France has one of the most complex and demanding inheritance tax systems in Europe. For British nationals who move there, the succession picture involves two tax systems operating simultaneously and independently: French succession tax on French-sited assets (and, in some cases, worldwide assets), and UK inheritance tax at 40% on the worldwide estate of those who remain UK-domiciled. Understanding where each system applies, where they overlap, and how a portfolio bond addresses both is essential before assuming that either country’s rules can be managed in isolation.
French Succession Tax: the Rates Matter
France levies inheritance tax based on the relationship between the deceased and the beneficiary, applied to the net value of assets received. Confirmed by PwC’s Worldwide Tax Summaries (last reviewed 5 June 2025), the position is as follows. Transfers between spouses and PACS partners are fully exempt from French succession tax. For direct-line descendants (children and grandchildren), an allowance of €100,000 per child applies, and progressive rates then run from 5% on the first €8,072 above the allowance to 45% on amounts above €1,805,677. These are significant rates on any meaningful estate.
For beneficiaries who are not close family (a partner who is neither a spouse nor a PACS partner, a stepchild without formal adoption, a close friend, a godchild, a sibling outside the specific exemption), the rate is 60% above a minimal allowance of €1,594 per beneficiary. This is not a marginal charge: on a €500,000 legacy to a non-family beneficiary, the French succession tax bill is approximately €299,000. For British expats whose estates include assets they intend to leave to non-family members, the French succession tax position is one of the most important planning considerations in this entire series.
The territorial reach of French succession tax is also broader than many expect. If the deceased was a French tax resident at death, French succession tax applies to their worldwide assets, not just French-sited property. If the deceased was not French resident, French succession tax still applies to all assets with a French situs: French real estate, shares in French companies, French bank accounts, and French-listed securities. There is a further provision: if the beneficiary has been a French tax resident for at least six of the ten years preceding the inheritance, French succession tax applies to the worldwide assets of the non-resident deceased. British expats in France who have been resident for more than six years and whose parents or other potential testators remain UK-based need to be aware that their French residency can bring worldwide non-French assets into the French succession tax net on the death of a foreign donor.
Brussels IV: A Partial Advantage
France is an EU member state and applies the EU Succession Regulation (Brussels IV). British nationals resident in France can elect for UK succession law to govern the distribution of their estate, overriding French forced heirship provisions that would otherwise require a fixed share to pass to children regardless of the will’s instructions. For British expats whose estates include children from prior relationships, or who wish to leave assets in ways that French forced heirship would prevent, this election is a valuable and specific advantage over non-EU destinations such as the UAE or Singapore.
However, it is important to be precise about what Brussels IV does and does not achieve. The election governs succession law: who inherits what, in what proportions. It does not govern French succession tax. A British national in France who elects UK succession law and leaves their entire estate to a non-family beneficiary has resolved the distribution question under English law, but the French succession tax on the French-sited portion of that estate at 60% still applies. The legal framework and the tax framework operate on separate tracks.
UK Inheritance Tax Does Not Stop at the Channel
For UK-domiciled British nationals in France, HMRC’s 40% inheritance tax on worldwide assets above the nil-rate band of £325,000 runs in parallel with the French succession tax charge. Domicile is not determined by French residency: HMRC’s concept of domicile tracks a person’s intended permanent home, and most British nationals in France retain their UK domicile of origin unless they have formed a genuine and settled intention to remain in France permanently and can demonstrate it convincingly.
The UK-France double tax treaty includes a limited provision on estate taxes that can provide some relief where both systems apply to the same assets, but it does not eliminate the UK IHT charge: it allocates taxing rights on specific categories of assets and provides a credit mechanism that often does not fully neutralise the combined exposure. A British national in France with a worldwide estate of £2 million (comprising a French house, a UK investment portfolio, and offshore assets) faces French succession tax on the French property and potentially the worldwide estate (depending on residency duration), and UK IHT at 40% on the entire worldwide estate above £325,000 with only partial treaty relief. The two charges are not simply additive, but neither are they self-cancelling.
From April 2025, the UK introduced a residency-based reform to IHT: once you have been non-UK resident for ten consecutive tax years, your non-UK assets begin to phase out of the UK IHT net. For British expats who have been in France long enough and have consistently passed the HMRC Statutory Residence Test as non-UK resident, this creates a meaningful planning horizon. But for those in the first decade of French residency, UK IHT on worldwide assets remains fully in scope.
Article 990I: How Life Insurance Changes the Succession Calculation
French law treats life insurance policies (including properly structured offshore portfolio bonds) outside the standard succession tax framework. Under Article 990I of the Code Général des Impôts, the death benefit paid by a life insurance policy to a named beneficiary is not subject to standard French succession tax. Instead, a specific and more favourable levy applies: the first €152,500 of death benefit received by each named beneficiary is entirely exempt. Above that threshold, a levy of 20% applies on amounts up to €700,000 per beneficiary, and 31.25% on amounts above that level.
The contrast with the standard French succession tax rates is striking. A non-family beneficiary receiving €500,000 from an estate subject to normal succession rules faces a 60% charge, approximately €299,000 in tax. The same €500,000 received as a named beneficiary of a portfolio bond under Article 990I faces zero tax on the first €152,500 and 20% on the remaining €347,500, a total levy of approximately €69,500. The saving is not marginal.
For direct-line family beneficiaries, the arithmetic is different but the Article 990I treatment can still be advantageous, particularly where multiple beneficiaries each receive their €152,500 exemption. A British couple in France with two children naming each child as a beneficiary of their respective policies can shelter up to €305,000 per policy outside the succession tax net entirely. Note that different rules apply under Article 757B for premiums paid after the policyholder reaches age 70: those premiums enter the standard succession tax framework rather than Article 990I, so the timing of policy establishment relative to the policyholder’s age is a relevant planning consideration.
Bypassing French Probate and Addressing UK IHT
A portfolio bond achieves two further succession objectives that complement the Article 990I benefit. First, as a life assurance contract, the policy proceeds are paid directly by the insurer to the named beneficiaries without passing through the estate and without requiring a French grant of probate. French succession administration (even with a valid will) takes time and involves legal costs and formalities. The policy value is available to beneficiaries promptly, providing liquidity at exactly the moment when estates are otherwise frozen.
Second, for the UK IHT dimension, appropriate trust structuring around the policy can in many circumstances remove the policy value from the UK taxable estate. A portfolio bond held directly by a UK-domiciled policyholder forms part of their UK estate for HMRC’s purposes. Where the policy is written in trust (an offshore trust arrangement that holds the policy outside the policyholder’s estate), the death benefit can fall outside the 40% UK IHT charge. This is long-established planning that requires correct legal structuring from the outset: the trust instrument, the reservation of benefit rules, and the relationship between the trust and the policy need careful specialist attention. Providers such as RL360, Hansard, Friends Provident International (FPI), and Utmost International all write Isle of Man or Guernsey-based policies with trust options designed for this purpose.
The combination of a portfolio bond held in an appropriately structured trust, with named beneficiaries, can therefore address the French Article 990I succession tax advantage, bypass French probate for the policy value, and position the death benefit outside the UK taxable estate simultaneously. It is not a one-size-fits-all solution, and it requires specialist legal and tax advice in both the French and UK contexts. But for British expats in France whose estates exceed the nil-rate band and who have non-family beneficiaries or complex family structures, it is one of the most effective available frameworks.
If you are a British national in France who has not reviewed your succession position, particularly the interaction between French and UK inheritance tax on your worldwide estate, it is worth doing so before your circumstances change. The structure that addresses both systems most cleanly requires time and proper advice to implement correctly. Request a free consultation here