In summary…
A child who inherits €500,000 from a parent pays €78,194 in inheritance tax. The €100,000 allowance under Article 779 is renewed every fifteen years. Parents who give early use it several times and pass on €400,000 per child tax-free over two cycles. Those who wait until death use it only once.
1. The cost of an inheritance without planning ahead
In direct line, each child benefits from a tax allowance of €100,000 per parent (Article 779 of the French General Tax Code). Beyond this amount, the scale of Article 777 applies, ranging from 5 to 45 % for the portion exceeding €1,805,677.
For €500,000 received from a parent, the taxable base is €400,000 and the tax due amounts to €78,194. If each parent transfers €500,000 to the same child, the tax bill rises to €156,388.
2. The 15-year timeframe, the driving force behind the strategy
Gifts made less than fifteen years ago are subject to change: they consume the available allowance upon the next transfer. After this period, the allowance is fully restored.
Each parent can therefore give €100,000 to each child, and then another €100,000 fifteen years later. Two parents, two cycles: €400,000 per child, tax-free. For an estate of this size, each €100,000 portion removed from the estate avoids the 20% tax bracket: €20,000 in taxes avoided.
3. Concrete example
Situation. A couple in their 50s, one son. Each parent is entitled to leave him €500,000.
Issue. Without advance planning, each inheritance incurs €78,194 in taxes: €156,388 for the couple.
Strategy. Each parent gives €100,000 at age 50, then €100,000 at age 65. €400,000 is transferred tax-free, and each inheritance now only covers €300,000.
Result. Death after age 80, more than fifteen years after the last gift: the €100,000 allowance is reinstated, and the tax falls to €38,194 per parent with a constant estate. €76,388 instead of €156,388: a saving of €80,000.
4. What causes the strategy to fail
Starting late. A late first donation makes the second cycle unlikely, and each year of waiting postpones the replenishment of the allowance.
Dying less than fifteen years after a donation. It is recalled and consumes the inheritance tax allowance: the donation schedule must take into account the donor's age.
Giving without structure. The choice between manual gift, simple donation and shared donation conditions equality between children and the stability of values on the day of death.
5. The additional levers
The allowance under Article 779 can be combined with the family gift allowance of €31,865 (Article 790 G), available to donors under 80 years of age for the benefit of an adult child. Grandparents have their own allowance of €31,865 per grandchild (Article 790 B). The order, frequency, and method of gifting are determined by the parents' age and the composition of their estate.
Frequently asked questions
Is the €100,000 allowance per parent or per couple?
Per parent and per child. A couple with two children has four allowances of €100,000, i.e. €400,000 that can be passed on without tax every fifteen years.
What happens in the event of death less than fifteen years after the donation?
The gift is subject to taxation and uses up the available allowance in the inheritance. The benefit of the strategy is thus reduced.
Is it possible to give something other than money?
Yes: securities, real estate, capitalisation contracts. The allowance applies to the value of the asset given, regardless of its nature.
Want to start your first round of donations? Book a wealth management consultation: we'll set up the schedule and support for each donation.
