This article is part of what I think of as the “things people usually get wrong” series. And if you’ve read past the headline, maybe you are also confused about this. The fact is that there is a big difference between succession and inheritance tax. Let me explain.

Anytime someone dies, there is a set of laws to help the courts and everyone else figure out who should get the dead person’s stuff. In the U.S., every state has it’s own set of trust and estate laws, though they usually come out about the same. And other countries, including France, also have a set of estate laws. These laws generally tell you what makes a will legitimate, what stuff you are allowed to pass down, who gets the stuff if no one can find your will, and whether you’re allowed to leave everything to your cat.

Great.

There is an entirely different set of laws around how and when and who pays taxes when someone dies and the stuff gets passed down. These are the laws we lawyers and financial advisors actually spend a lot of time thinking about. We call it succession or estate planning, but most of it is about trying to lower taxes on the transfer of your wealth after you’ve died.

Over the past few years, we’ve all seen a fair amount of discussion amongst ex-pats in France about the right to opt for your home country’s estate laws in place of the French ones your estate would otherwise be subject to. I cover it a bit in this post about the difference between French and U.S. gift and estate laws.

 The right to opt for U.S. succession laws does exist. It’s part of an EU Succession Regulation from 2015 known as “Brussels IV.” Theoretically, it should mean that you can avoid France’s so-called “forced heirship” laws. This right has been somewhat in doubt because France has not read the law that way (probably incorrectly), but most French legal experts seem to think that will be corrected. As I was saying…

The problem with opting for U.S. succession law is that it probably doesn’t solve the problem you had in mind. France has laws to keep you from totally disinheriting your children and spouse. And if that is what you were hoping to do with the election, a U.S. succession law election is a good idea. If on the other hand, you were trying to cut down on estate taxes when your kids inherit, you should probably know that the succession laws have nothing to do with the that.

What?

Yes, you read that correctly. You might be able to use your U.S. nationality to disinherit the child who forgot your birthday. But none of this will have any effect on the taxes. For that, you need to go back to the tax laws and the tax treaty. And if you are a resident of France when you pass away, your heirs will be paying under the French tax system. Ready for another link to the French estate tax article?

As always, let us know about any questions you have or issues that you find confusing.