What gets declared, before any tax is worked out

Mrs Ferrand leaves a flat valued at 350 000 €, 95 000 € in bank accounts, and 17 250 € of debts and funeral costs. Her two children assume the estate is worth 445 000 €. It is worth 467 250 €: nobody thought about the furniture, which the law values by default at 5 % of everything else. Before you read on: where do those 22 250 € come from, when no one has listed a single item?

The tax falls on a net share, not on the estate as a whole

Inheritance tax strikes neither the deceased's wealth taken as a block, nor what each heir believes they are receiving. It strikes a figure built in three steps: the gross estate, less deductible liabilities, equals the net taxable estate — which is then divided between the heirs.

The order matters, and it is the first source of error. An heir who applies their 100 000 € allowance before deducting the debts gets it wrong twice: they tax a sum they will never receive, and they charge it against the wrong base. The official sequence is fixed and cannot be rearranged.

A second, less familiar marker: the deceased's bank balances are frozen at the date of death. Not on the day the notary opens the file, nor on the day the return is filed. An account that has shrunk since the death is still declared at its value on that day.

Furniture: three valuation methods, and a floor

Article 764 of the French tax code does not let heirs value furniture as they please. It imposes a hierarchy of three methods, in order, each applying only when the previous one is unavailable.

First, the sale price, where the furniture is sold at public auction within two years of the death. Failing that, the valuation contained in an inventory drawn up in the prescribed form within five years. Failing that again, the detailed and estimated declaration of the parties.

It is this third case that holds the surprise. The same article sets a floor: the taxable value of household furniture cannot be less than 5 % of all other movable and immovable assets of the estate. Proof to the contrary remains open, but it has to be proved.

In the Ferrand estate, the other assets total 445 000 €. The default rate therefore puts the furniture at 22 250 €, when nobody has opened a cupboard. Having an inventory drawn up costs a few hundred euros and can bring that base down to its real value.

Deductible liabilities, and what never enters the estate

Debts owed by the deceased at the date of death are deductible: the outstanding capital of a loan, unpaid taxes, final invoices. Funeral costs are also deductible, up to a fixed ceiling, without having to justify each item of expenditure.

One thing does not appear in that estate, and it is the most frequent confusion: life insurance proceeds paid to a named beneficiary. They follow a separate tax regime, with their own allowances, and do not mix with the estate.

The reverse is also true: some assets heirs believe are outside the estate do come back in, such as gifts made by the deceased less than fifteen years before death. They are not taxed twice, but they return into the calculation of the allowance still available.