Giving up an inheritance may seem counterintuitive. However, more and more French people are opting for this tax strategy when it comes to inheritance. A notary explains to us why it is often “much more advantageous”.
When you lose a parent, the pain unfortunately does not stop at the emotional level. Then comes the painful matter of inheritance, with the complicated procedures and the resulting costs, and we often find ourselves in a double administrative and financial penalty. But more and more French people are making a surprising choice to protect themselves: renouncing the inheritance left by their parents. Maître Mathilde de Legge de Kerlean, notary specializing in family law, sees this situation arising “very often” in his Parisian study: “It’s perhaps one in three successions today”.
“It happens very often, because we inherit later and later. When grandparents die, their children are already early retirement or retired. And they consider that they do not need more.” But why can refusing an inheritance be a good idea? Mathilde de Legge explains to us why this choice is often “much more tax advantageous”and everything you need to know before giving up your piece of the pie.
In reality, the aim is to avoid double taxation. Because when accepting an inheritance, you pay inheritance tax. And our children will have to pay in turn after our disappearance. By activating the “generation jump”, we only carry out one transmission instead of two. “What’s great is that the children come to represent their renunciating parents, so we apply to them the taxation that we would have applied to their parents”specifies the notary. Indeed, instead of benefiting from the reductions and tax rates reserved for grandchildren, which are much less advantageous, the latter obtain the same rights as those reserved for children, i.e. 100,000 euros of reduction and a progressive tax scale, ranging from 5 to 45% depending on the amount of assets. Concretely, “if my father gives up and there are three children, we will divide the reduction by 100 000 euros in three, so 33 333 euros each. And everyone will benefit from the progressiveness of the tax scale.”
This system is therefore largely favorable, because if the deceased simply wishes to make a special legacy for the benefit of their grandchildren, the reduction is only 1,594 euros each. “There is still progressive tax that applies, but the reduction is really meager”deplores Me de Legge. This is why the generation jump turns out to be a golden gift for the grandchildren. However, there are a few important points to note before giving up on an inheritance. First, the notary reminds us that we “can’t go shopping” : either we renounce everything, or we renounce nothing. It is in fact impossible to refuse only part of the inheritance. And this also applies to life insurance contracts. A parent can waive it in favor of their children, but there is a subtle trap to avoid at all costs.
“Everything depends on one word. When I say ‘I renounce for the benefit of my grandchildren’, it is considered a donation, so it is a double penalty. Whereas the beneficiary clause of life insurance often says that, if the spouses and children renounce, it goes to the grandchildren. If I only say ‘I renounce’, it is the clause which takes precedence and which regulates the subsequent beneficiaries, therefore the grandchildren”alerts Mathilde de Legge.
In short, the generation jump is a powerful tool, but it is better to be accompanied by a notary to avoid disappointments. More than a simple tax strategy, renouncing an inheritance is an act of intergenerational solidarity: a way of passing the baton directly to those who, at the start of their working lives, often need it the most.
