Real Estate Inheritance Planning in France: Passing Property to Your Grandchildren

Reducing IFI Liability through Real Estate Donations

One of the most effective ways to lower your real estate wealth tax base is through property donations to your children or grandchildren.
Because IFI is calculated based on property values as of January 1st each year, any donations made before that date will reduce your taxable estate for the following year.

Under French law, each parent can give:

• €100,000 per child,

• €31,865 per grandchild,
  completely tax-free.

A couple can therefore transfer up to €327,460 to one child and two grandchildren every 15 years without paying any inheritance tax.

💡 Tip: Donations can also be made through a “transgenerational gift”, allowing both children and grandchildren to benefit simultaneously.

Usufruct Holders Remain Liable for IFI

To fully remove a property from your taxable estate, it must be donated in full ownership.
When a property is held in usufruct (where one person uses the property while another holds its bare ownership), the usufruct holder remains fully liable for IFI on the entire property value.

If the bare ownership has already been gifted more than 15 years ago, it may be advantageous to donate the usufruct.
This donation will only be taxed on the value of the usufruct, which decreases with the donor’s age.

Temporary Usufruct Donation: A Smart Fiscal Strategy

A temporary usufruct donation allows property owners to reduce their IFI liability while helping younger generations.
This strategy consists of transferring the usufruct of a rental property to a child or grandchild for a limited time, usually between 3 and 10 years.

During this period:

• The property is excluded from the donor’s taxable IFI base,

• The beneficiary receives the rental income,

• And the donor reduces their income tax and social charges.

This donation is taxed at a flat rate of 23% of the property’s value per 10-year period.

Transferring Property into a Family Real Estate Company (SCI)

Instead of transferring a property directly, it may be wiser to sell or contribute it to a Family Real Estate Company (SCI).
This approach offers several advantages:

• The SCI can take out a mortgage, reducing the taxable value of its shares at the IFI level,

• The loans are repaid through rental income,

• The owner can retain management control,

• And the liquidity released can be transferred to children or grandchildren.

This makes the SCI an elegant and flexible structure for long-term inheritance and tax optimization.