Legal: Divorce - the division of assets in France

International living is no longer just for the rich and famous. Increased employment mobility and the popularity of buying a French property has led to a rising number of ‘international families’ – and disputes spanning EU borders. Divorce is always a distressing and emotional time for any family, but the issues become more acute if the couple has moved abroad. Mst couples investing in France are married, which has some advantages from a legal, income or inheritance tax point of view.

One of the issues which is regularly raised is how to protect the surviving spouse in a country which favours children above the spouse. France has forced heirship rules and statutory inheritance rights which aim to protect the children. In France it is much easier when you are married to protect the surviving partner on the first death. Often there is an issue with the presence of children from a previous relationship. This can normally be circumvented for those who intend to become permanently resident in France by entering into a survivorship scheme such as the ‘tontine’ or by signing a French marriage contract and setting up a communauté universelle regime.

In respect of the latter, children from a previous relationship should sign a waiver by which they will give up any claims against the surviving spouse. Those who intend to remain UK resident can hold Frenchbased assets under UK inheritance law (and therefore their UK will) by purchasing the property through a French holding property company (i.e. société civile immobilière). They can decide under their UK will to whom the estate should pass. The use of the French company has recently come back into favour with professionals since the threat for shareholders of incurring a benefit-in-kind charge in the UK disappeared (subject to conditions).

Breaking up is hard to do
When a relationship falls apart, the spouses will be looking to lodge a divorce petition through a court. Which country will have jurisdiction over the divorce? This is a complex subject. The spouse will usually find it more convenient to issue the divorce petition in their home country, without the additional cost and impracticality of having to endure foreign proceedings with transport and language barriers for the parties, their families, witnesses and lawyers.

Those living in the UK would normally involve a UK court, while those who have established new residency in their French home are likely to have a choice (under the European rule dated 27 November 2003, Brussels II bis) to bring the divorce through a French or UK court. Within the EU there are significant differences between member states in both their procedures and the law concerning grounds for divorce, due to different social policies and cultural beliefs. In France divorce can be granted on the autonomous ground of mutual consent. In the UK and other member states, irretrievable breakdown of the marriage is the sole ground for divorce. Conflict between divorce laws of member states may cause difficulties in getting the divorce proceedings off the ground. Other potential legal problems arise such as enforcement of the financial settlement in France and the treatment of financial issues when choosing the court of issue.

Being caught between two competing legal systems is a complex position for a client to find themselves in and the choice of forum can make a huge difference to the outcome. The UK’s view is to look at the couple’s combined wealth and start dividing on a 50/50 basis irrespective of the origin of the assets and then adjusting it in the light of the couple’s particular circumstances – this is the judge’s decision. The French way is likely to be different and a French judge will generally be bound by a pre- or post-nuptial agreement signed by the parties. It is worth remembering that if proceedings are issued in a foreign jurisdiction there will be additional costs in retaining two sets of lawyers. As each party may gain advantages in choosing a particular jurisdiction, a race to issue proceedings is common.

When a French house is part of the overall family assets to be divided or dealt with, it is essential to ensure the settlement approved by the court gives directions as to what should be done with the French property. The couple might wish to keep it jointly, but generally one party will have to transfer his or her interest into the other expartner’s name. The arrangement should indicate who will bear the costs of the transfer. The French legal title would need to be amended through the French land registry and a stamp duty will apply at 1.10% on the whole property’s value if one spouse is due to become the sole owner. The notaire dealing with this would require (a) an English translation of the divorce documentation, (b) a certificate of custom drafted by a solicitor in French confirming the divorce has been granted by a decree absolute and that the court has endorsed a financial settlement which deals with the assets including the French house. Despite all of this, remember that couples moving abroad are less likely to divorce than those staying in the UK.

Philippe Piedon-Lavaux is a partner with law firm Blake Lapthorn Tarlo Lyons. Tel: 020 7814 6932 www.bllaw.co.uk

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