Inheritance Tax: What If You Asked for Payment Arrangements?

In the context of an inheritance, estate taxes must be paid upon filing the estate tax return, within six months of the person’s death if the death occurred in France. However, provisions are in place to facilitate payment, such as deferred payment.
 

Deferred payment may be requested in several of the following situations, as noted by the Directorate of Legal and Administrative Information: When the estate includes property held in bare ownership; if the surviving spouse has opted for the life interest in habitation and use; or if the estate involves the preferential allocation of a farm.
 

In a decision dated March 13, 2024, the Court of Cassation ruled on this deferred payment arrangement. The ruling states that an heir who receives only bare ownership of real property because their surviving parent has chosen to inherit the usufruct of the entire property has the right to defer payment of taxes until the death of that parent, who holds the usufruct. This option, which must be accompanied by guarantees for the tax authorities, was reaffirmed by a ruling of the Court of Cassation, but it entails a definitive choice.
 

Upon their father’s death, the children inherited bare ownership of the property because their mother had chosen to inherit the usufruct of the entire estate rather than full ownership of one-quarter of the property. Instead of paying the inheritance tax on their share immediately, the children requested to pay only upon their mother’s death. They then had two options: either they would pay inheritance tax on their bare ownership only when their mother’s death occurred—but in the meantime, they would have to pay annual interest to the tax authorities—or they would pay inheritance tax on the entire estate, including both bare ownership and usufruct, but would then be exempt from paying interest.
 

Generally, when the bare owner regains the usufruct, the transaction is not taxed. Choosing to broaden the tax base by being taxed on both the bare ownership and the usufruct—in order to avoid paying interest—was therefore a gamble that could only pay off if their mother was elderly and had many years left to live.
Installment or Deferred Payments: New Developments Since February
 

After choosing the second option, thinking that the total bill would be lower, they changed their minds. In the end, they preferred to pay taxes only on their bare ownership and to make periodic interest payments until their mother’s death. But the tax authorities, backed by the Court of Cassation, ruled that this was not possible. The choice they made was final, and the option was irrevocable, the tax collector and the judges told them.
 

In addition to the payment mechanism, the law provides for the option of paying in installments—up to three equal payments—over a maximum period of one year. This maximum period is extended to three years if at least 50% of the estate consists of illiquid assets (real estate, works of art, unlisted securities). In such cases, the number of installments is limited to 7.
 

With regard to procedural deadlines, changes took effect on February 1, 2024. Previously, the Administration had four months to rule on requests for deferred or installment payments. Going forward, this deadline is two months from the date the request is received. The deadline granted to the person liable for inheritance tax remains unchanged at four months.