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3 strategies to successfully transfer your assets without harming your heirs

As a business manager, it is important to plan for the transmission of your assets to your heirs in the event of death. This is a very important subject, too often postponed by business leaders.


The transfer of assets explained by Blendy, digital accountant

In addition to the question of the choice of buyer, the taxation linked to this transfer can be heavy and represent an obstacle to the transfer. Because inheritance costs in France can go up to 45% of the amount bequeathed.


It is therefore imperative to look into this subject in advance and to organize everything during your lifetime. At Blendy, French digital accountant, we particularly like 3 dedicated devices, which are:

1- The Dutreil Pact: an opportunity to optimize business transfer


In France, the Dutreil Pact is the possibility for the business manager to transmit the securities  (shares) of their company to their children without any taxation in return.


What is the Dutreil Pact?


The Dutreil Pact is a French tax measure put in place in 2003. It allows companies established in France to benefit from a 75% reduction on the value of the securities during the transfer of a company. This measure applies to unlisted companies, i.e. SARLs, SASs, EURLs, etc. It aims to encourage the transfer of businesses  by facilitating the transfer of securities and avoiding taxation from representing an obstacle to transfer.


Conditions to benefit from it


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


  • First of all, the manager must undertake to retain the securities  of the transferred company for a minimum period of two years.

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

  • Then, the Dutreil Pact  must be concluded between the manager and his heirs or beneficiaries (spouse, descendants, ascendants), for a minimum of 34% of social rights.

  • The Dutreil Pact  must be registered in France with the tax services within 15 days following the conclusion of the agreement.

  • Finally, the company must carry out an industrial, commercial, artisanal, agricultural or liberal activity.

2- Dismemberment of shares in the event of inheritance: what is it and how can you benefit from it?


What is it about?


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


How to benefit from it?


The division of shares is possible in France if you are a partner in a company. This means that you can give your children bare ownership of your shares while retaining usufruct, i.e. the right to receive dividends, participate in general meetings and vote.


This technique allows you to pass on ownership of the company  to your children while retaining control of it. The usufructuary can also sell the shares or donate them to a third party, subject to agreement with the bare owner.


What are the advantages ?


The division of shares   also makes it possible to reduce inheritance tax . In fact, inheritance tax is calculated on the value of the bare ownership and not on the total value of the shares. In addition, the duration of the usufruct is taken into account to calculate inheritance tax . The longer the holding period, the more the inheritance tax is reduced.


Let's take the example of the dismemberment of shares in an SCI. Let's say that, as a business manager, you own real estate worth 1 million euros. You will then be able to “dismember” the shares and give bare ownership to your children. The administration will calculate the value of this property based on 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 are going to make a donation of an equivalent amount of €300,000 to your children. You will therefore pay inheritance tax on €300,000 and not on one million euros. And if you are between 40 and 50 years old, the rate rises 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 death of the donor to benefit from a reduction in inheritance tax . If the donation is made less than six months before death, inheritance tax will be calculated on the total value of the shares.


In France, the division of shares  must also be carried out equitably between the heirs. Indeed, if you have several children, it is important to distribute the shares equitably between 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 bare ownership, provided that this is justified and that the other children are compensated accordingly.


This technique therefore makes it possible to transmit the ownership of the company   while maintaining control, to reduce inheritance rights and to prevent family conflicts provided that it is anticipated and carried out in a manner equitable between the heirs.

3- The donation-cession

And finally the last device that we really like at Blendy is the donation-transfer .


What is donation-transfer


The donation-cession is a business transfer strategy for companies estabblished in France which allows business managers to transfer their business to their heir while minimizing the tax burdens linked to succession. This strategy is particularly interesting for small and medium-sized family businesses .


The donation-transfer allows the business manager to gradually transfer ownership   of his business to his heir. In other words, the business manager 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 be done in the form of a forward sale, a transfer of shares, or a transfer of shares.


What are the advantages ?


The advantages of the donation-cession are multiple. First of all, this strategy makes it possible to considerably reduce French inheritance taxes . Indeed, gift taxes  are much lower than inheritance taxes , and can even be zero in certain cases, depending on the relationship between the donor and the beneficiary.


So when you transfer financial securities to your children, you will “ purge ” the capital gain, that is to say you will not pay inheritance tax on the capital gain of your shares . Your child will receive shares in the amount of the value including the capital gain. Thus, when he resells his shares, he will not pay capital gains inheritance tax. He will only pay gift tax.


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


Finally, the donation-transfer   allows the business manager to maintain a certain autonomy during the transfer period. Indeed, the transfer can be spread over several years, and the company manager can retain preferential voting rights to guarantee the continuity of management of the company.

Let's say, for example, that you make an investment of €10,000. 5 years later it is worth €100,000. Then, you transfer these shares to your children who will therefore 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 less the €10,000 invested). They will only pay gift tax, knowing that up to €100,000 they benefit from a reduction which allows them not to pay taxes. They will thus have received €100,000 from you.

How to benefit from it?


To benefit from the advantages of the donation-transfer for your French company, certain conditions must be met.


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

Then, the donor must be under 80 years old, and the beneficiary must be an adult.

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

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



Do you want to know more about solutions to set up your estate now?

Ask our experts to accompany you !



With  Blendy , French digital accountant take advantage of digital accounting to accelerate your finance process and develop your business.


Pennylane ,  Dext ,  QuickBooks and Stripe  experts, we support digital and IT service companies, e-Commerce, SaaS, SMBs, in France and internationally.

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