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Usufruct of French property and GWR rules

Parents buy French usufruct, daughter buys freehold funded by cash gift from parents. Is gift a GWR?

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Family [all UK resident and domiciled]purchase a French holiday home as follows:-

Parents buy usufruct[broadly a life tenancy] of French property and daughter buys Freehold reversion funded by cash gift from parents. Parents will buy usufruct at full market value so IHTA s43(3) should not make arrangement a settlement for IHT.

Likelihood is that parents daughter and grandchildren will all occupy each year.

Is Gift to daughter a GWR?

As a separate question, does Hague Convention- parents' Wills will specifically include any overseas properties - override French Forced heirship rule ?

 

 

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By Tax Dragon
13th Sep 2021 14:25

Montrose wrote:

As a separate question, does Hague Convention- parents' Wills will specifically include any overseas properties - override French Forced heirship rule ?

Are you seriously asking members of a UK accounting forum for French legal advice? (But, FWIW, I don't understand the relevance of the question - unless France is weird [which it may be], the usufruct will expire with the parents.)

Montrose wrote:

Is Gift to daughter a GWR?

Luckily for you, cfield has taught me how to answer this question**. Let's assume that the logic behind the Anna/Bill example in IHTM14372 applies to your situation*. Then there may be a GWR as per s102A.

* This logic/the conclusion seems to me a bit airy fairy, but I am not aware that it has been refuted in court. Maybe yours can be the test case?
** Possibly not as well as he'd hoped.

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Replying to Tax Dragon:
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By David Ex
13th Sep 2021 20:23

Tax Dragon wrote:

Let’s assume that the logic behind the Anna/Bill example in IHTM14372 applies to your situation*. Then there may be a GWR as per s102A.

That says “Anna gives £100,000 cash to Bill which Bill uses to purchase Anna’s residence (worth £100,000). Anna remains in occupation until her death.

This may be a GWR of the residence.”

There’s presumably an argument (if, like me, you have no IHT expertise) that, in the OP’s case, the donor has zero benefit from the reversion.

As I said earlier, the structuring must be deliberate so it would be interesting to hear the thinking behind it.

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Replying to David Ex:
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By Tax Dragon
14th Sep 2021 00:26

I think s102A-C do away with any 'interests' arguments (such as that the donor has zero benefit from the reversion).

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Replying to Tax Dragon:
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By More unearned luck
13th Sep 2021 21:26

Try changing the facts slightly, eg:

Anna has an estate of £200k all cash. She buys a house for £100K, moves in and then gives the house to Bill but continues to reside in the house. Or

Anna has £100K cash and lives in a house valued at £100K She gives the cash to Bill who buys the house from Anna (perhaps this is what HMRC mean by 'remains' and so this case is just HMRC's example restated slightly?).

GWR undoubtedly applies in these two cases. Anna is living in a house owned by Bill which he was either gifted or bought with money given to him by Anna and Anna has £100k of savings.

If the Courts and tribunals didn't agree with HMRC then anyone with savings equal to or greater than the MV of their home could avoid a GWR by doing what Anna did. There would be a cost in SDLT and the loss of an uplift of the base cost on death, but these will presumably be outweighed by the IHT saved..

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Replying to More unearned luck:
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By Tax Dragon
14th Sep 2021 00:32

By 'logic' I meant legislative logic.

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By David Ex
13th Sep 2021 14:34

I’m guessing the acquisitions of the usufruct and reversion at around the same time might have been planned to achieve some objective.

If that’s correct, and not just some huge coincidence, who suggested the planning and what was the intended benefit?

Might - or might not - shed some light?

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Caroline
By accountantccole
13th Sep 2021 14:46

If you do Facebook - Strictly Legal France may be a good place to ask. English speaking with French experts
Lots of guides and fact sheets on there - esp re wills and rights of non residents. UK less protected now since brexit

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