What is a declaration of inheritance?
When inheriting, one of the formalities to be completed is the drawing up of a declaration of inheritance. The equivalent term in English when winding up a succession is an Estate Duty Return.
This declaration must be sent to the tax authorities in order to determine the duties (Inheritance Tax / IHT) to be paid by each of the deceased’s heirs. Even if there is a tax exemption, an inheritance declaration must be filed.
What are the formalities to be completed?
The forms relating to the declaration of inheritance are forms 2705-SD and 2705 S-SD, as well as form 2705 A-SD if there are one or more life insurance contracts.
The declaration must be filed with the registration department of the Public Finance Centre of the deceased’s domicile, with the non-resident tax department if the deceased was not domiciled in France, or with the departmental registration department in Nice if he was a resident of Monaco.
Who is subject to this declaration?
If there are several heirs, the declaration may be made by only one of them. The legatees are, in principle, obliged to submit a declaration in their own name (unless an agreement specifies otherwise).
The obligation depends, on the one hand, on the relationship with the deceased and, on the other hand, on the amount of the estate.
There are indeed cases of exemption for which the filing of a declaration is not compulsory, namely:
- When the gross estate assets are less than 50,000 euros and the estate bequeath to the heirs in the direct line, the surviving spouse or the civil union partner, and in the absence of a previous donation.
- When the gross estate assets are less than 3,000 euros for estates accruing to other individuals (collaterals, third parties).
Reference is always made to the gross estate assets.
Thus, the value of all the assets and rights will be taken into account for the valuation, including those subjects to a legacy. Similarly, a legatee who submits a declaration in the presence of other successors must also refer to the gross estate assets, and not only to the amount of the legacy from which he benefits.
Which assets are concerned?
In principle, all the assets and rights making up the estate must be included in the declaration. However, some assets benefit from a special regime, exempting them from this obligation. This will be the case in particular for:
- Assets received by the surviving spouse under an advantageous matrimonial regime (universal community with full attribution or marriage contract including, for example, deduction or preciput clauses / gifts in advance).
- The capital of a life insurance contract whose payments were made before the subscriber’s 70th birthday.
Note that the principal residence of the deceased benefits from a 20% allowance when it is occupied by the spouse, the civil union partner or the descendants.
What does the declaration include?
The declaration must mention the various elements used to establish the calculation of the IHT, namely:
- Information regarding the identity of the deceased and his or her beneficiaries
- Any testamentary provisions, gift declarations and the provisions of the marriage contract or civil partnership agreement
- The date and place of birth of the usufructuary in the case of a split inheritance / life interest
- The jewelry, gems, works of art or collectors’ items covered by an insurance policy on the day of death, as well as the date of the policy and the identity of the insurer
- An itemized list and detailed estimate of the assets (Probate values for brick and mortal, chattels, etc)
- An affirmation of sincerity signed by the declarant (except for the specific legatee)
What about deadlines?
Under Article 641 of the CGI (the French Tax Code – Code Général des Impôts), the heirs have in principle six months from the date of death to file the declaration of inheritance with the tax authorities; this period is extended to one year in the event of death outside mainland France.
There are special deadlines applicable to certain specific situations, particularly in the event of a dispute over the devolution of the estate. In such cases, a distinction must be made between heirs and legatees:
- No postponement of the starting point of the six-month period may be granted to intestate heirs (in this sense, cass.com. 20-5-2008 n° 07-13.648 F-D).
- However, the starting point of the time limit will be postponed to the date on which the decision establishing the rights of the legatee (not an intestate heir) has become final (in this sense, Cass. Com. 1-4-1997 n° 95-13.181 D: RJF 7/97 n° 753).
In the event of non-compliance with these deadlines, the second paragraph of Article 1728 of the CGI provides for several penalties:
- A 10% penalty from the 7th month following the expiry of the six-month period
- An increase of 40% if the tax authorities send a formal notice and the declaration is not filed within 90 days
The taxable basis for the calculation of these penalties is the amount of the IHT that should have been declared and paid.
Pursuant to Article 1727 of the CGI, late payment interest at the rate of 0.20% per month is also incurred in the event of failure to comply with the deadlines.
This is deducted from the first day of the month following the month in which the return should have been filed until the last day of the month in which the return was actually filed.
If no duty is due, the rightful claimants are liable to a fine of EUR 150.
In the event of delay resulting from the negligence of the notary, the debtors of the above-mentioned penalties remain the heirs and legatees of the deceased.