Client Profile
| Detail | Info |
|---|---|
| Name | Sophie (anonymized) |
| Age | 38 |
| Nationality | French |
| Residence | Paris, France |
| Situation | Inherited €800K from an uncle (not direct line) |
| Family | Married, one child (age 5) |
| Employment | Marketing director, €75K/year |
The Problem
Sophie's uncle passed away, leaving her €800K in cash and securities. As a niece (not direct descendant), she faced punitive French succession tax:
| Relationship | Allowance | Tax rate |
|---|---|---|
| Direct line (children) | €100,000 | 5-45% progressive |
| Siblings | €15,932 | 35-45% |
| Nephews/nieces | €7,967 | 55% |
Sophie's inheritance tax:
| Calculation | Amount |
|---|---|
| Gross inheritance | €800,000 |
| Allowance (nephew/niece) | -€7,967 |
| Taxable base | €792,033 |
| Tax at 55% | €435,618 |
| Net received | €364,382 |
Sophie would lose more than half of the inheritance to tax. Additionally, the €364K she kept would then be subject to ongoing French taxation on any investment returns (30% PFU).
The Solution
Step 1: Assess Options
The inheritance tax was already owed — this couldn't be avoided retroactively. The uncle had not set up any donation or succession planning before death.
What could be optimized: How Sophie deployed and grew the remaining €364K going forward.
| Option | Outcome |
|---|---|
| ❌ Leave cash in French bank | 30% PFU on all gains, IFI risk as assets grow |
| ❌ Assurance-vie | Tax-efficient but locked, limited flexibility |
| ✅ International diversification | Protect future gains, currency diversification |
| ✅ Long-term relocation planning | If Sophie and family consider leaving France within 3-5 years |
Step 2: Immediate Actions (Post-Tax)
Sophie didn't want to relocate immediately — her daughter was in school, both spouses worked in Paris. But she wanted to set up a structure for when they might move in 3-5 years.
Phase 1: Swiss Banking (Month 1-2)
| Action | Cost |
|---|---|
| Swissquote account opening | €2,000 |
| Transfer €200K to CHF-denominated account | Wire |
| Multi-currency portfolio (CHF, USD, EUR) | Via Swissquote |
Why Switzerland now?
- Currency diversification (CHF as hedge against EUR)
- Non-resident account — fully compliant, declared to French tax authorities
- Future optionality — if they relocate, accounts are already in place
Phase 2: Luxembourg Assurance-Vie (Month 2-3)
| Action | Cost |
|---|---|
| Luxembourg life insurance contract (contrat d'assurance-vie luxembourgeois) | €3,000 setup |
| Deposit €100K into unit-linked funds | Via contract |
Why Luxembourg assurance-vie?
- "Triangle of security" — assets held by a custodian bank, separate from the insurer
- Portable — the contract follows the policyholder if they move countries
- Tax-neutral in most jurisdictions on exit (depends on destination)
- No French inheritance tax on beneficiary designations (within limits)
- Better investment universe than French assurance-vie
Step 3: Future-Proofing (Year 1-3)
Sophie and her husband began exploring a potential move to the UAE. They weren't ready yet, but wanted the groundwork laid.
| Preparatory action | Timeline |
|---|---|
| Research UAE Golden Visa requirements | Year 1 |
| Visit Dubai (exploratory trip) | Year 1 |
| Employer discussion about remote work | Year 2 |
| School research for daughter | Year 2 |
| Formal relocation decision | Year 3 |
Asset Allocation Post-Structuring
| Asset | Location | Amount | Purpose |
|---|---|---|---|
| Cash reserve | French bank (BNP) | €64,382 | Emergency fund |
| Swiss portfolio | Swissquote | €200,000 | Growth + CHF diversification |
| Luxembourg assurance-vie | Lombard International | €100,000 | Tax-efficient growth + succession |
| Total deployed | €364,382 |
Succession Planning for Sophie's Own Family
The inheritance experience opened Sophie's eyes to French succession planning. She wanted to ensure her daughter wouldn't face the same tax burden.
| Action | Benefit |
|---|---|
| Luxembourg assurance-vie with daughter as beneficiary | Up to €152,500 tax-free (if premiums paid before age 70) |
| Donation programmée | €100K allowance per parent per child, renewable every 15 years |
| If relocating to UAE | No inheritance tax in UAE — full wealth passes to heirs |
Projected succession outcome if family relocates to UAE:
| Scenario | At Sophie's death | Tax on heirs |
|---|---|---|
| Stay in France, €1M estate | Up to 45% above €1.8M combined | €200K+ |
| UAE resident, €1M estate | 0% | €0 |
Financial Summary
| Item | Amount |
|---|---|
| Gross inheritance | €800,000 |
| French succession tax (55%) | -€435,618 |
| Net received | €364,382 |
| Structuring costs (Swiss + Lux) | -€5,000 |
| Deployed in optimized structure | €359,382 |
Projected benefit over 10 years (assuming 7% annual return):
| Scenario | After 10 years | Tax paid on gains |
|---|---|---|
| All in France (PFU 30% on gains) | ~€520K net | ~€87K |
| Swiss + Lux structure (then UAE move in year 3) | ~€640K net | ~€12K |
| Difference | ~€75K saved |
Services Used
| Service | Cost |
|---|---|
| Private Office — Swiss account opening | €2,000 |
| Luxembourg assurance-vie setup | €3,000 |
| Succession planning consultation | €2,000 |
| Total | €7,000 |
Key Takeaways
- French succession tax on non-direct line inheritance (55%) is devastating — plan ahead if possible
- Even when inheritance tax can't be avoided, the deployment of remaining capital can be optimized
- Swiss and Luxembourg structures provide diversification and optionality while remaining fully compliant
- Luxembourg assurance-vie is one of the most powerful portable wealth tools in Europe
- Succession planning should start decades before it's needed — Sophie is now planning for her daughter
- Relocation remains the most effective long-term strategy for families concerned about French wealth erosion