Giving part of your assets in your life remains the most effective way to reduce the inheritance tax due by heirs.
With an allowance currently set at 100,000 € between each parent and each child (200,000 € for a couple, per child), which is replenished every 15 years, the sums passed on without paying donation tax climb quickly.
Especially if you add the deduction of 31,8865 € which applies to family donations of money made by a donor under 80 years old to an adult beneficiary, which is also renewed every 15 years.
Today, a 50 years old person who gives 131 865 € (a “classic” donation coupled with a family donation) to a child can renew the operation at 65 years old, then at 80 years old, without paying a single cent to the tax office.
Experts even recommend giving beyond the allowance; up to around 550,000 €. This is especially so the donor can pay the donation tax without it being considered a supplement of taxable donation.
It is better to smooth out the transmission of one’s assets over time in order to purge the allowance every 15 years and reset the tax calculation scale.
As the tax rate is progressive, it allows you to take advantage of the bottom of the scale several times, up to the one taxed at the rather reasonable rate of 20% (capped at 552,324 €, NDLR).
If nothing is anticipated, the same sum transmitted once after the passing will be taxed at a rate of 30, 40, or even 45%, as inheritance tax.
Of course, the age to convey varies according to the size of the estate.
The average person will start to work on it at the age of 60 or 65, after having built up enough assets to transfer part of them.
Nevertheless, to convey during one’s lifetime is a very good fiscal operation, not only to reduce inheritance tax in the long run.
By giving the usufruct of a rental property for 5 to 10 years to a child who will finance his or her studies thanks to the rents he or she will receive, the parents take the property out of their estate subject to the real estate wealth tax (IFI), with a tax saving at the end.
In the same way, it is sometimes more advantageous to give a property than to proceed to its sale.
The reason for this? The act of donation erases the added value tax on real estate capital gains (at a rate of 36.2%, NDLR).
Don’t give away too much too soon
With the 15-year time limit, the number of donations that can be exempted remains limited for large estates.
However, it is better not to give away too much too young, at the risk of impoverishing oneself, getting into difficulty or losing control of one’s assets.
This is particularly the case if you give away the bare ownership of your main residence.
The donor who becomes the usufructuary of his home can no longer sell it without the agreement of his bare-owner children.
The donor is irrevocably stripped of his property. As the popular French saying goes: “To give is to give, to take back is to steal”.
If one should not give away too soon, the opposite is also true.
After the age of 81, you should no longer transfer in dismemberment of ownership, because the value of the usufruct reaches the rate of 20%.
The donation tax culminates at 80% of the value of the property in full ownership.
The cost of the transmission becomes dissuasive, hence the need to anticipate these operations.
Moreover, after a certain age, giving away is no longer of any use to the estate.
Donations made by the deceased to his heirs in the 15 years preceding his death are taken into account in the succession.
The 100,000 € allowance between parent and child being common to inheritance tax, it will already have been used up.
Moreover, when the tax rate is progressive, the bottom of the scale of calculation already used for a gift of less than 15 years will not be reused, or only up to the remaining balance.
The next lowest unused part of it will be applied in ownership.
But, contrary to popular belief, a previous donation is not taxed again.
Only the inherited excess is.
Lawyer of the Bar of Nice
Specialist in banking and financial law
Cabinet BRAHIN Avocats