3 strategies to successfully transfer your estate without harming your heirs

In addition to the question of the choice of the buyer, the taxation linked to this transfer can be heavy and represent a brake on the transfer. In France, inheritance taxes can be as high as 45% of the amount bequeathed.

It is therefore imperative to think about this subject in advance and to organize everything during your lifetime. At Blendywe are particularly fond of 3 dedicated devices, which are as follows:

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1- The Dutreil Pact: an opportunity to optimize the transfer of a company

The Pacte Dutreil is the possibility for the company director to transfer the shares of his company to his children without any taxation in return.

What is the Dutreil Pact?

The Dutreil Pact is a tax measure introduced in 2003. It allows to benefit from a 75% deduction on the value of the shares when transferring a company. This measure applies to unlisted companies, i.e. SARL, SAS, EURL, etc. It aims to encourage the transfer of a company by facilitating the transfer of shares and by avoiding that taxation represents an obstacle to the transfer.

Conditions to benefit from it

To benefit from the Dutreil Pact, it is necessary to respect certain conditions:

- First of all, the manager must undertake to keep the shares of the transferred company for a minimum period of two years.

- Secondly, the heir must actively participate in the management of the company and hold shares for a minimum period of 4 years.

- Secondly, the Dutreil Pact must be concluded between the manager and his heirs or assigns (spouse, descendants, ascendants), up to a minimum of 34% of the company's rights.

- The Dutreil Pact must be registered with the tax authorities within 15 days of the conclusion of the agreement.

- Finally, the company must carry out an industrial, commercial, craft, agricultural or liberal activity.

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2- The dismemberment of shares in case of inheritance: what is it and how to benefit from it?

What is it about?

The dismemberment of shares is a second very interesting legal and fiscal technique in the context of a business transfer. This technique allows to dissociate the usufruct (the right to use and enjoy the property) and the bare ownership (the property without the use) of an asset, in this case the shares of your company.

How can I take advantage of it?

The dismemberment of shares is possible if you are a partner in a company. This means that you can give your children the bare ownership of your shares while keeping the usufruct, i.e. the right to receive dividends, to participate in general meetings and to vote. This technique allows you to pass on the ownership of the company to your children while keeping the control of the company. The usufructuary can also sell the shares or donate them to a third party, subject to agreement with the bare owner.

What are the benefits?

The dismemberment of the shares also allows to reduce the inheritance tax. Indeed, the inheritance tax is calculated on the value of the bare ownership and not on the total value of the shares. Moreover, the length of time the usufruct is held is taken into account when calculating the inheritance tax. The longer the holding period, the lower the inheritance tax.

Let's take the example of the dismemberment of shares of a SCI for example. Let's say that you own a property worth 1,000,000 euros as a company director. You can then dismember the shares and give the bare ownership to your children. The administration will calculate the value of this property according to your age. If you are between 30 and 40 years old, the value will be calculated on 30% of the value of the property. So you will make a donation of an equivalent amount of 300 000€ to your children. You will thus pay inheritance tax on 300 000€ not on 1 00 0000€ of euros. And if you have between 40 and 50 and the rate goes up to 40%, etc.

Mandatory anticipation

It is important to note that the dismemberment of shares must be anticipated. Indeed, the bare ownership donation must be made at least six months before the donor's death to benefit from a reduction of the inheritance tax. If the donation is made less than six months before the death, the inheritance tax will be calculated on the total value of the shares.

The dismemberment of shares must also be carried out in an equitable manner among the heirs. Indeed, if you have several children, it is important to divide the shares fairly among them to avoid family conflicts. If you wish to give a larger share of your shares to a particular child, it is possible to give him the usufruct of the shares and the other children the bare ownership, provided that this is justified and that the other children are compensated accordingly.

This technique allows to transmit the ownership of the company while keeping the control, to reduce the inheritance taxes and to prevent family conflicts provided that it is anticipated and carried out in an equitable way between the heirs.

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3- The donation-assignment

And finally, the last feature that we like very much at Blendyis the donation-assignment.

What is a donation-assignment

The gift-divestment is a business transfer strategy that allows business leaders to transfer their business to their heir while minimizing the tax burden associated with the succession. This strategy is particularly interesting for small and medium-sized family businesses.

The donation-assignment allows the business owner to gradually transfer the ownership of his company to his heir. In other words, the business owner makes a donation of the business to his heir, which is immediately accompanied by a partial or total transfer of the business to his heir. This transfer can take the form of a forward sale, a transfer of shares or a transfer of stock.

What are the benefits?

There are many advantages to the donation-assignment. First of all, this strategy allows for a considerable reduction in estate taxes. Indeed, gift taxes are much lower than inheritance taxes, and can even be zero in some cases, depending on the relationship between the donor and the beneficiary.

Therefore, when you transfer financial securities to your children, you will " purge " the capital gain, i.e. you will not pay estate taxes on the capital gain of your shares. Your child will receive shares at the value including the capital gain. Therefore, when he or she resells the shares, he or she will not pay any estate tax on the increase in value. He or she will pay only the gift tax.

In addition, the donation-assignment allows to guarantee the durability of the company by transmitting it to a competent heir, who will have already been involved in the management of the company. This gradual transfer also makes it possible to prepare the succession smoothly, by avoiding potential conflicts between the heirs.

Finally, the gift-divestment allows the business owner to retain a certain degree of autonomy during the transfer period. Indeed, the transfer can be spread over several years, and the head of the company can keep a preferential voting right to guarantee the continuity of the management of the company.

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For example, let's say you make an investment of 10 000€, 5 years later it is worth 100 000€. Then, I sell these shares to my children who will receive 100 000€. If they sell these shares a few days after receiving this portfolio, they will not pay the capital gain, i.e. 90 000€ (= the value of 100 000€ minus the 10 000€ invested). They will only pay the gift tax, knowing that up to 100 000€ they benefit from an allowance which allows them not to pay taxes. They will thus have received 100 000€ for these personal processes from you.

How can I take advantage of it?

In order to benefit from the advantages of the donation-assignment, certain conditions must be met.

First, the beneficiary must be a family member of the donor.

Second, the donor must be under 80 years of age, and the beneficiary must be of age.

Finally, the donation must be declared and registered with the tax authorities.

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Here are three strategies for a successful succession. There are many other solutions. It all depends on your situation and your goals.

You want to know more about the solutions available to set up your succession ? Ask our experts and Coach Success to accompany you!

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