A retired man in the south of France received a 700 thousand euro inheritance from his sister, with whom he lived for about a decade. When the sister died without children, the brother believed he was exempt from inheritance tax, under French law that grants this benefit to cohabiting siblings who meet certain requirements.
According to the French General Tax Code, the inheritance tax exemption between siblings requires that the heir be over 50 years old or have a disability, be single or widowed, and have lived continuously with the deceased for at least five years before the death. However, the sister never formalized the change of her tax residence, remaining officially registered as a resident of Paris.
Without the proof of cohabitation required by law, the French tax authorities applied the normal inheritance tax rates. The heir found himself forced to pay 305 thousand euros on the net estate of 700 thousand euros, after a legal deduction of 15,932 euros and a rate of 45%. Without the liquidity to cover the amount, he had to sell the Paris studio he received as inheritance.
The case became a warning about the importance of keeping tax and administrative records always up to date. In Portugal, the framework is different, since since 2004 direct heirs, such as spouses, descendants, and ascendants, are exempt from Stamp Duty on inheritances, while other relatives pay a rate of 10%.
