 
> https://en.wikipedia.org/wiki/Taxation_in_France


I'd be very reluctant to rely on Wikipedia for tax advice. A quick search for the source cited in the footnote, article 750 of the general tax code, turned up the exact opposite information. See, for example, this explanation, which includes the following: 

Si le défunt ou le donateur est *domicilié en France* à la date de la mutation, tous les biens transmis sont imposables, qu'ils soient situés en France ou hors de France et quelle que soit la domiciliation fiscale à cette date des héritiers, donataires ou légataires (CGI art. 750 ter, 1°).

As others have said on this forum, it is highly unlikely that the French tax authorities would go to the trouble of pursuing a US resident who inherits US-based assets unless very large amounts of money are at stake. However, this is a question of practicality, not "jurisdiction." 

If it were true that, once a French resident dies, assets outside of France "are beyond the reach of the French fisc," that would mean that _any_ French citizen/resident (not just US citizens) could leave millions of euros to a person in another country tax free, simply by transferring their assets to that country before they die. That would create an enormous loophole.


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## newyorkerinparis

Actually, I just re-read the Wikipedia entry, and it's not inconsistent with what I just said, since it connects the three categories (a), (b), and (c) with an "or," not an "and." So if the situation falls under "_(a) The donor/deceased is resident in France at the date of the gift/death_," it doesn't matter whether it also falls under "(_c) "The asset is a French asset." _Category (c) only matters in situations where neither the donor nor the recipient is resident in France.


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## Chrissippus

newyorkerinparis said:


> Actually, I just re-read the Wikipedia entry, and it's not inconsistent with what I just said, since it connects the three categories (a), (b), and (c) with an "or," not an "and." So if the situation falls under "_(a) The donor/deceased is resident in France at the date of the gift/death_," it doesn't matter whether it also falls under "(_c) "The asset is a French asset." _Category (c) only matters in situations where neither the donor nor the recipient is resident in France.


You are misreading the text. The conjunction "or" only joins conditions B and C, not condition A. It is therefore not the case that any single one of the three conditions is sufficient to establish that the French succession with apply. If the author had intended that he would have written "or" after both conditions A and B or, more likely, he would have simply stated that the succession tax would apply if any of the three conditions were met.

What it says is that the necessary conditions are A and (B or C). So, (A) the decedent must have died in France and then if either ((B) the heir is resident in France or (C) the asset is French) then the fisc can collect. In the case at hand it is neither the case that the heir resides in France nor that the asset is French, therefore the tax does not apply. 

Beyond a careful reading of the Wikipedia text, common sense is probably going to be sufficient. Just imagine if the French fisc were snatching up chunks of American IRA accounts at Vanguard or Fidelity. We would have been reading about such shocking events in the New York Times long before now. And, yes, it very much is a question of jurisdiction, which the French fisc lacks with respect to American brokerage accounts, unless there is a specific provision to that effect in the tax treaty against which common sense argues strongly.

While Wikipedia is hardly authoritative, this entry both provides more details and cites supporting documents, than quoting the vague opinion of some unnamed lawyer once upon a time.


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## newyorkerinparis

Chrissippus said:


> You are misreading the text. The conjunction "or" only joins conditions B and C, not condition A. It is therefore not the case that any single one of the three conditions is sufficient to establish that the French succession with apply. If the author had intended that he would have written "or" after conditions A and B or, more likely, he would have simply stated that the succession tax would apply if any of the three conditions were met.
> 
> What it says is that the necessary conditions are A and (B or C). So, (A) the decedent must have died in France and then if either ((B) the heir is resident in France or (C) the asset is French) then the fisc can collect. In the case at hand it is neither the case that the heir resides in France nor that the asset is French, therefore the tax does not apply.
> 
> Beyond a careful reading of the Wikipedia text, common sense is probably going to be sufficient. Just imagine if the French fisc were snatching up chunks of American IRA accounts at Vanguard or Fidelity. We would have been reading about such shocking events in the New York Times long before now. And, yes, it very much is a question of jurisdiction, which the French fisc lacks with respect to American brokerage accounts, unless there is a specific provision to that effect in the tax treaty against which common sense argues strongly.


When a list says "(a), (b), or (c)," it means (a) or (b) or (c). If the intent is to say "(a) and either (b) or (c)," it would be written that way. For example, if a menu says that it includes beef, chicken, or fish, would you interpret that to mean that you could have either the beef and the chicken or the beef and the fish?

In any event, the relevant text is the law itself, not the Wikipedia entry about it. 

As for the IRA accounts, there may well be treaty provisions that exclude them from taxation in France. You'd have to look at the treaty (and its interpretations) to find the answer to that.


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## Chrissippus

newyorkerinparis said:


> When a list says "(a), (b), or (c)," it means (a) or (b) or (c). If the intent is to say "(a) and either (b) or (c)," it would be written that way. For example, if a menu says that it includes beef, chicken, or fish, would you interpret that to mean that you could have either the beef and the chicken or the beef and the fish?
> 
> In any event, the relevant text is the law itself, not the Wikipedia entry about it.
> 
> As for the IRA accounts, there may well be treaty provisions that exclude them from taxation in France. You'd have to look at the treaty (and its interpretations) to find the answer to that.


There are two reasons that that reading is incorrect. First, the actual punctuation is (A); (B); or (C.) At least in American English practice, a semi-colon means "and." But this point is not entirely bullet-proof since the writer appears not to be in full control of his punctuation. Secondly and logically, if, following your reading, any of the three conditions were alone sufficient for the fisc to impose and collect its succession tax, it could do so even if the decedent died outside of France without a requirement that he had even ever been a resident of France as long as either the heir or the assets were in France. Sort of beggars belief, since even French income tax is based on residency, not citizenship. 

It's much more logical that the decedent must have died in France and that either the heir or the assets must also be in France, because only then would France have jurisdiction over both ends of the transaction: the decedent and either the heir or the assets, since otherwise they would have no power to collect. Jurisdiction is the very heart of the matter here.

This argument does not depend on the special protections that IRA accounts enjoy, but would apply to any bank or brokerage account in the US, over which the French fisc would not have jurisdiction. You are correct that Wikipedia's text is not going to be the controlling text, but as I have pointed out if the French fisc were in the habit of taxing US brokerage accounts directly even in the case where the heir did not reside in France, then we would have read reports of the resulting outrage of American citizens.


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## Keri22

paulmlemay said:


> I find this thread very helpful, as I wonder what happens to my 401k balance when I die while residing in France. For example, my 401K currently goes directly 50/50 to my son and my partner. My son lives in the USA. If I am living in France and pass away, will he have to pay French inheritance tax on whatever becomes his?


i believe the 401k is treated like an assurance vie, last time I looked those were not subject to tax unless the value is more than 152,500€. After that I believe its 20% tax imposed. But I do not know if that applies to the total value or the value to each beneficiary. Also, you will need to examine the inheritance treaty (? May be the tax treaty) to see whether it has an impact. If your account is likely to be large you really ought to get professional advice.


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## Keri22

Chrissippus said:


> There are two reasons that that reading is incorrect. First, the actual punctuation is (A); (B); or (C.) At least in American English practice, a semi-colon means "and." But this point is not entirely bullet-proof since the writer appears not to be in full control of his punctuation. Secondly and logically, if, following your reading, any of the three conditions were alone sufficient for the fisc to impose and collect its succession tax, it could do so even if the decedent died outside of France without a requirement that he had even ever been a resident of France as long as either the heir or the assets were in France. Sort of beggars belief, since even French income tax is based on residency, not citizenship.
> 
> It's much more logical that the decedent must have died in France and that either the heir or the assets must also be in France, because only then would France have jurisdiction over both ends of the transaction: the decedent and either the heir or the assets, since otherwise they would have no power to collect. Jurisdiction is the very heart of the matter here.
> 
> This argument does not depend on the special protections that IRA accounts enjoy, but would apply to any bank or brokerage account in the US, over which the French fisc would not have jurisdiction. You are correct that Wikipedia's text is not going to be the controlling text, but as I have pointed out if the French fisc were in the habit of taxing US brokerage accounts directly even in the case where the heir did not reside in France, then we would have read reports of the resulting outrage of American citizens.


this discussion makes me smile because it me that when I was at law school we spent three weeks arguing about a comma in a statute!


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## Keri22

Keri22 said:


> this discussion makes me smile because it me that when I was at law school we spent three weeks arguing about a comma in a statute!


Oops...missed out the word "reminds"


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## newyorkerinparis

Chrissippus said:


> if, following your reading, any of the three conditions were alone sufficient for the fisc to impose and collect its succession tax, it could do so even if the decedent died outside of France without a requirement that he had even ever been a resident of France as long as either the heir or the assets were in France


Yes, that is correct. If a French resident (who has been a resident for at least six out of the past ten years) inherits from a non-resident, the assets are subject to French inheritance taxes, regardless of where the assets are located. This is clearly explained on the Ministry of Finance's website: 

"*The deceased was not a French resident.* ... If you [i.e., the recipient of the inheritance] are resident of France for tax purposes on the date of the transfer and were also resident for at least six of the ten years prior to this date, then you owe taxes on transfers without valuable consideration on the movable or immovable assets which are located in France or outside France that you inherit. Taxable assets include public funds, ownership interests, the assets or rights constituting a trust and, more broadly, all French and foreign securities of any nature whatsoever."

Honestly, I had the same reaction as you the first time I learned of these rules, but they are what they are. You may think they are illogical or unfair, but the same could be said about many provisions of the tax laws.


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## Bevdeforges

How many times do I have to remind you folks that French law does not pick nits with the precise use of words and punctuation the way English language law does? (And that quote from Wikipedia is hardly "the word" on whatever law it is that you're referring to.)



Keri22 said:


> i believe the 401k is treated like an assurance vie, last time I looked those were not subject to tax unless the value is more than 152,500€.


Don't confuse income tax law and inheritance tax law here. Taxation of the gains in value on an assurance vie are subject to income tax only on withdrawal. But even then it depends on the amount of funds the owner put into the assurance vie account in the first place, their age at the time they deposited the funds and how long the funds have been held prior to the date of withdrawal. And, like "life insurance" in the US and elsewhere, on the death of the owner of the assurance vie, the declared beneficiary receives the balance of the contract without paying income taxes on the amount transferred. Hence, an assurance vie is very often established in order to provide funds for heirs to pay off the inheritance taxes on property and other assets without having to sell off assets that are part of the estate.

And as Keri and Newyorkerinparis have both mentioned, it's the residence of the decedent at the time of his or her death that determines which law applies (or at least which tax rate, given the ability to incorporate the home country rules of distribution). If Mr. Smith is resident in France, but gets hit by a bus while visiting back in the US, he may have died in the US, but he was resident in France on the date of his death and so French law comes into play.


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## PinkUnicorn

Chrissippus said:


> One point that is confusing is that in the US it is the héritier who pays the inheritance tax, if any, not the estate.


I don't think that's true, at least at the federal level.
i.e. there's a federal estate tax but not an inheritance tax.








Understanding the Estate Tax


An estate tax is a federal or state levy on inherited assets whose value exceeds a certain (million-dollar-plus) amount.




www.investopedia.com












What Is Inheritance Tax?


Inheritance tax is a tax imposed on those who inherit assets from an estate. Discover who pays inheritance taxes and how much you might owe.




www.investopedia.com


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## PinkUnicorn

With a 401k/403b also note that (unless it's a Roth, or a spouse is inheriting) the US government will require the deferred income tax to be paid.
Here in the US my French wife and I drawing up wills, with a division between charities and relatives. Our lawyer advised us that anyone inheriting a 401k/403b would
have to pay the deferred income tax, unless it's going to a charity.


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## Keri22

I think you are not 


PinkUnicorn said:


> With a 401k/403b also note that (unless it's a Roth, or a spouse is inheriting) the US government will require the deferred income tax to be paid.
> Here in the US my French wife and I drawing up wills, with a division between charities and relatives. Our lawyer advised us that anyone inheriting a 401k/403b would
> have to pay the deferred income tax, unless it's going to a charity.


Inheritance of IRAs and 401ks are governed by the Secure Act. A non spousal beneficiary must fully withdraw the inherited funds within 10 years and pay income taxes on the distributed amounts.

An exception to this is for a surviving spouse, and other limited categories of beneficiary. These people do not have to fully distribute the account in 10 years but must follow the distribution rules from the IRS actuarial table. The distributions in either instance are regarded as ordinary income and subject to income tax.

All of this information is readily available from the IRS Website.


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