Divorce scenario: Is donation between spouses challengeable during the process of marital dissolution?
Firing Up the Money Talk: A Notary Unveils Insights on Spousal Transfers Amidst Divorce
Tune into the "Financial Powwow" (our site / Radio Heritage) and hear Nathalie Couzigou-Suhas, a Parisian notary, shed some light on a listener's conundrum: the implications of a donation between spouses during marriage, and what happens if the relationship goes south.
Every month, the "Financial Powwow" brings forth the expertise of specialists such as tax experts, wealth managers, and notaries to tackle all your financial head-scratchers. Today's focus has Magali wondering about equitable asset distribution with her husband's proposed 225,000 euro donation intended to build future wealth for their children: could the donation be scrutinized during a potential divorce?
"Magali's husband desires to even their real estate assets via a hefty donation, but takes heed," miles Nathalie Couzigou-Suhas, a Parisian notary. "The transaction might be seen as a disguised tax optimization attempt, particularly if it leads to a tax-friendly succession to the children."
Donations Stand Tall in Divorce, but Succession Implications Owe a Word
In the event of a divorce, Magali can rest easy regarding the donation's irrevocability, as Nathalie reminds us: "Since May 26th, 2004, a donation between spouses is inalterable in divorce situations." However, where inheritance matters, the 80,724 euro allowance applies, yet beyond this limit, taxes bite hard at 20%.
"It's smarter to tweak their marital status instead," suggests our expert. "Perhaps by sharing assets in a common ownership structure or community property, with a no-recovery clause on divorce. Either way, you'll secure the same outcomes as a donation, while sidestepping tax audits and inheritance rights." Of course, the legality of such a move must be justified to avoid tax scrutiny.
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FYI: To expand upon the topic:
In French law, donations between spouses can encompass both taxation and divorce considerations. Tax-wise, donations are typically tax-free during a lifetime, but there can still be hidden implications. For instance, gift tax (IFT) exemptions may not apply for donations with conditions attached.
Upon divorce, taxes and inheritance can interweave. Marital regimes play a role in asset division, with the French marital regime (e.g., "communauté réduite aux acquêts") influencing how assets are divided.
Gifts can also become part of the communal assets or be considered separate property, potentially triggering compensation claims in the event of a disparity. To ensure a balanced approach during divorce, it's wise to document donations clearly, consider a prenuptial agreement, and stay savvy about potential tax planning consequences. Consulting a French family law attorney or tax professional is strongly advised for customized guidance.
- In a potential divorce, it's crucial to note that a donation between spouses made with the intention of building future wealth, like Magali's situation, can be scrutinized, as it might be seen as a disguised tax optimization attempt.
- The transactional implications of a donation during marriage, such as in Magali's case, are inalterable in divorce situations, according to Nathalie Couzigou-Suhas, a Parisian notary, since May 26th, 2004.
- While the allowance of 80,724 euros for inheritance matters applies to donations beyond this limit, taxes bite hard at 20%.
- To avoid tax audits and inheritance rights, Nathalie suggests alternative methods such as sharing assets in a common ownership structure or community property, with a no-recovery clause on divorce, which could offer the same outcomes as a donation.
