Redressing potential ‘injustices’

Settling an estate in accordance with the provisions of the Civil Code does not always achieve the desired result. Where this is the case, and subject to the Civil Code's requirements, especially the reserved portion, it is possible to instigate certain measures during your lifetime to adjust each heir’s rights and create a distribution that is more in tune with your wishes.

For example, it’s possible to derogate from the provisions of the Civil Code to give a greater share to the surviving spouse. Even though the Civil Code provides for a whole series of measures designed to protect the interests of the surviving spouse, these are not always sufficient for individual cases. You can strengthen this level of protection by means of a gift or a will, but also by adapting your marriage contract, creating a joint estate and/or inserting specific clauses for the distribution of the assets on the death of the first spouse.

It is also possible to pass on some or all of your assets to people who, in principle, have no direct claim on the estate, such as grandchildren or stepchildren.

Subject to compliance with the reserved portion rule, this objective can be easily achieved by making a gift or drawing up a will in favour of the person you wish to bequeath to.

Different tax and legal attributes

A gift does not have the same legal and tax attributes or consequences as a will. From a tax point of view, unlike a will, a gift substantially reduces the tax burden of passing on an estate. Legally, however, it results in the immediate and irrevocable impoverishment of the donor, in contrast to a will, which only takes effect on the day of death. However, certain conditions can be attached to a gift to mitigate some of the undesirable effects it could produce.

You also have the option to pass on some or all of your assets to people who, in principle, have no direct claim on the estate, such as grandchildren or stepchildren. Subject to compliance with the reserved portion rule, this objective can be easily achieved by making a gift or drawing up a will in favour of the person you wish to bequeath to. A gift does not have the same legal and tax attributes or consequences as a will. Legally, it results in the immediate and irrevocable impoverishment of the donor, in contrast to a will, which only takes effect on the date of death. However, certain conditions can be attached to a gift to mitigate some of its potential undesirable effects.

Other more or less sophisticated techniques, such as a life insurance policy, a simple partnership or a private foundation, may also be considered depending on the specific features of each situation.

Any solution of this kind requires the settlor to take a proactive approach to their situation during their lifetime.

Preventing family conflicts

There is no shortage of subjects on which heirs may disagree, ranging from the valuation of assets that make up the inheritance to the division of personal or family heirlooms, and sometimes even differing concepts of equality or fairness.

The family context is often emotionally charged, which exacerbates tensions and resentments, hugely complicating situations that could otherwise be easily resolved.

Detecting potential conflicts between heirs and trying, as far as possible, to prevent them requires dialogue between the family members, during which it is vital that everyone is able to express their own point of view and be heard by the others.

Giving everyone the opportunity to express their hopes, fears and frustrations helps to remove the emotional dimension from the family context and paves the way for consensual solutions which work for everyone.

It is only once the emotional context has been set to one side that legal tools such as inter-vivos transfers, wills or agreements as to succession (one-off or comprehensive) can take full effect and seal the understanding between the various family members to prevent any risk of conflict at the time of death.

An agreement as to succession is a useful tool for preventing potential conflicts between future heirs. A comprehensive (family) succession agreement encompasses the parents and all the children. It makes it possible to take stock of what each child has already received or will receive, and to ensure that everyone receives fair and balanced treatment. By signing the agreement, each party acknowledges that they have been treated fairly and in a balanced way, and agrees not to go back on any gifts already made or to be made by requesting a reduction or reversal.

Protecting ‘vulnerable’ heirs

The notion of a vulnerable heir is not a clearly defined term and is open to interpretation depending on individuals' conception. Generally speaking, it is assumed to cover anyone suffering from a disability (mental or physical) or with mental or behavioural problems. Vulnerability can be construed more widely to include heirs who might be under the influence or authority of another person who could be considered potentially malevolent.

It is not uncommon for a spouse to be considered as a vulnerable heir who needs greater protection. Similarly, the same concern for protection may arise in relation to one of the children or grandchildren who need to be protected from the potentially harmful influence of a son-in-law, daughter-in-law or parents-in-law.

Because of the heir's greater vulnerability, the main objective will be to provide for and put in place mechanisms to guarantee their well-being and ensure that the assets they inherit are managed in their best interests and remain free from the damaging influence of someone with malicious intent.

In general, organising the protection of an heir with a disability or suffering from a major disorder and safeguarding their assets will require more specialised and complex structures, such as a private foundation or charitable trust (to be set up or one already in existence).

For more straightforward situations, a less restrictive solution such as a simple partnership or life insurance can perfectly meet all the needs of the situation.

Safeguarding your estate

In addition to estate planning techniques in the strict sense of the term, the transfer of a family business requires the establishment of corporate governance principles that unite all the members of the family around a common objective. This is particularly true when the family business is to be taken over by several heirs whose interests may sometimes diverge.

Equally important alongside these rules of governance, will be to anticipate any conflicts of interest between the active and passive partners without jeopardising the long-term future of the business.

Maintaining the unity of a collection or preserving an estate within the family fold is also a frequently encountered concern, particularly where there is more than one heir.

In addition to gifts and wills, the transfer of a business will usually require changes to the articles of association, the drafting of shareholder agreements, or the creation of a family charter to ensure that all members of the family unite round a common objective.

Depending on the case, the transfer of a collection can be arranged through a simple company, a private foundation, or more straightforwardly by means of a gift or will.