While settling the estate, gifts made by the deceased will be taken into account in two situations:
- Where there exists at least two heirs and one of them has received a gift; and
- Where the deceased leaves at least one mandatory heir (‘héritier réservataire’).
The reporting of donations (le “rapport des donations”)
The donations made to an heir are returned to the succession in the presence of other heirs in order to ensure equality between successors.
This donation is considered as an advance on the future asset. A reduction of donation to the succession will then be operated in which the given value of the donation is added to the assets left by the deceased to determine the share of each heir in the succession.
All heirs are held to this reduction, except if the donation is otherwise drafted (article 843 of the French civil code) or if the latter renounces to the succession.
Universal legatees (“légataires universels”) and residuary legatees (“légataires à titre universel”) are not held to the reduction of bequests. This also applies to heirs that have renounced to the succession, except if the donation holds them to the reduction (article 845 of the French civil code) or if the heir is excluded from the succession due to an heir of highest order.
All the forms of donations are concerned by this reduction whether they are manual, indirect, disguised or notarial donations. They are then qualified of donations in advance of the succession share or reportable donation (“donation rapportable”).
However, all the given assets of a joint donation (“donation-partage”) are excluded from this reduction. The beneficiary and the donor can also foresee a relief of reduction for the donation (article 843 of the French civil code).
All maintenance, food, education, and learning costs do not apply to the reduction as well as gifts (“présents d’usage”) and sales in the profit of children operated with reservation of usufruct or purchase of life annuity (“moyennant une rente viagère”).
The donor can foresee the way the report will be valued. If the latter chooses not to, the value of the assets will be reintegrated to the mass of assets to be shared at the date of the distribution of the estate, according to their state at the time of the donation (article 860 paragraph 1 of the French civil code). This valuation will apply notwithstanding the value of the asset on which works have been carried out. However, all added value or capital loss due to exterior factors will be taken into account.
The value also depends on the type of assets that are subject to the donation:
- For donations of the bare-ownership of the assets: the reduction concerns the value of the full ownership;
- For the donation of a sum of money: the reduction concerns the given amount;
- For the donation of a sold or given asset: the reduction concerns the value of the asset on the day of the sale or the donation.
In order to settle the report, the beneficiary generally keeps the given asset and the reduction is made in value (article 858 of the French civil code). It is possible to settle it in nature if it is foreseen in the act of donation, or if the beneficiary wishes it, provided it being free of charge or occupation.
In the event where the reduction is inferior to the heir’s share in the distribution of the estate, the latter will take less in the succession. To the contrary, when the reduction of the donation exceeds the share to be received by the heir, the latter owes compensation to the other heirs for the reduction.
Donations and rightful heirs: the reduction of donations
The reduction of donations is a mechanism aiming to preserve equality between joint heirs. Another mechanism is aimed at protecting certain heirs: the reserved portion (“reserve héréditaire”). Indeed, the children and the surviving spouse cannot be completely disinherited. The reserved portion ensures this objective by necessarily allocating a share of the succession to its beneficiaries. For this reason, all donations consented to the deceased inter vivos are returned to the succession in order to ensure that they do not infringe on the share of compulsory heirs (“héritiers réservataires”). In case of infringement, an action in reduction of donations can be carried out.
The reserved portion takes account of the totality of assets left at the death of the deceased, except for the debts of the deceased and those linked to his death. It is necessary to add the donations to this reserved portion in order to calculate the share that is to be received by compulsory heirs in compliance with the regulation in place.
The valuation of the donation is made according to their state at the moment of the death and their value at the opening of the succession (article 922 of the French civil code).
Therefore, the donation will be reduced if the value of donations at the day of the death exceeds the available portion and prevents the compulsory heirs from obtaining their reserved portion. If the value of the donations is inferior or equal to the available portion, the donation will not be reduced.
The reduction is exercised at the request of compulsory heirs. The action in reduction of donations is limited to five years starting from the opening of the succession or two years starting from the day where the inheritors were aware of the breach carried out on their reserved portion (article 921 of the French civil code).
The reduction is settled in value, the beneficiary of the donation keeps the asset however compensates the heirs (article 924 of the French civil code). It is to be paid at the moment of the distribution except if it is otherwise decided by the joint heirs.
It is possible to settle the reduction in nature if the asset is free of any charge or occupation (article 924-1 of the French civil code).
The compulsory heirs can however choose to waive the reduction.
Maître Frédéric Michel – Fairfield Law firm | Lawyer in Cannes