Cross border planning: the French PACS

We are seeing that most HNW advisors regularly signpost clients to the importance of entering into a prenuptial agreement prior to marriage. From our perspective, prenuptial agreements have been rising in popularity, in particular following the 2010 Supreme Court judgment in Radmacher v Granantino, and rightly so.  These agreements offer a useful planning tool and can, when drafted appropriately, remove the uncertainty and conflict of contentious divorce proceedings.  Alongside the pre-wedding planning, it is important to recognise the need for legal agreements prior to the start of other relationships, or before an international relocation. A prime example of this, which we are seeing more frequently in our practice, is in relation to the French PACS status.

French PACS and civil partnerships

The French Pacte Civil de Solidarité (“PACS”) is a contract entered into by two unmarried adults, of the same or opposite sex, and which can be signed before a notary or simply registered with the local town hall or with the Foreign Ministry if both partners were born abroad. If the partners live outside of France, at least one of them must be French to register a PACS with the diplomatic or consular agent of their place of residence.

For any clients with international connections (or who may move abroad), it is crucial to be aware that the French PACS may be recognised abroad, and have different financial consequences to those that would be applicable in France. In England & Wales, a validly entered into PACS will be recognised as an overseas relationship under the Civil Partnership Act 2004 (“CPA”) (as a result of the amendments made by regulations in 2019). There is no mechanism to register a PACS in England, but English law will treat a PACS, registered pursuant to French law, as a civil partnership, provided the criteria are satisfied.

The consequences of this recognition of the French PACS as a civil partnership are far-reaching.  The financial consequences under English law go well beyond the rights that a cohabiting PACS couple would have under French law. The rights and obligations imposed under English civil partnership laws puts civil partners in the same position as married couples. Therefore, on the breakdown of the PACS, if English jurisdiction requirements are met, partners can make claims for all forms of financial relief in the same way as they could if they were married (including maintenance claims, property claims and pension sharing).

In France, financial claims related to a PACS are limited to property claims, determined according to what regime the parties have elected in their PACS contract. There are no ongoing maintenance obligations on dissolution. 

In England & Wales, a civil partnership is dissolved through a formal court process, whereas in France, the PACS can be dissolved through a joint declaration of the partners, which they send to the registrar or notary, or through a unilateral decision by one of them. The partner who decides to put an end to the PACS has it notified (by bailiff) to the other. A copy is sent to the registrar or notary. The French formalities are not onerous or time consuming.

Aside from the financial claims, there are other differences between the English civil partnership and the French PACS, including inheritance consequences. In an English civil partnership, if one partner dies without a will, the surviving partner will inherit some or possibly all of the property. Gifts to a civil partner are entirely exempt from inheritance tax and partners can transfer assets to each other free of capital gains tax.  For a PACS in France, absent a will, partners do not automatically become heirs of one another.  The surviving partner can stay in the couple’s main residence for a year free of charge and there is an inheritance tax benefit between partners.

Pre and post-PACS planning

Clients and their professional advisors must be aware of the potential for claims to be made in England & Wales if the partners move here or where one partner is English domiciled.  Given the likely significant differences between the financial outcome in France versus England on dissolution of a French PACS, cross channel planning is essential, to avoid unintended consequences. Consideration will also need to be given to the tax applying in relation to the couple’s assets and the tax impact of an English order dissolving the PACS.

Clients with close links to England & Wales can enter into a pre or post-civil partnership agreement (depending whether the PACS is already in place) with a view to restricting the potential financial claims that could be made in England.  We frequently work in collaboration with French lawyers and notaires to prepare these agreements, putting in place an English agreement which replicates, as closely as possible, the financial consequences flowing from the French PACS.  The English agreement will be much longer and more detailed than a simple PACS contract and needs to be comprehensive and relevant from the legal perspectives of both France and England.

As an alternative to a comprehensive English pre or post-nup, the French lawyers/notaire, could prepare a bespoke PACS contract, drafted to consider the couple’s family and financial situation, with an English lawyer inputting into the draft agreement and giving advice from an English law perspective.  Where there are international considerations, it would be worthwhile for any PACSing couple to opt for a tailored contract to include jurisdiction clauses and clear applicable law clauses.

Advisors should also take note that there are other “overseas relationships” which will be automatically recognised in England & Wales and the considerations above will be equally relevant for those relationships (for example, the Belgian legal cohabitation, civil union in Canada, the German civil partnership “Lebenspartnerschaft” and many more).

Conclusion

We regularly act for clients who are in the process of moving to England. They are frequently surprised that the existing structures they have in place are either not tax efficient here or leave them in a vulnerable position in terms of wealth protection. Foreign nationals moving to England cannot simply assume that a legal arrangement of any kind entered into in their jurisdiction of origin will be upheld or treated in the same way here in England. For that reason it is crucial that advice is taken at an early stage prior to any move being made.

further information

If you have any questions regarding this blog, please contact Will MacFarlane or Claire Wood in our Family & Divorce team. 

about the authors

Will is a partner in the Family & Divorce team and advises clients on the full range of family law issues arising on the breakdown of relationships. He has a particular interest in resolving complex financial claims often with an international element. 

Claire returned to Kingsley Napley as Legal Director in 2022, having previously worked at the firm from 2008- 2018. Claire is a family lawyer with over 15 years’ experience of advising clients on divorce or separation, financial settlement, prenuptial agreements and the arrangements for children.