Proclamation of Line of Succession
Tax-deductible debts in a succession: What you need to know
Are you facing the intricate process of handling a succession in France? Navigating the declaration of succession, especially when dealing with complex estates and numerous assets, can be an overwhelming task. But don't worry, we're here to help you understand the ins and outs with ease.
Table of Contents
- Overview
- Debts Prior to Death
- Certain Commitments
- Evaluating a Business During a Succession
- Non-reportable Assets
- Liquidation of Marital Regime During a Succession
- Valuing a Usufruct in an Inheritance
- Reporting Donations to the Succession
- Notary Fees and Inheritance Tax
- Sending Form 2705-A-SD
Overview
A declaration of succession is a mandatory document that heirs must file within a specific timeframe following the death of the deceased individual. This declaration aids in the calculation of inheritance taxes owed to the State and is necessary for the proper division of assets.
Debts Prior to Death
All debts incurred by the deceased before their passing are eligible for deduction from the succession. This includes but is not limited to:
- Outstanding tax checks
- Repaid social benefits
- Alimony owed to the former spouse
Even if they occur post-death, funeral and last medical expenses are also deductible.
Certain Commitments
Personal commitments are only taken into account if they are "certain." In other words, if the deceased had acted as a guarantor, the commitment was only conditional and is not considered a certain debt. The debt must be certain, liquid (evaluable in money), and due on the day of death.
Evaluating a Business During a Succession
Professionals such as accountants are needed to assess the value of a non-exchangeable business when dealing with a succession declaration. Several factors must be taken into account, such as the sector of activity, value of assets, reputation, age, financial results, and the personality of the deceased directors.
Non-reportable Assets
Certain assets are exempt from being reported in the succession. These include:
- Donations "outside the share of the succession" - that is, received in addition to the heir's share,
- Donations in kind,
- Goods given that have accidentally been destroyed,
- Cash gifts used for the education or maintenance of heirs, provided they did not impoverish the donor,
- Gifts given on an occasion (wedding, birth, etc.), as long as they are not excessive, and
- "Remuneratory" donations, made to an heir as compensation for a particular help or work.
Additionally, the transmission of life insurance policy capital does not form part of the succession, unless there is evidence of abuse. In most cases, this money comes in addition to the heir's share.
Liquidation of Marital Regime During a Succession
Resolving the marital regime, in the case of a married deceased, is necessary to identify the assets that belong to each spouse. Separation of assets can be a complex process, depending on the marital regime in effect. The most common regime, community property, requires careful distinction between personal assets (those owned prior to marriage or received by inheritance or donation) and community assets (acquired during the marriage). Afterward, accounts between spouses must be settled to determine the community's debt to each individual.
Valuing a Usufruct in an Inheritance
The value of a usufruct, often held by the spouse, depends on two main factors: the usufructuary's age and the value of the asset. For instance, the usufruct of a 40-year-old person is worth 70% of the total value of the asset, while the bare ownership's value for that age is only 30%.
Reporting Donations to the Succession
When reporting donations to the succession, any previously given assets or services must be accounted for to maintain fairness among heirs. These are reported as part of the active portion of the succession to be shared by all parties.
Notary Fees and Inheritance Tax
Notary fees are a standard part of processing a succession declaration, including:
- Proportional fees, calculated as a percentage of the value of the assets transmitted,
- Disbursements, representing costs incurred by the notary on behalf of the heirs, such as obtaining documents or publication fees, and
- Fixed fees and formalities, covering the costs of the formal administrative procedures required.
Inheritance tax, a fee owed to the French government, depends on the net value of the inherited share after deducting debts and charges, as well as the degree of kinship with the deceased and a progressive scale.
Sending Form 2705-A-SD
Form Cerfa n° 2705-A-SD is for the certificate of release of bank accounts for heirs, which allows them to claim funds from bank accounts, up to €5,000 in the absence of a notary's intervention. This form should be sent directly to the deceased's bank and is separate from the inheritance declaration.
Still feeling overwhelmed? No worries! Our team is here to help you navigate the complexities of succession declarations. Don't hesitate to reach out with any questions you may have. 🤝💪
- The declaration of succession may involve numerous assets, including a business, which requires the services of professionals like accountants to evaluate the non-exchangeable business.
- Personal-finance commitments are only taken into account if they are certain, meaning if the deceased acted as a guarantor, and the commitment is liquid and due on the day of death.
- Inheritance taxes owed to the State can be deducted for debts incurred by the deceased before their passing, such as outstanding tax checks, repaid social benefits, alimony owed to the former spouse, as well as funeral and last medical expenses.
- The transmission of life insurance policy capital does not form part of the succession, unless there is evidence of abuse, but it often comes in addition to the heir's share.
- Education-and-self-development can benefit from cash gifts given to heirs, provided they did not impoverish the donor, as long as these gifts are not reported in the succession declaration.
