In France there are various types of marriages, known as marital regimes. A marital regime is essentially a 'marriage contract', which is very important in terms of division of property during and after the marriage. The choice of marital regime is important as it affects the allocation of assets in the case of divorce and also is extremely important in determining inheritance rights and inheritance taxes. Note that the marital regime affects not only French property, but potentially all assets worldwide.
Because of the importance of the type of marriage (for inheritance, taxes, and divorce settlements), it is important to choose a marital regime that suits your circumstances.You can choose your marital regime at the time of marriage or you can change it after marriage. If you have been married outside of France and have not selected one of the French marital regimes, it is probably advisable to do so prior to buying property or becoming resident in France. This will enable you to determine the framework for division of assets upon death and divorce. It will also enable you to minimise (or in some cases completely avoid) inheritance taxes.
There are some restrictions on changes to marital regimes. For example, if you have chosen one regime at time of marriage, there is a minimum waiting period before you can change it. Also, both parties need to agree to the change.
The importance of marital regimes to inheritance is discussed below and also in Inheritance Tax.
Martial Regime: En Indivision
If a property is purchased without taking special actions or arranging a marriage contract, it will likely be purchased jointly "en indivision". This means that each person owns a share (e.g. in the case of husband and wife, they each own one half), but cannot sell it without the permission of the other person, except with a court order.
If no special steps are taken, then upon the death of one spouse, other family members will automatically inherit a portion. This is true even if the deceased spouse had a will specifying that the surviving spouse should inherit everything (for explanation, see Inheritance Law). The surviving spouse cannot sell the property without the permission of the family members who have inherited (unless a court order is obtained). If one of the family members is an under-age child, then the child may not be legally able to give permission, in which case a court order would need to be obtained on the child's behalf (more time and cost).
To make matters worse, the family members who are inheriting (including the spouse) will be liable to inheritance tax on the property and other assets (including potentially worldwide assets). In the worst case, it would be necessary to sell the property or other assets in order to pay for the property (which may in fact be the family home).
Fortunately, there are two broad mechanisms to avoid this issue. One is to use a form of purchase more suitable (see section Inheritance Law) than 'en indivision' and the other is to use a suitable marriage contract (see below).
Martial Regime: Communauté Universelle
In the marital regime “Communauté universelle avec attribution de la communauté conjoint au survivant”, all assets of the two spouses (with possible exception of some personal items) are considered to be jointly held. In this case, the surviving spouse would not need to pay inheritance tax on the assets as he/she is deemed to have already jointly owned them. Furthermore, as the surviving spouse already owns the assets (although jointly), the problem of Reserve Legale is avoided.
As the assets are jointly owned, in the event of divorce they must be legally divided (either my mutual agreement or by the courts). If, in the case of divorce, one wants to protect personal assets or assets brought into the marriage, another regime may be more appropriate.
If one has remarried and there are children from a previous marriage, one should be aware that in this case the children from the previous marriage would still have a Reserve Legale.
Martial Regime: PACS
Technically, PACS is not a form of marriage. It is a legal recognition of a couple in a stable relationship, which provides much the same recognition and rights as a marriage. The partners are taxed as a family unit, can take advantage of each other social security benefits and are treated as a family unit from the purpose of employment rights (e.g. time off for family matters). PACS is available both to people of different sexes and people of the same sex.
However, although the general intent of PACS is to provide the same rights as a married couple, in fact there are a number of differences. For example, they are not taxed as a family unit until three years after they signed the PACS contract. Also, inheritance tax allowances do not exactly match those available to those allowed to the surviving spouse of a traditional marriage. Likewise, PACS does not meet the criteria for adoption that the couple be married.
Despite these and other limitations, many couples (in particular, homosexual couples) have chosen to sign a PACS contract. Meanwhile, there is considerable discussion on modifying PACS to bring its rights and duties more in line with those provided by marriage.
Martial Regime: Others
Following are two other standard types of marital regimes:
- Communauté de biens réduite aux acquêts. Assets acquired before marriage are separately owned, assets acquired during the marriage are jointly owned.
- Séparation de biens. All assets are individually owned, including both assets obtained before the marriage and assets obtained during the marriage.
In addition to the standard marital regimes, one can modify any marital regime in almost any way one wants. Advice on this subject can be obtained from various sources, including French notaires.