Two Estate Tax Systems, One Estate
France imposes droits de succession on assets transferred at death. The United States imposes an estate tax on the worldwide assets of every US citizen, regardless of residence. A US citizen living in France with assets in both countries is subject to both systems simultaneously.
The interaction of the two systems is governed by the 1978 US–France Convention with Respect to Taxes on Estates, Inheritances and Gifts. This is a separate treaty from the 1994 US–France income tax treaty. The income tax treaty does not cover estate or gift taxes. Articles citing the 1994 treaty in the context of inheritance planning are citing the wrong document.
The result for a US citizen dying in France with French and US assets: two overlapping tax systems, each with its own computation, each allowing a credit for the other. The credit mechanism reduces but does not always eliminate double taxation.
French Droits de Succession: How the Tax Works
Structure
French inheritance tax is levied at the heir level, not the estate level. Each heir pays droits de succession on the net value of their personal share, after deducting the heir’s individual abatement. There is no entity-level estate tax in France.
A notaire (French civil-law notary) is legally required to administer most successions involving real property or estates above a de minimis threshold. The notaire prepares the estate declaration (déclaration de succession), computes the droits de succession owed by each heir, and files with the DGFiP.
What Assets Are Taxed
French-resident decedent: All worldwide assets are subject to French droits de succession. The French tax base is global for residents.
Non-resident decedent with French assets: Under domestic law, only French-situs assets (real property in France, French securities, French bank accounts) are subject to droits de succession.
Non-resident decedent with a French-resident heir: Article 750 ter of the CGI extends French droits de succession to the heir’s share based on the heir’s own residence, not the location of assets. When a beneficiary has been a French tax resident for at least 6 of the 10 years preceding the succession, French droits de succession applies to their inherited share even if the decedent was not a French resident and the assets are not located in France. This rule catches US-parent-to-French-resident-child transfers that would otherwise fall outside French taxation.
Abatements per Heir
Each heir applies their personal abatement before the rate schedule applies. Statutory basis: CGI Art. 779.
| Relationship to Decedent | Abatement |
|---|---|
| Child (per parent, per child) | €100,000 |
| Spouse or PACS partner | Fully exempt (CGI Art. 796-0 bis) |
| Sibling | €15,932 |
| Niece or nephew | €7,967 |
| Grandchild (standard) | €1,594 |
| Grandchild (inheriting by representation) | €31,865 |
| Handicapped heir (any relationship) | €159,325 additional, stackable |
| All other heirs | €1,594 |
Spouse and PACS partner: The full exemption from droits de succession applies to legally married spouses and PACS-registered partners. Unmarried partners without a PACS (concubins) receive only the €1,594 general abatement and are taxed at the 60% non-relative rate. The PACS is a critical legal structure for unmarried couples in France.
Tax Rate Schedules (After Abatement)
Direct Line (Parents, Children, Grandchildren)
Applies to transmissions between parents and children, grandparents and grandchildren, and children and parents. Statutory basis: CGI Art. 777.
| Taxable Amount After Abatement | Rate |
|---|---|
| Up to €8,072 | 5% |
| €8,073 to €12,109 | 10% |
| €12,110 to €15,932 | 15% |
| €15,933 to €552,324 | 20% |
| €552,325 to €902,838 | 30% |
| €902,839 to €1,805,677 | 40% |
| Above €1,805,677 | 45% |
Siblings, Other Relatives, and Non-Relatives
| Category | Rate |
|---|---|
| Siblings: up to €24,430 after €15,932 abatement | 35% |
| Siblings: above €24,430 | 45% |
| Other relatives to the 4th degree (uncles, aunts, cousins) | 55% |
| Non-relatives and concubins | 60% |
The combination of the €1,594 abatement and 60% rate makes non-family bequests exceptionally costly. This tax structure is the primary driver of assurance-vie use as a succession planning tool in France.
Forced Heirship (Réserve Héréditaire)
French law reserves a mandatory minimum portion of the estate for the decedent’s children. This reserved portion (réserve héréditaire) cannot be overridden by will or gift. Only the balance (quotité disponible) is freely disposable.
| Number of Children | Reserved Portion | Freely Disposable |
|---|---|---|
| 1 child | 1/2 of the estate | 1/2 |
| 2 children | 2/3 of the estate | 1/3 |
| 3 or more children | 3/4 of the estate | 1/4 |
Statutory basis: Code civil Art. 912–930.
Brussels IV and Its Limits
Under EU Succession Regulation No. 650/2012 (Brussels IV), a US citizen residing in France may elect US law to govern the distribution of their estate. This election can be made in a will or separate declaration.
However, French courts treat the réserve héréditaire as an overriding mandatory provision (disposition impérative). For French-situs assets, and potentially beyond, French courts may apply the réserve regardless of the law the testator has elected. A US citizen cannot reliably use Brussels IV to disinherit children under French forced heirship rules when French assets are involved. The legal position continues to evolve through French case law, and any estate plan involving potential réserve conflicts requires specialist review.
US Estate Tax for Americans in France
Worldwide Scope
US estate tax under IRC §2001 applies to the worldwide gross estate of every US citizen at death. A US citizen who has lived in France for decades and whose assets consist primarily of French real estate and French financial accounts remains fully subject to US estate tax on the entire estate.
Unified Credit
The unified credit shelters $13,990,000 per person from US estate tax in 2025, rising to $15,000,000 in 2026. The One Big Beautiful Bill (OBBB) enacted in 2025 made the elevated Tax Cuts and Jobs Act exemption level permanent; the exemption is indexed for inflation annually under Revenue Procedure 2025-32.
Portability: A surviving spouse may elect to use the deceased spouse’s unused exemption (DSUE) by timely filing Form 706. This election is available even when no estate tax is owed on the first death. IRS anti-clawback regulations (final Reg. §20.2010-1(c)) protect amounts sheltered under the exemption in effect at the date of the first death.
Foreign Tax Credit on Form 706
The US estate tax return (Form 706) allows a credit for foreign death taxes paid on assets also included in the US gross estate. This credit, available under IRC §2014, reduces US estate tax dollar-for-dollar for French droits de succession paid on the same assets. The credit is limited to the lesser of the foreign death tax paid and the US estate tax attributable to those same assets.
Where the French droits de succession rate on an asset exceeds the US marginal estate tax rate on that same asset (which is common for non-direct-line heirs), the excess French tax is not refundable or creditable for US purposes.
The 1978 US–France Estate and Gift Tax Treaty
The 1978 Convention between the United States and France with respect to Taxes on Estates, Inheritances and Gifts (as amended by protocols in 1984 and 2009) is the operative instrument for avoiding double taxation of cross-border estates. It is entirely separate from the 1994 income tax treaty.
Credit Mechanism
The treaty requires each country to allow a credit for the other country’s estate or gift tax on assets subject to both taxes:
- US (domiciliary state for US citizens): Must allow a credit for French droits de succession paid on French-situs assets, up to the US estate tax attributable to those assets.
- France (situs state for French assets): Must allow a credit for US estate tax paid on French-situs assets, up to the French droits de succession attributable to those assets.
Practical result: A US citizen dying in France with French real estate pays French droits de succession on that property. The US estate tax on the same property is reduced by a credit for the French tax paid. If the French tax equals or exceeds the US estate tax on that property, no residual US estate tax applies to those assets. Residual US estate tax may remain on assets held entirely in the US or in other non-French jurisdictions.
Saving Clause
The treaty preserves the US right to tax the worldwide estate of its citizens. The saving clause means the treaty does not eliminate US estate tax for US citizens. It allocates taxing rights and provides credits; it does not exempt US citizens from the US estate tax obligation.
Situs Rules
The treaty allocates situs of assets for purposes of determining which country is the situs state:
| Asset Type | Situs |
|---|---|
| Real property | Country where located |
| Business assets of a permanent establishment | Country of the permanent establishment |
| Portfolio securities | Domiciliary state of the issuer (generally) |
| Debts | Domicile of debtor |
Form 3520: Reporting a French Inheritance
Who Must Report
A US person who receives a bequest or inheritance from a foreign person (including a French decedent who is not a US person) exceeding $100,000 in aggregate within a calendar year must file Form 3520, Part IV with the IRS. The threshold is cumulative across multiple transfers from the same foreign person (and related foreign persons) within the calendar year.
This is an information report only. Foreign inheritances are excluded from US gross income under IRC §102. Filing Form 3520 does not create a US income tax liability on the inheritance itself.
Penalties for Non-Filing
Failure to file a required Form 3520 is subject to a penalty of 5% of the unreported amount per month, to a maximum of 25%. On a €500,000 inheritance (approximately $550,000), this is a maximum penalty exceeding $130,000. The IRS actively pursues these penalties. The penalty is imposed on the amount received, not the tax owed.
Due Date
Form 3520 is filed with the individual’s Form 1040, due April 15 (or June 15 for those living and working abroad), with extension to October 15 available via Form 4868.
Assurance-Vie as a Succession Planning Tool
Assurance-vie is France’s primary succession planning vehicle precisely because the death benefit is paid to designated beneficiaries outside the estate (hors succession). The death benefit does not pass through the notaire process and is not subject to droits de succession under the standard rate schedules.
French succession tax treatment for designated beneficiaries:
- Premiums paid before the policyholder’s 70th birthday: each beneficiary receives up to €152,500 of death benefit free of French succession tax. Amounts above €152,500 per beneficiary are subject to a flat levy of 20% (up to €700,000 per beneficiary above the threshold) and 31.25% above that.
- Premiums paid after the policyholder’s 70th birthday: only €30,500 of post-70 premiums (across all policies combined) is exempt; the balance is subject to droits de succession at normal rates. Gains on post-70 premiums are fully exempt from succession tax.
US estate tax treatment: For US citizens, assurance-vie is included in the gross estate under IRC §2042 where the policyholder holds incidents of ownership in the policy. The favorable French treatment reduces French succession tax but does not reduce US estate tax inclusion. The treaty credit mechanism applies to any French succession tax paid on the assurance-vie death benefit, but the full US estate tax inclusion of the policy value remains.
PFIC consideration: Assurance-vie contracts holding foreign mutual funds or similar investment vehicles may contain PFIC investments, creating ongoing US reporting obligations independent of the succession context. See the article on investment structuring for full treatment.
The 15-Year Gift Strategy
French gift tax uses the same rate schedules and abatements as succession tax. The abatements reset after 15 years under CGI Art. 784. A parent can give each child up to €100,000 gift-tax-free today; after 15 years, the full €100,000 abatement is available again. This recharging mechanism is the primary French estate planning tool for direct-line transmissions.
Gifts made more than 15 years before death do not reduce the heir’s succession abatement. A parent who gives €100,000 to a child today and survives more than 15 years preserves the child’s full €100,000 inheritance abatement at the parent’s death.
US gift tax rules apply independently for US citizens. Lifetime gifts are subject to US gift tax reporting and apply against the unified credit. The French gift tax and the US gift tax on the same transfer are coordinated through the 1978 estate and gift treaty, not the 1994 income tax treaty.
Compliance Summary
| Obligation | Form | Who Files | When |
|---|---|---|---|
| Report French succession (for US-citizen decedent) | Form 706 | Executor or administrator | 9 months after death (extensions available) |
| Report foreign inheritance over $100,000 | Form 3520 Part IV | US heir | With Form 1040 for the year of receipt |
| French succession declaration | Déclaration de succession | Notaire on behalf of heirs | Within 6 months of death (12 months if death outside France) |
| Claim French death tax credit | Form 706, Schedule P | Executor or administrator | With Form 706 |
Frequently Asked Questions
Do I owe US income tax on a French inheritance?
No. Foreign inheritances received by US persons are excluded from gross income under IRC §102. A US person who inherits from a French decedent owes no US income tax on the amount inherited. Form 3520 is required for informational purposes if the aggregate received exceeds $100,000, but that report does not create tax liability.
Do both the US estate tax and French droits de succession apply to the same assets?
Yes, potentially. A US citizen who dies owning French real estate is subject to French droits de succession on those assets (France is the situs state) and to US estate tax on those same assets (the US taxes its citizens’ worldwide estates). The 1978 treaty credit mechanism reduces double taxation: the US allows a credit for French droits de succession paid on French-situs assets, reducing or eliminating US estate tax on those specific assets.
Does the US–France income tax treaty help with estate planning?
No. The 1994 US–France income tax treaty explicitly excludes estate and gift taxes from its scope. The applicable treaty for estate and inheritance tax relief is the 1978 Convention with respect to Taxes on Estates, Inheritances and Gifts, as amended by protocols in 1984 and 2009.
Can I use a will to leave my estate entirely to my partner instead of my children?
Only up to the quotité disponible. French forced heirship law (réserve héréditaire) reserves a mandatory share for children: one-half if there is one child, two-thirds for two children, and three-quarters for three or more children. The balance is freely disposable. A Brussels IV election may allow US law to govern testamentary distribution, but French courts may still enforce the réserve as an overriding mandatory provision, particularly for French-situs assets.
Does assurance-vie reduce US estate tax?
No. The French succession tax treatment of assurance-vie (exemption up to €152,500 per designated beneficiary on pre-70 premiums) reduces French droits de succession on the death benefit. For US estate tax purposes, assurance-vie death benefits are included in the gross estate under IRC §2042 where the decedent held incidents of ownership. The US estate tax obligation is separate from the French succession tax.
What happens if I do not file Form 3520 after inheriting from a French parent?
Failure to file Form 3520 subjects the US heir to a penalty of 5% of the unreported amount per month, to a maximum of 25% of the total amount received. This penalty applies regardless of whether any US income tax is owed on the inheritance. The IRS may assert the penalty even when the taxpayer is unaware of the filing requirement.
Technical References
French droits de succession are governed by CGI Art. 777 (rate schedules), CGI Art. 779 (abatements), CGI Art. 784 (15-year gift recap rule), CGI Art. 750 ter (French-resident-heir nexus rule), CGI Art. 796-0 bis (spousal exemption), and CGI Art. 990 I (assurance-vie succession tax treatment). Forced heirship is governed by Code civil Art. 912–930. EU Succession Regulation No. 650/2012 provides the Brussels IV nationality election framework.
US estate tax is governed by IRC §§2001 and 2010 (imposition and unified credit), IRC §2014 (foreign death tax credit), IRC §102 (exclusion of inheritances from gross income), and IRC §2042 (life insurance inclusion). The Form 706 estate tax return and the Form 3520 information report implement these rules.
The 1978 US–France Convention with Respect to Taxes on Estates, Inheritances and Gifts (as amended by protocols in 1984 and 2009) provides the bilateral credit mechanism. The 2009 Protocol added arbitration procedures to the treaty. Treaty text and technical explanations are available through the IRS France treaty documents page.
Estates of any size involving French and US assets, a réserve héréditaire conflict, a surviving non-PACS partner, or a US estate tax exemption question should be reviewed by a cross-border estate planning specialist before the decedent’s death. Post-death options for restructuring are limited.