In summary…
It is not the deceased's country of origin that triggers French taxation. It is your own residence : if you have lived in France for at least six of the last ten years, France taxes everything you receive, wherever the assets are located.
A trust It is not a mere envelope: it is an independent tax regime. If the share allocated to each beneficiary is not determined, taxation shifts to the highest tax bracket. The fate of the case hinges on the distribution drafting, not upon receipt of funds.
And no: moving to Portugal the year you inherit makes no difference. The criterion is calculated over ten years. What's being prepared is the distribution — not the move.
A call, often from a different time zone: your sister, your uncle, your father has died in the United States. There's an account with an American broker, perhaps a retirement plan, sometimes a trust you're hearing about for the first time. You're told that "it's going to take time.".
You will then spend months trying to obtain documents from an institution that doesn't understand why you don't have a US Social Security number. During those months, two clocks are ticking in opposite directions: the US administration imposes its deadlines on certain assets, and the French administration, for its part, is waiting for an inheritance tax return whose countdown began upon the death.
No one in this sequence will spontaneously tell you the only thing that matters: The final amount will be determined before the money arrives..
1. It is your residence that triggers the tax
The initial misunderstanding, and it's costly.
The natural reaction is to assume that American assets, transferred by someone who lived in the United States, fall under American law. That's true from the American perspective. It says nothing about France.
French law recognizes three points of entry: the deceased's domicile, the location of assets, and — the one that is often forgotten — the residence of the person receiving. An heir who has had their tax residence in France for at least six of the ten years preceding the transfer is taxable in France on All what he receives, including assets located outside of France.
Specifically. You have always lived in France. Your sister has lived in the United States for twenty years; all her assets are there. France will tax your entire share—the securities account, the retirement plan, the house. The tax paid in the United States will be credited, but only on assets located there, and only up to the amount actually paid there. If the American tax was low or nonexistent, there is almost nothing to credit, and the full French tax bill remains.
For the technician. Article 750 ter, 3° of the CGI: the heir, donee or legatee domiciled in France within the meaning of article 4 B for at least six of the ten years preceding that of the transfer is taxable on the assets received, whether they are located in France or outside France.
The Franco-American convention of November 24, 1978, concerning inheritance and gift taxes, as amended by the addendum of December 8, 2004, which entered into force on December 21, 2006, allocates the right to tax and provides for the elimination of double taxation. It mitigates—but does not eliminate—the application of Article 750 ter.
2. The Washington Convention: what it protects, what it does not protect
Signed on November 24, 1978 — and it's this one that saves you from the worst
Unlike Switzerland, with which France has had no inheritance treaty since 2015, the United States and France are bound by a dedicated agreement: the convention signed in Washington on November 24, 1978, regarding inheritance and gift taxes, supplemented by an amendment signed in Washington on December 8, 2004.
His logic can be summed up in four lines. buildings are taxable where they are located. Assets allocated to a permanent establishment They are located where the establishment is situated. tangible personal property Furniture, artwork, and cars are taxable where they are physically located. intangible assets and cash — securities accounts, receivables, cash — are taxable only in the State of which the deceased was a citizen, or in which he was domiciled.
This last rule is the most important of the four, and it works both ways.
Specifically. You hold US stocks in your French securities account. This is the case for almost all diversified portfolios today. In the absence of a treaty, the United States imposes a tax allowance on the transfer of assets held there by a non-resident, with a tax break far exceeding that granted to US residents—your heirs could be liable for a US estate tax return on your securities.
The Washington Convention rejects this hypothesis These securities are intangible assets, therefore taxable only in the deceased's country of citizenship or residence. A deceased French citizen domiciled in France is thus exempt from US estate tax on their American shares. This is not a minor detail: it's what the treaty provides without you ever having to ask for it.
Conversely, if the deceased was domiciled in the United States, their intangible assets—such as securities accounts and retirement plans—become taxable there. France, however, still taxes the heir it claims as a dependent and grants a tax credit corresponding to the US tax actually paid on assets located in the US.
The convention It distributes and corrects, it does not exonerate. It never eliminates the French connection of the resident heir. It avoids double jeopardy, which is already considerable — and it includes a guarantee that is often forgotten: It cannot, under any circumstances, result in a tax higher than that which would be due without it.
For the technician. Convention of November 24, 1978, entered into force on October 1, 1980, applicable to estates opened and gifts made from that date. Amendment of December 8, 2004, entered into force on December 21, 2006; certain provisions relating to community property and deductions are retroactive to November 10, 1988.
Article 4: Domicile, with a hierarchy for determining eligibility in cases of dual domicile — permanent residence, center of vital interests, habitual residence, nationality, then an amicable procedure. Article 5: Taxable real estate in the State of location. Article 6: Assets of a permanent establishment. Article 7: Tangible movable property, State of location. Article 8: Intangible and cash assets, taxable only in the State of citizenship or domicile of the deceased or donor. Article 12: Elimination of double taxation by crediting. Article 12, paragraph 8: Safeguard clause — the convention may not have the effect of increasing the amount of tax collected.
The connection with article 750 ter, 3° of the CGI remains entirely intact: the agreement organizes the credit, it does not neutralize the connection of the heir domiciled in France.
3. A trust is not a shell, it's a system
And it takes place before the distribution
The word is reassuring. It shouldn't be. In French tax law, trusts are subject to a specific regime, and this regime is strict when things are not clearly written down.
The general rule is clear: the transfer of assets held in a trust is subject to gift tax based on the relationship between the settlor and the beneficiary. In other words, the trust does not shield the beneficiary—it is visible through the trust.
The trap lies elsewhere. When the share due to each beneficiary is not determined, Taxation is no longer based on the degree of kinship; it is calculated at the highest tax bracket. A trust drafted with flexibility—which is common and perfectly normal under American law—can therefore result in the highest tax liability upon arrival in France.
Specifically. Two identical cases, same assets, same heirs. In the first, the trust distribution deed specifies precisely who receives what. In the second, it leaves to trustee a degree of discretion. The first is taxed according to the relationship; the second can be taxed at the maximum rate. The difference is not in heritage: it lies in a single sentence. And this sentence is written before distribution, not after.
For the technician. Article 792-0 bis of the French General Tax Code (CGI). Assets held in trust and transferred upon the settlor's death are subject to inheritance tax according to the relationship between the settlor and the beneficiary. If no specific share is allocated, the portion accruing to the descendants is taxed at the rate of the highest bracket in Table I of Article 777, and the remainder at the rate of the highest bracket in Table III.
Not to be overlooked: the specific reporting obligation of trusts incumbent upon the trustee, and the joint and several liability of the beneficiaries for payment when the trustee falls under the jurisdiction of a non-cooperative state or territory — in which case the maximum rate applies.
4. US retirement accounts impose their own schedule
IRA, 401(k): the constraint is not fiscal, it is procedural.
A U.S. retirement plan inherited by someone who is neither a U.S. resident nor citizen is an administrative ordeal before it's a tax issue. The institution requires the opening of a dedicated account, demands tax identification forms that the foreign beneficiary doesn't possess, and applies strict deadlines for heirs other than the spouse.
These deadlines are non-negotiable, and they run regardless of whether the French dossier is ready or not.
Specifically. You have two calendars that don't communicate. On the American side, there's a window to open the receiving account and organize withdrawals. On the French side, there's a deadline for filing the inheritance tax return that began upon the death. Cases that go wrong are almost always those where the heir waited until "the money arrived" before handling the French part. At that point, the order of operations can no longer be changed.
For the technician. The French treatment of sums from a US retirement plan received by a French resident—whether they are classified as a pension, capital income, or part of the estate, depending on the circumstances—requires a case-by-case analysis, taking into account both the income tax treaty and the inheritance tax treaty. This is a point on which the position must be documented on a case-by-case basis; any general answer would be incorrect in half of all situations.
5. The collateral line changes everything
Inheriting from a brother or sister is nothing like inheriting from a parent.
Most of the reference points we have in mind come from direct line inheritances: generous allowances, a progressive tax scale that starts low. Between siblings, the situation changes: the allowance is modest, and the tax scale has only two brackets, the second of which is triggered very quickly.
Add to that an international succession, a poorly structured trust and a US asset that is difficult to mobilize, and you have the most expensive configuration possible — one where tax is calculated on an estate of which the heir has not yet seen a penny.
- Direct line — Significant allowance per child, progressive scale with several tiers.
- Brother or sister — Modest allowance, only two tiers — the second applies from a small amount.
- Nephew, niece — High single rate.
- No family relationship — Maximum rate — the same one that applies to the trust whose shares are not determined.
6. Donate before or after expatriation
The most frequently asked question, and the most counterintuitive answer
Since taxation also depends on the residence of the recipient, the temptation is immediate: what if we left? Or what if we waited until the child was settled abroad to give it to them?
The idea is not absurd. It is simply poorly calibrated in nine out of ten cases, due to scheduling issues.
- The recipient leaves, then receives the next year — No effect. The connection is measured on six of the previous ten years : it requires a long absence, not an opportunistic move.
- The recipient has been living abroad for a long time. — Donating assets located outside France can be exempt from French taxation — subject to the donor's residence and the location of the assets. That's where the real opportunity lies.
- The donor leaves, the child stays in France — The donor's departure does not protect anything: the child residing in France remains linked to the family. This is the most frequent mistake.
- Donation before the donor's departure — Often the best option, because it takes place within a known framework, with stable rules and discounts that are replenished over time.
Specifically. A donation is not something that can be improvised in reaction to someone leaving. It requires planning. several years before, When savings can be replenished and the timing is still flexible, deciding to donate because you're leaving next week is making the decision at the worst possible moment in the cycle.
Three questions. If you don't have the answer, the topic concerns you.
If you were to inherit this year from a relative living abroad, on what basis would you be taxed—and in which country? Do you know if a trust exists in your family, and if each beneficiary's share is determined? And do you hold any US assets in your securities account for which your heirs will be liable?
Our position
In American estate settlements, the general reflex is to wait. Wait for the documents, wait for the funds to be released, wait for things to "settle down." This is exactly the opposite of what should be done: Everything that has an impact is decided before the funds arrive., and nothing can be recovered afterwards.
And regarding donations, we often say the thing the client doesn't expect: leaving won't solve your problem. Geography changes less than the calendar.
An inheritance opened abroad, a family trust, a planned donation before departure?
The initial meeting is to identify what needs to be decided before any funds are released. Forty-five minutes, no obligation.
Notaries, chartered accountants, fellow consultants: We work in partnership on international estates and trust matters. The client remains yours; we handle the cross-border aspects and deliver the fully documented file to you.
Make an appointment
The initial consultation is to establish your exact situation and determine if there is anything that can be done—sometimes there is nothing, and we will say so as well. Thirty minutes, with no obligation.
