France taxes the heir; the United States taxes the estate. When a succession crosses the Atlantic, the risk is rarely double taxation. It is a perfectly settled French succession followed by American penalties nobody anticipated.
The French notary has done everything right. The succession is declared, the duties are paid, the accounts are transferred. The heir, a daughter who has lived in Boston for fifteen years, receives her share and moves on. Two years later, she learns that her inheritance should have been reported to the IRS, that the penalty for not doing so can reach a quarter of its value, and that the French funds she kept are now taxed under a regime designed to punish exactly that choice.
Successions linking France and the United States follow a logic that neither system's practitioners naturally see. The two countries do not tax the same person: France taxes the heir, the United States taxes the estate of the deceased. That difference usually prevents double taxation in the simple cases, and creates traps in all the others. This article maps both directions: the American heir of a French parent, and the American citizen who dies domiciled in France.
Part I sets out who taxes what. Part II examines the French decedent with American heirs. Part III examines the American decedent domiciled in France, where the Form 706-CE comes in. Part IV gives the method.
I. Who taxes what
A. France taxes what the heir receives
French succession duties are owed by each heir on his or her share, with a territorial reach defined in three layers (CGI, art. 750 ter). When the deceased was domiciled in France, all property is taxable, wherever located. When the deceased was not, only property situated in France is taxable, including French real estate held indirectly through companies. And independently of the deceased's domicile, everything received by an heir domiciled in France is taxable, provided the heir has been domiciled there for at least six of the ten preceding years. Each child benefits from an allowance of 100,000 euros (CGI, art. 779, I), and the surviving spouse or civil partner is fully exempt (CGI, art. 796-0 bis). Life insurance sits largely outside the succession and follows its own levy, on the share of each beneficiary above an allowance of 152,500 euros, at 20% and then 31.25% (CGI, art. 990 I), premiums paid after the insured's seventieth birthday following a separate regime to which that article refers.
B. The United States taxes the estate, never the heir
The federal estate tax is a tax on the estate of the deceased. An American citizen or domiciliary is taxed on worldwide assets, above an exemption of 15 million dollars per person in 2026; a non-resident non-citizen is taxed only on assets situated in the United States. The heir, for his part, pays no tax on what he receives: an inheritance is not income. That asymmetry is the key to the whole subject. A French parent's succession is taxed in France only, even when all the heirs live in the United States, because the United States has nothing to tax: the deceased was neither American nor holding American assets.
C. The 1978 treaty as arbiter
When both countries claim the same succession, typically for an American citizen domiciled in France, the France-United States estate and gift tax convention of 24 November 1978, amended by the protocol of 8 December 2004, allocates taxing rights: it determines the fiscal domicile of the deceased (art. 4), reserves real property to the State where it is situated (art. 5), organizes credits (art. 12), and since the protocol, provides a limited American marital deduction when the surviving spouse is not a US citizen (art. 11, para. 3). The United States retains the right to tax the estates of its citizens. We will devote a dedicated analysis to this treaty, which deserves a reading in its own right.
II. The French decedent and the American heir
A. The French duties: the only tax actually due
Take a mother domiciled in France who leaves her estate to two children, one in Lyon and one in Boston. France taxes the whole estate, on both shares, with the allowance of 100,000 euros for each child. The American child owes nothing in the United States on the inheritance. There is no double taxation to resolve: there is one tax, French, and it has been paid. French duties can reach further than heirs expect: in a case brought by an heir living in the United States, the Cour de cassation held that assets placed in a foreign trust, even one described as discretionary and irrevocable and designed to outlive its settlor, must be declared in the French succession when the settlor never effectively divested himself of them, the judge examining how the trust actually functioned rather than its validity under foreign law (Cass. com., 8 Oct. 2025, n° 24-16.995).
B. The American side: no tax, but a return and a valuation
The American heir must nevertheless report the inheritance. A US person who receives, during a year, more than 100,000 dollars from a foreign individual or a foreign estate, including amounts from related persons, must report it on Part IV of Form 3520, filed with the income tax return. The penalty for failing to do so is 5% of the amount received per month of delay, capped at 25% (IRC, section 6039F), unless the heir shows reasonable cause. The penalty is real: in Zhang v. IRS (N.D. Cal., 4 May 2026), a federal court confirmed that the IRS may assess it directly, leaving the taxpayer to argue reasonable cause, in a case concerning family gifts received from abroad. Since late 2024, the IRS has however announced that it no longer assesses these penalties automatically on late-filed Forms 3520 and first examines the taxpayer's reasonable-cause statement, which makes a prompt and documented late filing far preferable to silence. It is the most frequent trap of these successions, because nothing on the French side alerts the heir: the notary has no reason to know about it, and the American adviser often does not know the inheritance exists.
In exchange, the heir benefits from a valuable rule: the basis of inherited property is reset to its fair market value on the date of death (IRC, section 1014), and the IRS has confirmed that this applies to foreign property inherited from a non-resident decedent (Rev. Rul. 84-139). The Paris apartment or the portfolio inherited at today's value can be sold shortly afterwards with little or no taxable gain in the United States. The value must be established in dollars, at the exchange rate of the date of death, and documented: it is the reference for every future American calculation.
C. Three pitfalls: funds, life insurance, accounts
Inherited French funds. French investment funds are PFICs in the hands of an American, and the PFIC regime normally denies the reset of basis at death (IRC, section 1291(e)). The statute makes an exception when the deceased was a non-resident non-citizen throughout the holding period: the American heir of a French parent therefore keeps the reset basis. But from the date of death, the punitive PFIC regime applies to him. The rule is simple: sell the funds inherited from a French parent quickly, when the gain since death is close to zero, and reinvest in instruments compatible with American rules, as we explained in our analysis of assurance-vie and PFICs.
Life insurance. The French levy applies when the insured was domiciled in France, whatever the beneficiary's residence. On the American side, the exclusion of death benefits presupposes a contract that qualifies as life insurance under American law, which the French assurance-vie generally is not. The treatment of the sum received by an American beneficiary therefore deserves a case-by-case analysis, and a conservative approach reports it with the inheritance.
Inherited accounts. If the American heir keeps accounts in France, even temporarily during the settlement, they enter the FBAR and, above the thresholds, Form 8938, with the traps we listed in our FBAR inventory. And if the inheritance passes through a trust, the reporting moves to the trust regime of Form 3520, with its own penalties, described in our article on the double reporting trap.
III. The American citizen who dies in France
A. Two taxes on the same estate
The case reverses when the deceased is an American citizen domiciled in France. France taxes the worldwide estate, as for any French domiciliary. The United States also taxes the worldwide estate of its citizen, on a Form 706, above the 15 million dollar exemption. For most families, that exemption means no American estate tax is due at all, but a return may still be required depending on the size of the estate. For the largest estates, the two taxes overlap, and the treaty and the credit for foreign death taxes resolve the overlap.
B. The credit and Form 706-CE
To credit the French duties against the American estate tax, the executor must file Form 706-CE, a certificate of payment of foreign death tax, before the IRS can allow the credit claimed on Form 706. The form must be certified by an authorized tax official of the foreign government, who confirms the tax finally determined, the amounts paid and the property subjected to it. If the French administration refuses to certify, the executor must explain why and attach a copy of the French return and proof of payment. In practice, this certification is the slowest step of the file: it must be requested as soon as the French duties are paid, not when the American return is due.
C. The surviving spouse who is not American
The French spouse of an American is fully exempt in France. The United States, by contrast, denies the unlimited marital deduction when the surviving spouse is not a US citizen, unless the property passes through a qualified domestic trust that defers the tax (IRC, sections 2056(d) and 2056A). The 2004 protocol provides an alternative for couples linked to France: under conditions relating to citizenship and domicile, and in exchange for waiving any other marital deduction, the estate may deduct the property passing to the spouse up to the amount of the exemption (convention, art. 11, para. 3). With an exemption of 15 million dollars, the question only arises for large estates; for them, it must be organized during lifetime.
D. The heirs of an American decedent: a different basis rule
One consequence often overlooked: the exception that preserves the reset of basis for PFICs inherited from a non-resident does not apply when the deceased was an American citizen. The children of an American who held French funds inherit his historical basis on those funds, with his PFIC history. The same portfolio is therefore worth more, after tax, when inherited from a French parent than from an American one, a difference that justifies cleaning up the American parent's portfolio during lifetime.
IV. The method
A. One valuation, two currencies, two calendars
The values declared in the French succession and the values retained for American purposes must tell the same story: same date, same assets, same appraisals, converted into dollars at the rate of the date of death. Discrepancies are what administrations notice when they exchange information. The two calendars must also be managed together: the French declaration, the American heir's Form 3520 with his income tax return, and, in the case of an American decedent, the Form 706 and the certification of Form 706-CE.
B. Our position
For the American heir of a French parent, the real cost is French and the real risk is American: report the inheritance on Form 3520, document the values at the date of death, sell inherited funds quickly, and keep no French account that is not declared. For the American who will die domiciled in France, the planning happens during lifetime: clean the portfolio of PFICs, organize the spouse's position under the protocol if the estate is large, and prepare the heirs to request the French certification without delay. In both directions, the succession that goes wrong is the one handled by two advisers who never spoke to each other.
Conclusion
France taxes the heir, the United States taxes the estate, and that difference structures every Franco-American succession. When the deceased is French and the heir American, only France taxes, but the United States requires reporting, with a penalty that can reach a quarter of the inheritance, and offers in return a reset of basis that even extends to inherited French funds. When the deceased is an American domiciled in France, both countries may tax, the 1978 treaty and the Form 706-CE credit resolve the overlap, and the non-American spouse requires specific planning.
The practical rule fits in one sentence: a Franco-American succession is settled when it is settled on both sides, with the same values, the same dates, and the reporting the French notary will never mention. The rest is a question of method, and of timing.
Frequently asked questions
I live in the United States and inherited from my mother in France. Do I owe American tax?
Generally no. The United States taxes the estate of a deceased citizen or resident, not the heir, and your mother's estate was taxed in France. But if you received more than 100,000 dollars, you must report the inheritance on Form 3520 with your income tax return; failing to do so exposes you to a penalty of 5% per month, up to 25% of the amount received, unless you show reasonable cause.
What is my American tax basis in the apartment or portfolio I inherited?
In principle, its fair market value on the date of death, converted into dollars at that day's exchange rate. This reset of basis applies to foreign property inherited from a non-resident. If you sell soon after the death, the American taxable gain is therefore generally small. Document the value carefully: it will serve as the reference for every future calculation.
I inherited French investment funds. Should I keep them?
Generally not. In your hands, they are PFICs subject to a punitive regime from the date of death. When inherited from a non-American parent, they keep the reset of basis, so selling them quickly produces little or no gain. Kept, they generate annual reporting and heavy taxation on future gains. The usual recommendation is to sell and reinvest in instruments compatible with American rules.
My American husband is domiciled in France with me. What happens at his death?
France taxes his worldwide estate and fully exempts you as the surviving spouse. The United States also taxes his worldwide estate, above a 15 million dollar exemption in 2026, which means most estates owe nothing. For larger estates, the unlimited marital deduction is denied to a non-citizen spouse, but the 1978 treaty as amended in 2004 provides a limited deduction under conditions, and French duties are credited through Form 706-CE. These questions should be organized during lifetime.