The international scene through acts : anticiping, protecting, transferring - 18 october 2019
The developments and exchanges of the Rencontres Internationales 2019 will revolve around the practical case of Mr. and Mrs. Derennes. Their problems will enable us to deal in a very concrete way with the protection of spouses and family assets, as well as the organisation of transfer through several generations in an international context.
Mr. and Mrs. Derennes are French, French residents, married under separation of property. They are creators of a French SSII company that experienced strong growth during the 2000s.
They have 3 daughters, Camille, Chloé and Charlotte, who excel in their studies: Baccalauréat with high honours, HEC, etc. Camille, a piano virtuoso, has been in a relationship for several years with Vince, a British singer in the band they created. Chloé is in a relationship with Victor, a Belgian national, whom she met on one of her trips to Uccle. She is passionate about cooking and plans to write a cookbook. Charlotte, an engineer in cosmetology, is doing her internship in a large beauty products company, where she has met Valentin.
After a few years of relationship, the 3 girls announce their engagements at their parents’ 30 year wedding anniversary. Delighted by these engagements, they organise a grand ceremony at the Château de Chantilly, having taken care to consult the Althémis Notary Office on the usefulness of drawing up a marriage contract, especially given the important donations they plan to make to their daughters.
Camille will marry in the United Kingdom where she is living with Vince, a British national. Chloé will settle in Belgium with her husband Victor, of Belgian nationality. Charlotte will move to Switzerland with Valentin, of French-Swiss nationality.
The 3 girls will draw up a contract of separation of property under which they will choose French law to govern their matrimonial relations.
To congratulate them on their personal success and give them a helping hand to start their lives, the parents plan to donate to each of their daughters. This would be done equally as monetary sums or possibly shares in the portfolio. Camille intends to use this money to set up a jazz music production company. Chloé will place the money received into specific financial allocations (life insurance and capitalisation). Charlotte will use the proceeds to launch her vegan cosmetics brand.
At this time, Mr. and Mrs. Derennes also plan to transfer to their daughters part of the family company shares, full and bare ownership. This donation will be made under the Dutreil regime.
This insists that any donated assets belong to their daughters and not to their spouses. Althémis advises them to set up donation-sharing with specific and tailored clauses.
However, since their daughters are living abroad with their respective husbands, Althémis draws the attention of Mr. and Mrs. Derennes to the need to validate the legal recognition and effectiveness of these clauses in their respective countries.
Legal topics covered:
Validity, recognition and scope of the donation clauses abroad
Submission of the gift to several different rights
Transnational act
Tax treatment of dismemberment in the United Kingdom
The family is doing well, and parents are happy to meet with their children at family reunions where each year they see another grandchild arrive. Camille has 1 child, Chloé has 5 children and Charlotte has 2 children.
Business is booming for Camille and Charlotte. Camille’s company continues its success with big names in jazz and Charlotte’s cosmetics brand is booming with its anti-aging cream based on cocoa extract.
But unfortunately, Chloé dies in an accident. Victor, devastated, goes to his Belgian notary to open the estate. He learns that in the absence of a will, he inherits the usufruct of Chloé’s property.
Mr. and Mrs. Derennes are worried about the influence that their son-in-law could have under this usufruct, in particular on the family company shares. The parents put a lot of pressure on Victor to give up the estate.
However, Chloé and Victor had bought their principal residence in Belgium together and Victor wants at least to be secured on this asset.
Finally, Chloé’s parents conveniently find the holograph will they advised their daughter to draw up at the time of her marriage, under which she “deprives her spouse of any rights to her estate”. There is no explicit provision for the choice of applicable law in this will.
Victor and the parents negotiate an agreement and the Althémis Notary Office offers them a transnational transaction.
Legal topics covered:
Presentation of the Belgian internal legal rules in the absence of a will
Overview of legal devolution in French, Swiss and British law
Possibility of partial waiver and segregation
Interpretation of the will
Transitional provisions of the European Regulation on Succession
Consequences of the application of Belgian law
Consequences of the application of French law
Representation terms for minor children in Belgian law for company shares
This dramatic episode leads Camille and Charlotte to wonder about the inheritance rules applicable in their respective countries and the opportunity to make provisions for any last wishes. They want to avoid being in an uncertain situation regarding applicable law, and ensure their spouses are protected while respecting the will of their parents to preserve the family business.
In Switzerland, Valentin has put a lot of work in at Charlotte’s company. It is therefore fair that he is entitled to a share in the estate, especially since he has nothing personally. She also wants him to maintain his lifestyle. She also tells us that he is a good manager.
In the United Kingdom, Camille thinks that her husband needs income and that it is necessary to preserve capital because she finds her husband expensive. It’s normal to her that her husband stays in their London apartment for at least some time. Her husband has no taste for or ability to manage wealth.
Legal topics covered:
How to protect the surviving spouse according to their profile?
How to protect family assets and ensure their transfer to the children, without interference from the spouse?
What are the local solutions for protecting the spouse for the rest of the estate?
Focus on the civil handling of life insurance in Belgium, Switzerland and the United Kingdom
What are the transnational solutions?
Years have passed, the grandchildren are now of age. Christian, Chloé’s eldest son, is 30 years old, is married and has one child. He has taken up important roles within the family business of his grandparents, he still resides in Belgium where he works on business development for the company in the Benelux region. A company was specially formed that he manages.
Charlotte and Camille are now wondering about the usefulness and transfer methods for their inheritance to their own children. In addition, Mr. and Mrs. Derennes are worried about the tax costs in the event of Christian’s death and also encourage him to consider this.
Legal topics covered:
Is there good reason to transfer via donations?
Is there a risk of double taxation between France (location of assets) and Switzerland, the United Kingdom, or Belgium?
Presentation of transfer tax rules in France, Switzerland, the United Kingdom and Belgium
Application of tax treaties
Camille discovers a letter from her sister Chloé, addressed to her own husband Vince a few days before her death, in which she gives up their joint project to settle in the Bahamas and tells him that she will inform Camille of their relationship.
Camille kicks Vince out. The divorce proceedings are initiated in the United Kingdom, and Vince, with no resources other than his copyrights, claims rights in Camille’s production company. Camille and Vince had never drawn up between them a contract in their professional author/producer relations.
The divorce decree grants Vince very significant financial rights that Camille cannot finance, except through selling her production company, which she refuses to do.
Her parents decide to help her: they finance her divorce and are planning to buy a new apartment for her and her son in London. On this occasion, they are however wondering about the more global transfer of their inheritance, with the following priority objectives: they wish to maintain equality between their children per stirpes; they are not opposed to immediately integrating the children of Camille and Charlotte in the planning of the inheritance; scalded by their family history, they demand that the inheritance transferred be maintained within the direct family and wish to put in place a solution to guarantee this, in the event of either death or divorce; Finally, they want the chosen solution to take into account the possibility of moving because they would like to get closer to their grandchildren once retirement arrives.
Their common inheritance today is composed of the following: the shares remaining in the family company, which they wish to pass on; their current principal residence in Paris, which will probably be sold when they move; a house in Spain; financial investments in France and life insurance policies in Luxembourg.
When they examine the situation of their children and grandchildren, they find that Christian works in the family company and could receive, with his brothers and sisters, shares in this company. The siblings get along well and the company can generate significant income. In addition, Camille needs to buy an apartment in London and needs cash. Finally, Charlotte does not need money in the short term, but she agrees to any solution that will allow her to invest more in her company. She is also very interested in the house in Spain.
Legal topics covered:
Should we proceed by living gift? Will-sharing?
What clauses to include to meet the grandparents’ goals?
Could we envisage an immediate transgenerational mechanism?
Tax treatment of the transfer by the life insurance
Estate planning in case of Mr. and Mrs. Derennes remaining resident in France
Estate planning in the event of Mr. and Mrs. Derennes moving to Switzerland, Belgium or the United Kingdom
What transnational solution finally to adopt, given the uncertainty about the future residence of Mr. and Mrs. Derennes?
Mr. and Mrs. Derennes finally decided to stay in France and they do not work at all in the company, which is managed by Christian from Belgium. Christian proposes to organise an LBO and buy back the family company shares from the family members. There is therefore a large amount of money split up. Mr. and Mrs. Derennes question the use of these sums and the management of the splitting up, knowing that they are eager to keep control of this capital and the income it provides.
They still want to be closer to their children and grandchildren. They therefore wish to take into account this possible expatriation in the context of the arbitrations that will take place following the transfer, in particular as regards the handling of their succession.
Legal topics covered:
Management of the splitting up over the different countries
Civil recognition and tax treatment of quasi-usufruct in Belgium, Switzerland and the United Kingdom
The parents also ask us about the possibility of transferring part of their inheritance to their faithful Choupette, their cat, the renowned Instagram influencer.