Wealth Transfer: Tips for Reducing Your Taxes

In 2024, the French government implemented a major reform of the estate tax system, raising the tax exemption from 100,000 to 150,000 euros per direct heir. 

Hailed by some as a breath of fresh air for the middle class, this reform nonetheless sparks debate. What are its actual impacts? And does it truly address the issues of equity in the transfer of wealth?
 

A Helping Hand for Heirs with Modest Estates
By increasing the tax exemption, the government aims to ease the burden of inheritance tax, particularly for modest- to medium-sized estates. In practical terms, this means that a direct heir (child or parent) can now receive up to 150,000 euros without having to pay taxes. This measure is particularly welcome given that real estate prices—a major component of people’s estates—have skyrocketed in recent years. For many French people, this reform is seen as restoring balance.
 

Criticism Regarding Equity
While this reform clearly benefits heirs from the middle class, it has been criticized for its lack of impact on wealth inequality. Indeed, those with very large fortunes—often protected by mechanisms such as shared gifts or real estate investment companies (SCIs)—continue to enjoy a significant advantage. “Increasing the exemption does nothing to address the extreme concentration of wealth in the hands of a minority,” notes Thomas Piketty, an economist specializing in inequality.
 

On the other end of the spectrum, the lowest-income households—which have no significant assets to pass on—do not benefit directly from this reform. “It’s a symbolic measure that affects only a portion of the population,” says a tax expert. “The real inequalities are not being addressed.”
 

Costs to Public Finances
Another point of contention concerns the impact of this measure on public finances. Inheritance taxes represent a significant source of revenue for the government, estimated at approximately 14 billion euros per year. With this reform, a portion of that revenue will be lost. While the government defends this decision as a way to support households, some are concerned about the long-term effects on the national budget.
 

"Against the backdrop of a public deficit, reducing government resources to facilitate the intergenerational transfer of wealth may seem questionable," notes a report by the Council on Compulsory Levies. According to estimates, the reform could cost between 1.5 and 2 billion euros per year.
 

The Challenges of Estate Planning
For families, the transfer of assets remains a complex issue, where emotional and financial aspects are intertwined. While the increase in the tax exemption simplifies tax procedures for some, it does not resolve the many difficulties associated with estate planning. From family conflicts to real estate appraisals and the selection of beneficiaries, there are still many issues at stake.
Furthermore, the reform does not address mechanisms often considered opaque, such as gifts to the surviving spouse or transfers via life insurance. These tools, while legal, sometimes allow for the optimization of estate taxes in controversial ways.
 

What Role Does Real Estate Play?
Real estate makes up the bulk of French households’ assets, making its transfer a crucial issue. With the surge in real estate prices in recent years, inheritance taxes on this type of property have risen, particularly for primary residences in major cities. The exemption, raised to 150,000 euros, will allow some heirs to keep their property without having to sell it to cover tax liabilities.
However, in areas where prices have reached record highs—such as Paris, Lyon, or Bordeaux—this exemption remains insufficient to cover the full amount of inheritance tax due on properties valued well above 500,000 euros.
 

A Path Forward
The 2024 reform may be just the first step. Several experts are calling for a complete overhaul of France’s inheritance system. Among the proposals are the introduction of a progressive tax exemption based on asset levels, higher taxation on large fortunes, and incentives to transfer assets during one’s lifetime to stimulate the economy. Some also want to see simplified administrative procedures and better information for families.
 

An Ongoing Debate
While the increase in the tax deduction represents a step forward for households, it raises broader questions about tax justice and the concentration of wealth. In a society where wealth disparities continue to widen, this reform alone will not be enough to address the challenges of intergenerational equity. But it paves the way for necessary discussions about the future of wealth transfer in France.