Estate and inheritance: the new exemption rules to protect your loved ones

Tax rules surrounding wealth transfer are evolving to better protect families. In 2026, allowances on inheritance tax remain set at 100 000 € for children and parents, while specific measures encourage early transfers. Understanding these mechanisms makes it possible to optimize the protection of your loved ones and to secure your estate planning.

In short : Inheritance allowances are the key to reducing the taxation of estates. Each kinship category benefits from a specific deduction: 100 000 € for direct line, 15 932 € between brothers and sisters, 7 967 € for nephews and nieces. Heirs with disabilities enjoy a cumulative allowance of 159 325 €, while life insurance remains tax-exempt within certain limits. The finance law also establishes a temporary allowance of 100 000 € for family gifts intended for the purchase or energy renovation of a residence. These new rules aim to facilitate intergenerational transfer while protecting heirs against tax liabilities.

Understanding the inheritance tax allowance mechanism

The allowance represents a deduction applied to the value of the estate before calculating inheritance tax. It functions like a tax shield: the closer the kinship between the deceased and the heir, the greater the deduction granted. This system is based on the conviction that transfers within families deserve favorable tax treatment.

The operation is simple but strategic. Suppose a child inherits €250,000 from a deceased parent. With the €100,000 allowance applicable in the direct line, only €150,000 becomes taxable. Inheritance tax is then calculated on this reduced base, according to a progressive scale. Without this deduction, the amount of tax would have been significantly higher, burdening the inheritance and complicating the transfer of family assets.

Allowances by degree of kinship in 2026

The structure of the allowances clearly favors direct descendants. Children and parents of the deceased benefit from an allowance of 100 000 €, granted regardless of the number of heirs. Each child has their own allowance, which creates an increasing tax advantage for larger sibling groups.

For collateral transfers, the amounts fall sharply. A brother or sister of the deceased receives an allowance of 15 932 €, while nephews and nieces have only 7 967 €. For example, a nephew inheriting 50 000 € from his uncle will see only 42 033 € subject to taxation. These differences in treatment reflect a fiscal policy that favors direct lines, regarded as the traditional form of family transfer.

Marital or civil status also creates major distinctions. The spouse or PACS partner of the deceased enjoys a total exemption: no inheritance tax applies to their share of the estate, whatever its value. This provision recognizes the special character of the conjugal bond and guarantees the continuity of the household after a death.

Enhanced allowances for disability situations

An exceptional scheme benefits heirs with disabilities. An additional allowance of 159 325 € is added to the one applicable according to the kinship, creating a powerful cumulative effect. A disabled child of the deceased therefore combines the 100 000 € allowance as a child plus the 159 325 € related to the disability, bringing the total allowance to 259 325 €.

To benefit from this specific advantage, proof of the disability is required. Accepted supporting documents include a detailed medical certificate, a certificate from a specialized educational establishment, or a declaration from the Departmental Commission for the Rights and Autonomy of Disabled Persons (CDAPH). These documents must demonstrate that the beneficiary's situation prevents them from carrying out a normal professional or academic activity.

Concrete calculation of inheritance tax: practical examples

Moving from theory to practice reveals how these allowances translate into real tax savings. Consider the case of an ordinary family estate to better grasp the issues.

Marc, forty-two years old, inherits from his father who died in January 2026. The estate includes an apartment valued at 180 000 € and financial investments amounting to 70 000 €, making a total transferred estate value of 250 000 €. No debt encumbers the estate, simplifying the calculation. Marc is an only child and receives the entirety of this estate.

First step: application of the allowance. As the child of the deceased, Marc benefits from an allowance of 100 000 €. The taxable amount therefore becomes 250 000 € – 100 000 € = 150 000 €.

Second step: application of the progressive scale. The 150 000 € taxable amount is broken down according to the tax brackets: 5 % up to 8 072 € (403,60 €), 10 % from 8 073 € to 12 109 € (403,70 €), 15 % from 12 110 € to 15 932 € (573,30 €), and 20 % from 15 933 € to 150 000 € (26 813,40 €). The total tax payable amounts to 28 194,35 €. Without the allowance, Marc would have had to pay about 42 700 €, a saving of more than 14 000 € thanks to this single mechanism.

Specifics for transfers between brothers and sisters

When an estate involves collateral relations, the rules change significantly. A brother or sister inheriting from the deceased is not subject to the same tax scale as children. An allowance of 15 932 € applies first, then taxation is at a different rate: 35 % if the value remains below 24 430 €, and 45 % above that.

However, an important exception exists: total exemption is possible if the brother or sister meets three conditions. He or she must be single, divorced, legally separated, or widowed; be at least fifty years old or infirm and unable to work; and have cohabited with the deceased without interruption for at least five years before their death. These strict conditions aim to protect siblings united by close ties and a long shared life.

Life insurance: an exceptional mechanism for transfer

Life insurance occupies a unique place in estate taxation. Unlike ordinary assets, the insured capital does not pass through the estate and is not subject to classical inheritance tax. This distinction explains why many consider life insurance a preferred tool for wealth transfer.

The special regime for life insurance is based on specific legal provisions that offer significant advantages. According to article L132-12 of the Insurance Code, annuities paid to designated beneficiaries escape traditional inheritance tax. In their place, a lighter taxation applies: An allowance of 152 500 € benefits each beneficiary for payments made before the policyholder's 70th birthday, while an allowance of 30 500 € applies for payments after age 70.

Imagine a mother who took out a life insurance policy at age 55, with a regular premium of €200 for twenty-five years. She designates her only daughter as beneficiary. At the mother's death, the accumulated capital of 60 000 € is completely exempt from inheritance tax thanks to the allowance of 152 500 € applicable. That same sum, if it had been part of the ordinary estate, would have incurred inheritance tax, even if reduced.

If the deceased had named no specific beneficiary, the capital automatically returns to the estate and is divided among the heirs according to the usual succession rules. That is why naming a beneficiary is a crucial step, often not given enough seriousness in family planning.

Innovations 2025-2026: strengthening family protection

The finance law introduces a new mechanism particularly advantageous for property acquisitions and energy improvements. A temporary allowance of 100 000 € per donor applies to family gifts intended for the purchase or energy renovation of a residence, valid until December 31, 2027. This provision recognizes contemporary issues of housing and the ecological transition.

To benefit from this innovative allowance, several conditions must be met. Funds must be used within six months following the donation for the purchase of a main residence or energy improvement works (insulation, high-performance heating systems, etc.). The property must then be kept for a minimum of five years. These timing requirements aim to ensure that the tax aid actually serves long-term purposes and does not become a mere short-term optimization mechanism.

The declaration of these gifts follows two routes depending on their nature. For notarized donations, the notary transmits the deed directly to the Directorate General of Public Finances (DGFiP), simplifying procedures. For manual gifts, the beneficiary makes the declaration themselves by accessing their personal space on impots.gouv.fr. This dematerialization reduces administrative friction and facilitates access to this tax opportunity.

Adjustments to protective ceilings

Beyond the property allowance, the law increased several important ceilings to strengthen the protection of modest estates. The ceiling for deductible funeral expenses rises to 5 910 €, acknowledging the inflation in costs related to funerals and worship. This increase particularly benefits low-income families for whom these expenses represent a significant burden.

The recovery threshold for the Social Assistance for the Elderly (ASPA) was also revised. For deaths occurring in 2026, this threshold reaches 108 585,14 € in metropolitan France, and 150 000 € in overseas departments. These thresholds determine the minimal estate amount below which the State does not seek to recover social expenses incurred for the deceased. These increases reflect a desire to preserve small family estates from over-taxation.

Business transfer: a special tax treatment

The transfer of a family business follows specific rules recognized by lawmakers as essential to preserve the economic fabric. The Dutreil regime, a cornerstone of this taxation, allows partial exemption under conditions. Heirs taking over a professional activity can benefit from a 75 % exemption on the value of professional assets, provided they keep the business for a minimum period of six years.

For very small businesses, the scheme is even more advantageous. A 90 % exemption applies provided the valuation does not exceed 5 million euros. This progressivity recognizes that SMEs and very small enterprises face particular difficulties during generational changes, otherwise risking dissolution due to the tax burden of inheritance duties.

Agricultural operations receive an even more favorable treatment. A partial exemption of 85 % applies to the value of farmland and farm buildings, provided the agricultural activity is effectively continued for seven years after the transfer. This protection recognizes the sector's specificities: large fixed assets, often modest profitability, and strategic importance for the rural economy and national food supply.

Estate planning: anticipating to protect

The best transfer strategy begins well before death. Anticipation makes it possible to structure assets, optimize taxation, and above all to prevent family conflicts after death. The donation-partage is a key instrument, allowing the transfer of assets during one's lifetime while fixing their values at the time of the partition.

The donation-partage offers a twofold interest. On one hand, it freezes the value of assets on the day of transfer: if a gifted asset later appreciates, this gain does not increase the heirs' tax base. On the other hand, it allows the donor to define the shares themselves, thus preventing disputes during the settlement of the estate. A mother can for example give a house to her eldest daughter, a financial portfolio to her son, and a plot of land to her youngest child, assessing these elements equally according to her perception.

Financial planning techniques also make it possible to secure heirs' cash flow by offering them flexibility in the payment of inheritance tax. Spreading the payment over several years is a valuable option for heirs receiving real estate: rather than selling a property to pay the tax, they can spread the payment over a longer period.

Life insurance as a planning instrument

Life insurance naturally fits into a global transfer strategy. Unlike a classic estate, the insured capital does not depend on legal heirs: the policyholder freely designates beneficiaries. This flexibility allows succession arrangements that are otherwise impossible. A parent can for example allocate an equivalent share to their children despite an indivisible real estate estate: the one who receives the house gets a smaller life insurance, while the one who receives little or no real estate gets a larger insured capital.

The fiscal interest combines with the practical one. Life insurance is an excellent long-term savings vehicle, particularly relevant in a multigenerational transfer logic. The policyholder gradually accumulates reserves while benefiting from reduced taxation on generated interest. Over time, these reserves are transmitted without traditional inheritance duties, representing a substantial tax saving.

The decisive role of professional advice in estates

The increasing complexity of estate regulations justifies resorting to specialized professionals. A notary or an attorney in succession law provides irreplaceable expertise, both on fiscal aspects and on family and patrimonial matters. These advisors help structure the transfer optimally, avoiding tax pitfalls and interpersonal conflicts.

The notary plays a particularly important role. He formalizes donations, drafts wills, establishes the estate partition deed, and makes declarations to the tax administration. His intervention legally secures each step and guarantees the fiscal compliance of operations. He also informs the client of all optimization mechanisms applicable to their situation: allowances, staged donations, life insurance, family holding structures, etc.

The lawyer provides complementary insight, particularly useful in case of conflict between heirs, prolonged co-ownership, or disagreement over the distribution of a complex estate. He can also anticipate the risk of litigation by proposing, while the estate holder is still alive, a clear and consensual distribution, formalized in writing to avoid any later misunderstanding.

Particular situations: non-biological heirs and people with no family ties

The French system recognizes family situations beyond simple biological links. A child adopted by full adoption benefits exactly the same rights as a biological child: allowance of 100 000 € and the same taxation scale. This equal treatment reflects a legal philosophy: adoption creates a bond equivalent to natural filiation.

Simple adoption, more restrictive, does not automatically confer these advantages. The adopted child benefits from the same rights as a biological child only if certain conditions are met. If he or she is a minor or from the deceased's first marriage, no additional condition applies. If of age, they must have been dependent on the deceased for at least five continuous years. This distinction protects the system against late adoptions motivated solely by tax optimization.

People entirely unrelated to the deceased occupy the least favorable position. They benefit from only a minimal allowance of 1 594 €, and taxation is at 60 %. A friend, a neighbor or an unmarried partner of the deceased must therefore pay considerable duties in the event of an inheritance. This heavy taxation explains why same-sex couples before the introduction of marriage equality, or informal partners, long used life insurance as the main transfer vehicle: it escapes this prohibitive taxation.

Beyond allowances: additional deductions

Allowances are only part of the tax reduction mechanism. Several other deductions reduce the taxable base and lighten heirs' burden. Funeral expenses, capped at 5 910 €, are fully deductible from the estate. This means that an heir typically receiving 200 000 € will see this amount reduced by 5 910 € if funeral expenses have been incurred.

Debts of the deceased also reduce the taxable base. If the deceased leaves an outstanding mortgage, heirs can deduct the balance of that loan from the value of the transferred assets. A house valued at 300 000 € encumbered with a mortgage of 100 000 € increases the base by only 200 000 €. This mechanism can in some cases make the inheritance fiscally lighter than it initially appears.

For estates including specific financial or real estate assets, other reductions are possible. Shares in real estate investment companies (SCPI) receive particular tax treatment in certain situations, and tangible assets such as gold benefit from specific valuation rules. Professional advice helps identify and optimize each of these opportunities.

Digital transmission and taxation: new challenges

As estates increasingly include dematerialized and digital assets, succession law must adapt. Cryptocurrencies raise particularly thorny questions: how to value them? How to transfer them? What inheritance duties apply? The pseudonymous nature of these assets complicates their identification during succession, and their volatility makes valuation delicate.

Digital platforms (crypto wallets, digital accounts, data stored in the cloud) also require new attention. A savvy testator must think about passing on access to these resources to their designated heirs: account identifiers, recovery phrases for crypto wallets, backup information for sensitive data. These practical details, often forgotten, can make digital transfer impossible or very costly.

Soon, succession law will likely integrate specific categories for digital assets, similar to classic real and personal property. Entrepreneurs and owners of small digital structures should already consider the transfer of their clients, contracts, data and intangible assets, whose value can be considerable but difficult to quantify with traditional valuation tools.

International transfer: growing complexity

When an estate involves assets or heirs located abroad, the rules on applicable law become considerably more complex. France generally applies its own inheritance tax to non-residents inheriting French assets, while French residents bear tax on their worldwide assets. This asymmetry sometimes creates apparent injustice: an American heir receives a Paris apartment and pays French tax on that transaction, while they would be subject to different taxation in the United States.

Bilateral tax conventions attempt to mitigate double taxation, but they remain complex and little known. An heir with ties in several countries should consult an expert in international tax law before regularizing the estate, in order to understand the implications of all jurisdictions involved.

Digitalization and increased human mobility make cross-border estates progressively more common. Wealth management platforms now allow centralizing information about properties dispersed geographically, thus facilitating the work of heirs and professionals in charge of settling the estate.