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FAMILY

France’s welfare state set to get a little stingier

France’s welfare state is renowned worldwide for its generosity but the government has suggested that it might be time to tighten purse strings when it comes to the sensitive issues of unemployment benefits and family allowances. However, whether it will or not is another question.

France's welfare state set to get a little stingier
Protesters hold a banner reading "Unemployed and precarious workers marching for their rights" in southern France. Photo: Pascal Puyot/AFP

France’s PM Manuel Valls chose a trip to London this week to stir up a hornet’s nest back in France.

Perhaps he was wise to wait until he was out of the country given that he broached the highly sensitive issue of France’s unemployment benefits, which are considered some of the most generous in Europe.

Valls told a group of British journalists that it was time France looked at the system of payments which can see jobseekers claim allowances (assurances chômage) of up to a €6, 624 a month – over a period of two years – ten times the maximum paid out in the UK, according to a study by the Nouvel Obs.

The reformist PM, who continues to be compared to Tony Blair for his pro-business rhetoric and willingness to take on the traditional left, wants to reduce the amount paid out as well as the length of time allowances are paid out for, with the aim of encouraging people back into work.

When news of his comments made it back across the Channel there was the expected uproar from unions and leftist politicians.

But cutting unemployment benefits wasn’t the only sensitive area of France’s welfare state that Valls suggested needed reforming this week.

He also ignited a debate over the "allocations familiales" (family allowances or child benefit) which are paid out to all families in France irrespective of their salaries.

The PM mooted that it was perhaps time to rethink the allowances and make them means tested. Cue more unrest among unions and various family organisations.

His two welfare reform proposals come on the back of the 2015 social security budget presented this week that will see the government make a series of cuts aimed at saving €700 million next year.

Parental leave will be reduced and allowances paid out for the birth of children and to help parents with child care costs will also be reduced and made means tested.

All in all, it looks like the Socialist government has realised that if it wants to reduce the country’s crippling debt then its famous “protection sociale” will have to pay the price.

Expert Didier Demaziere from France’s National Centre for Scientific Research (CNRS) told The Local it’s inevitable there will be reforms to unemployment benefits because the system is in debt, but it won’t be the government that decides exactly what they are.

“The system is managed by unions and employers through agreements so any reform will have to be negotiated by those two groups,  which will no doubt be fraught,” he said.

“There will be some kind of reform, the question is what and how will it change,” he said.

Demaziere pointed out that stories of the outrageous generosity of France’s system jobless benefits system are often exaggerated.

“In reality only 0.7 percent of jobseekers pick up the maximum each month and the average amount paid out is €987 a month,” he said.

Demaziere says it’s more the time period allowances are paid out for, rather than the amount, that makes France’s “assurances chomage” system appear more generous than in other EU countries.

In Sweden unemployment benefit is paid out for 300 days, in Germany it’s a one year, Italy eight months and in the UK it’s six months, according to the Nouvel Obs study.

But despite predicting that reforms will have to be made, Demaziere says France is not about to dismantle its welfare state.

“Not even a right wing government would do that in France.  The country’s social protection allows us to limit poverty. When you compare France to countries like the UK, that’s its advantage,” he said.

“It’s based on the principle of solidarity where everyone contributes for the good of everyone,” Demaziere said.

On the issue of family allowances Demaziere also believes that despite the expectant uproar, it’s inevitable that changes are made to make the payments based on salaries.

“There will be protests, but a reform will be passed,” he said.

The question is how willing are the French public to see their welfare state messed with?

An opinion poll this week revealed the French accept that changes need to be made.

In terms of family allowances, eight of ten said they were favourable to the amount paid to be placed on sliding scale dependent on salary and 65 percent approved unemployment allowances should decrease over time.

However the poll revealed the French would not accept seeing cuts made to their health or pensions system.

The question now is, will any reform actually take place or as BFM TV pointed out is this just “a lot of noise for nothing” from Manuel Valls. 

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PROPERTY

French property: What is buying ‘en tontine’?

If you're buying property in France, you might be thinking about buying 'en tontine' - this has advantages especially when it comes to France's strict inheritance laws, but can also have tax implications.

French property: What is buying 'en tontine'?

What is it?

The ‘clause de tontine’ sometimes also known as a ‘clause d’accroissement’ is a clause that is inserted into the property deeds when you are buying a house or apartment.

It can only be inserted during the purchase, and cannot be added later.

It’s basically a ‘group purchase’. It’s most commonly used by unmarried couples who are buying together but it can be used by larger groups too – for example a group of friends buying a holiday home together.

You will have to ask a notaire to draw up the tontine clause during the property purchase and it can only be used if 

  • the parties are equally involved in the financing of the purchase
  • the parties involved have a roughly equal life expectancy (for this reason tontine clauses may be rejected if there is a significant difference in age between the purchasers)

What’s the point of it?

The main reason that people use it is to sidestep France’s strict inheritance laws, which assign that a certain portion of every estate must go to children, at the expense of a partner. 

READ ALSO How France’s strict inheritance laws work

For this reason it is particularly used by couples who have children from previous relationships.

On a property with a tontine clause in effect, when one owner dies their share of the property passes in its entirely to the other member/members of the tontine.

This cuts out children from inheritance, but means that a surviving partner is not evicted from their home in favour of the children of the deceased. 

It also has the advantage of making the intentions of the deceased clear, to avoid arguments among heirs after their death.

It should be noted, however, that the tontine clause only takes in the property that it covers – other assets may be subject to French inheritance law so it’s therefore probably wise to arrange a will, to ensure your wishes for your estate are met.

The surviving party can ask a notaire to update the property deeds to show that they are the sole owner, if they want. Be aware there will be a fee, which could reach four figures for the privilege – and it doesn’t actually involve any change to the property title.

Drawbacks

The advantages of the system are clear, especially for blended families, but there are some potential drawbacks too, which mean that anyone considering buying in this way would be well advised to take proper legal advice before they start.

Inheritance tax – while a tontine will help you to avoid restrictions on inheritance, it does not exempt you from inheritance tax. French inheritance tax is structured according to your relationship to the deceased, and people who are neither married nor related to the deceased pay an eye-watering inheritance tax rate of 60 percent.

The only exception to this top rate of inheritance tax is if the property is your main residence and it is valued at under €76,000 – in that case, tax is paid at a rate of 5.8 percent.

Married couples and family members pay a much lower rate or not tax, but if you’re not married to your tontine co-purchaser, be careful that you’re not lining yourself up for a massive tax bill in future years.

Wealth tax – depending on the value of the property, it could tip you over into the ‘wealth tax’ category when you inherit. France’s wealth tax is a real estate based tax and is levied on anyone who has real estate assets (property and land) worth €1.3 million or more.

The calculation includes property held en tontine.

Tax savings – you might hear tontines being advised as a way to limit your French tax liability.

While this used to be true, changes to tax laws means there are no no significant tax advantages to buying this way – the same is true for buying a property via an SCI, which used to represent a tax saving until the law was tightened up.

Disinheriting family membersOne side effect of the tontine clause on mixed families is to effectively disinherit any children of the first person to die.

Because the property passed to the survivor, under French law, only their direct descendants – rather than any family by marriage – are entitled to automatic inheritance.

That means that the children of the surviving partner will be entitled to the statutory share of the entire asset (between 25 and 30 percent depending on the number of children), but the children of the first person to die will be entitled to nothing. Obviously you can choose to leave them something in your will, but you can only leave them some or all of the estate which is not automatically given to the children on the survivor.

Divorce/dispute – if the members of the tontine split up or (in the case of friends) fall out, then they can either sell the whole property or agree to buy each other out.

However, if one party refuses to sell, then you have very limited legal options – unlike a standard property purchase a tontine is not regarded as joint ownership, so one partner cannot be forced to sell as part of a divorce procedings, for example.

Basically the tontine can only be ended or changed with the agreement of all parties – so if you can’t agree between yourselves then you may be stuck with it.

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