Tag Archives: marital deduction

French U.S. Estate Tax Treaty Gives French Citizens a Preferred Inheritance Tax Strategy

The French U.S. Tax Treaty gives French citizens  preferred inheritance tax strategy. 

France is on the United States’ favorite country list.   Recently, France and the U.S. changed their tax treaty.   Under the new treaty,  the U.S. estate tax does not apply if the spouse inherits the property.   And it gets better with the new $11,000,000 exemption.

French U.S.  Estate Tax Treaty Gives French Citizens part of the $11,000,000 Exemption.

This is how it works.  François owns $14,000,000 in assets.   $5,000,000 is invested in the U.S. stock market.  $9,000,000 is property and other assets in France.   His U.S. estate tax exemption is 5/14th of $11,000,000 (which is $3,928,571). 

If François should die, his U.S. taxable estate is $1,071,428 ($5,000,000 in stocks minus $3,928,571).  The U.S. estate taxes will be approximately $400,000.

The surviving French spouse can sell the property located in the U.S income tax-free.

This is  how it works.   When the spouse inherits the property, she or he has a new cost for tax purposes.   The cost is the market value at the time of the death.  For example, French couple acquired a home in Los Angeles in 2009 for U.S.$500,000.

The husband dies in 2017.   The house is now worth $1,500,000.   The wife inherits the homet.  The U.S. death tax does not apply because of the U.S. – French Tax Treaty.

Next, U.S income tax law increases the tax cost of inherited property to the market value as of the day of death.    When the spouse sells the property for $1,500,000 she will have no gain or loss.

This new tax law is found in a “protocol” to the original French-U.S. income tax treaty and not to the estate tax treaty.  Here is a link to the protocol.

If you need help with your U.S. – French tax planning, then please email me at [email protected]  Also, here is a link in French explaining the U.S. estate tax laws.

By the way, U.S. tax laws allow a unique type of trust that will avoid inheritance tax for the children of French citizens.  The  trust is called a “marital deduction trust”.  This trust created at the time of the death of the first spouse.   For French tax law, this trust is a U.S. person which provides interesting tax savings.  

New French U.S. Tax Treaty Gives French Citizens Preferred Inheritance Tax Strategy with a Nevada Trust

If you find that you owe U.S. estate taxes, consider a Nevada Self-Directing Trust.  The IRS has issued very favorable rulings on these trusts.   Just as the name sounds, you direct the trust investments and also distributions to your family. 

If you would like to discuss  how the new french – U.S. tax treaty  gives french citizens preferred inheritance tax strategy, then contact me at [email protected]  

You can learn more on how the  French U.S. Estate Tax Treaty Gives French Citizens a Preferred Inheritance Tax Strategy  on this link.  This page has the IRS international estate tax treaty explanation.  This IRS page applies to all estate tax treaties.