How this couple saves 150,000 euros of inheritance!

Jean-Paul and Véronique are both 68 years old. Through their work and their propensity to regularly put aside, they have built up a fortune of more than 2 million euros. With a particularly strong goal: to pass on a beautiful heritage to his two children. But they understand today that, without action on their part, their estate will be passed on to their children… with more than 350,000 euros of inheritance tax to pay! It is unthinkable for the couple to turn to a financial advisor who will guide them towards solutions to drastically reduce these rights.

Heritage and succession

The couple therefore went to a financial advisor to present the different characteristics of their assets:

  • Main residence: 600,000 euros.
  • Real estate investments (3 properties): 1,670,000 euros.
  • Financial investments: 200,000 euros.

The couple has not made any arrangements regarding their estate today. Here’s what happens at death:

At the first death : presumed age of the deceased: 85 years (ie: at the age of 85, the bare property is worth 80% of the full property).

The surviving spouse recovers half of the property (1,235,000 euros) and chooses to take all the rest in usufruct (the surviving spouse has the choice of taking 100% usufruct or 1/4 in full ownership).

Children recover them all in the bare property:

  • Value of the bare property: 80% * 1,235,000 euros = 988,000 euros.
  • Value per child: 494,000 euros.
  • Taxable value (after deduction of 100,000 euros): 394,000 euros.
  • Inheritance tax: 76,994 euros (per child).

At the second death: the children recover usufruct of the spouse (without paying expenses).

They will also recover all their own assets (1,235,000 euros):

  • Value per child: 617,500 euros.
  • Taxable value (after deduction of 100,000 euros): 517,500 euros.
  • Inheritance rights: 101,694 euros (per child).

Total inheritance rights per child: 178,688 euros.

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Reduce inheritance tax with life insurance

Husbands have the option ofuse deductions from life insurance policies. Every bride can really afford it 152,500 euros per child (therefore twice) before 70 years plus 30,500 euros (for all heirs) after 70 years. To do this, they will sell one of their properties and pay all their money on two life insurance contracts each (one before and one after 70). Or 335,000 euros per parent (670,000 euros in total).

At the first death : presumed age of the deceased: 85 years.

The couple’s estate:

  • Main residence: 600,000 euros
  • Real estate investments (2 properties): 1,200,000 euros
  • Life insurance: 670,000 euros

No rights on life insurance contracts.

The surviving spouse recovers half of the property (900,000 euros) and chooses to take the rest, all in usufruct.

The children therefore recover all in the bare owner:

  • Value of the bare property: 80% * 900,000 euros = 720,000 euros.
  • Value per child: 360,000 euros.
  • Taxable value (after deduction of 100,000 euros): 260,000 euros.
  • Inheritance tax: 50,194 euros (per child).

At the second death : the children recover usufruct of the spouse (without paying expenses).

They will also recover all their assets (900,000 euros):

  • Value per child: 450,000 euros.
  • Taxable value (after deduction of 100,000 euros): 350,000 euros.
  • Inheritance tax: 68,194 euros (per child).

Total inheritance rights per child: 118,388 euros.

Save thanks to the opening of insurance contracts before and after the age of 70 for a total of 670,000 euros: 60,300 euros per child.

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Donation and dismemberment

To reduce inheritance tax, spouses can give in his life to his children. They can give up to the limit of allowance (100,000 euros per parent and child) to avoid paying gift tax. This allowance is reusable (for inheritance or a new donation) every 15 years. Then bet that they live at least 15 years.

However, Jean-Paul and Véronique I really don’t want to be private (ie leaving with part of his estate). They are caught between the desire to reduce inheritance tax and the need for protection. An unsolvable equation? Not good.

There is a solution to this equation: dismemberment. This is a technique that separates the ownership of a property in two: on the one hand the usufructuarythat can use the good and perceive the fruits and to the other the naked ownerwho does not have the right to the property, but who becomes the full owner at the end of the dismemberment (death of the usufructuary).

Concretely, a parent can give bare ownership of property to a child. This allows them to anticipate their succession using the deductions from the donation. But it is not completely private, because retains the usufruct : in the case of real estate, he can therefore live in the real estate or rent it and receive the rent.

A very practical solution is to transfer bare ownership of SCPI shares. The parents continue to receive the income without having to deal with the management of the property (nor children for that matter). If necessary, it will be possible to sell a few SCPI shares without breaking the entire financial package. Finally, at the time of death, the children recover the shares of SCPI in full ownership, with the possibility of keeping, or selling all or part of these shares. There is no common ownership issue with SCPI shares.

It should be noted that the donation of the bare property allows to reduce the donation rights beyond the deductions. For what only the bare property of the transferred capital will be subject to the gift tax. So there is a discount. And no duty is paid on the contract at the time of death of usufructuary.

Jean-Paul and Véronique therefore go to sell 800,000 euros of real estate to invest in SCPI shares. Each parent will give the bare property of €200,000 to each child.

At the time of donation the age of the donee: 69 years. Bare property value: 60%.

  • Donation value: 60% * 200,000 euros = 120,000 euros.
  • Taxable value (after deduction of 100,000 euros): 20,000 euros per donation.
  • Donation rights per child (2 donations, 1 per parent): 4388 euros.

At the first death : presumed age of the deceased: 85 years.

The couple’s estate:

  • Main residence: 600,000 euros.
  • Real estate investments (1 property): 400,000 euros.
  • Life insurance: €671,000.
  • SCPI: 800,000 euros.

No rights on life insurance contracts.

No right to consolidation of SCPI shares.

The surviving spouse recovers half of the property (500,000 euros) and chooses all the rest in usufruct.

The children therefore recover all in the bare owner:

  • Value of the bare property: 80% * 500,000 euros = 400,000 euros.
  • Value per child: 200,000 euros.
  • Taxable value (after deduction of 100,000 euros): 100,000 euros.
  • Inheritance tax: 18,194 euros (per child).

At the second death: the children recover the spouse’s usufruct (without paying inheritance tax).

They will also recover all their assets (500,000 euros).

  • Value per child: 250,000 euros.
  • Taxable value (after deduction of 100,000 euros): 150,000 euros.
  • Inheritance tax: 28,194 euros (per child).

Total inheritance rights per child: 50,776 euros.

Save thanks to the opening and donation of SCPI shares for a total of 800,000 euros: €67,612 per child.

Note that this is a savings if the parents live another 15 years. If this is not the case, and the deductions are reintegrated into the estate, then these deductions of 100,000 euros are lost. But the savings would still be 27,611 euros per child.

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Subscription to GFI units

The forestry investment group, or GFI, is a civil society with forestry vocatione. Its activity is therefore attached to one or more forest areas. It allows private investors to buy shares in a civil society that owns forest land. The management company will then exploit its asset, ie maintain it, cut the wood and resell it.. He distributes the income to his partners, the share holders. Actions that the price can also change with the forest market and the growth of unharvested trees

To support the sector, which is sustainable and creates jobs, the State has granted several tax advantages: a reduction in income tax, an exemption from the IFI, and a decrease in the inheritance tax of 75%. no capping or lineage limitation or retention of shares, but with a commitment to sustainable use over 30 years made by the Forestier Group. This compensation applies to the value of the French forests held by the Group and not to cash.

Jean-Paul and Véronique are therefore going to invest 400,000 euros in shares in a Forestier Group. Of these 400,000 euros, only 100,000 euros entered the estate.

At the first death : presumed age of the deceased: 85 years.

The couple’s estate:

  • Main residence: 600,000 euros.
  • GFI investments: €400,000.
  • Life insurance: 671,000 euros.
  • SCPI: 800,000 euros.

No rights on life insurance contracts.

No right to consolidation of SCPI shares.

The surviving spouse recovers half of the property (500,000 euros) and chooses all the rest in usufruct.

Children therefore recover all in naked owner, including GFI shares for 200,000 euros, 75% of which are exempt.

  • Total property value: 80% * 500,000 euros = 400,000 euros.
  • Value of the bare taxable property: 80% * 350,000 euros = 280,000 euros.
  • Value per child: 140,000 euros.
  • Taxable value (after deduction of 100,000 euros): 40,000 euros.
  • Inheritance tax: 6,194 euros (per child).

At the second death : the children recover the spouse’s usufruct (without paying inheritance tax), plus all their assets (500,000 euros). Again only 350,000 euros are taxed.

  • Value per child: 175,000 euros.
  • Taxable value (after deduction of 100,000 euros): 75,000 euros.
  • Inheritance tax: 13,194 euros (per child).

Total inheritance rights per child: 19,388 euros.

Save thanks to the purchase of GFI shares for a total of 400,000 euros: 27,000 euros per child.

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Conclusion of this practical case on succession

By selling their real estate to invest in several financial products (and Pierre Papier), Jean-Paul and Véronique will save their children tens of thousands of euros in inheritance tax:

  • Thanks to life insurance: €60,000 reduction per child.
  • Thanks to the donation of the bare ownership of the SCPI shares: €27,600 per child + €40,000 per child if the parents live at least 15 years.
  • Thanks to the GFI: reduction of €27,000 per child.

It is a reduction of €147,000 per child. We went from almost €360,000 in inheritance tax in total to just over €60,000. We have therefore divided the inheritance tax by almost 6!

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Non-contractual communication of an advertising nature

France Valley is an independent Portfolio Management Company certified by the AMF (Financial Markets Authority), specialized in Forestry Groups, Private Equity and Real Estate.

France Valley manages about fifteen Forestry Groups on the part of many people who wanted to rely on their expertise to invest in this asset.

France Valley is a member of ASFFOR (Association des Sociétés et Groupements Fonciers et Forestiers), a professional association that brings together the main French institutional investors in the forestry sector. For this reason, France Valley respects the ASFFOR code of good conduct and has the practice of obtaining the PEFC certification (Program for the Endorsement of Forest Certification) of its forests under management.

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