Concealment of Inheritance: Beware of Non-Reportable Gifts Made Outside the Share

Imagine: in Lourdes, a family is torn apart after the death of the parents. One of the children, who had been given a gift of shares in a family property company (SCI) a few years earlier, is accused by his siblings of having concealed this asset during the division. Anger rises, lawyers get to work, and the court must decide: is there concealment of inheritance? The answer, which appears technical, changes everything. Because a gift made "by precipitation and outside the share" (by right of survivorship and outside the share) is not reportable to the estate. Therefore, concealing it does not constitute concealment within the meaning of Article 778 of the French Civil Code. This decision of 25 May 2016 by the Supreme Court clarifies a crucial point for thousands of families.

Are you the owner of a property in Saint-Jean-de-Luz and have you received a gift from your parents? Or are you an heir and suspect a sibling of having concealed an asset? The issue of concealment of inheritance is a sword of Damocles. But the penalty — losing one's rights to the concealed asset — only applies if the gift was reportable or reducible. Understanding this nuance can save your inheritance.

What exactly does this decision say, and how can it be applied concretely to your situation? Let's break it down.

The facts: a story like many that happen every day

Mr [M], a property owner in Lourdes, and his wife had set up a family SCI, the SCI du Carandeau. In 1998, they transferred to their son [A] 8 shares in this SCI at a price of 340,000 francs, as well as shares in another SCI, the SCI Trapellan, for 16,000 francs, their original nominal value. These gifts were made "by precipitation and outside the share" (by right of survivorship and outside the share), meaning that the son did not have to bring them back into the estate for division.

Upon the death of the parents, the other children discovered the existence of these transfers and considered that their brother had concealed these assets to remove them from the division. They sued him for concealment of inheritance. The lower court ruled in their favour: the son was found guilty of concealment, meaning he had to return the assets to the estate and lost his rights to them (penalty under Article 778, paragraph 2 of the French Civil Code).

The son appealed. The Court of Appeal upheld the concealment finding, but the Supreme Court quashed this decision. Why? Because the gifts were made by precipitation and outside the share. However, concealment can only relate to assets that are "reportable" (i.e., must be reintegrated into the mass to be divided) or "reducible" (which exceed the disposable portion, i.e., the portion the deceased could freely give without harming the reserved heirs). The Court of Appeal had not checked whether the gifts exceeded the disposable portion, a condition for them to be reducible. Without this verification, concealment was not established.

The reasoning of the court — broken down

The Supreme Court relies on Article 778 of the French Civil Code. This article provides that an heir who has concealed (deliberately hidden) an inheritance asset is deprived of his rights to that asset. But attention: the penalty only applies if the asset was subject to collation (i.e., had to be reintegrated into the mass to be divided) or to reduction (if it exceeds the disposable portion).

In this case, the gifts were "by precipitation and outside the share". The term "precipitation" means that the heir takes the asset before the division, without having to bring it back. "Outside the share" means that the asset does not count towards the child's share of inheritance. In principle, these gifts are not reportable. But they may be reducible if they affect the reserved portion (the minimum share that the law reserves for so-called "reserved heirs": children, spouse in certain cases).

The Court of Appeal had simply noted that the gifts were outside the share, therefore not reportable, but it had not investigated whether they were reducible. However, for concealment to be established, the concealed gift must be either reportable or reducible. The Supreme Court therefore reminds us that the mere fact of hiding a gift made outside the share is not enough: it must also exceed the disposable portion. In other words, an heir may conceal a gift without risking the penalty for concealment, as long as the gift remains within the limits permitted by law.

This decision is a confirmation of prior case law, but it clearly defines the scope of the penalty. It prevents heirs from being heavily penalised for hiding an asset that, in any event, was not supposed to go into the divisible mass.

What this changes for you — concretely

If you are an heir who has received a gift from your parents, you should know that hiding this gift exposes you to the penalty for concealment only if it was reportable or reducible. Concretely:

• For the donee (the one who receives): If the gift is made by precipitation and outside the share, you do not have to declare it in the estate, unless it exceeds the disposable portion. For example, in Saint-Jean-de-Luz, a gift of €100,000 made to a child when the disposable portion is €150,000 will not be reducible. Hiding it will not make you lose the asset. On the other hand, if the gift amounts to €200,000, it is reducible to the extent of €50,000, and its concealment may be penalised.
• For the other heirs: If you suspect a co-heir of having concealed a gift, you must prove not only that it was concealed, but also that it was reportable or reducible. Without this proof, the claim for concealment will be rejected. You may, however, claim reduction if the gift exceeds the disposable portion, but this requires a precise calculation by a notary or lawyer.
• For notaries and advisors: This decision reminds of the importance of clearly qualifying gifts in the deed: by precipitation and outside the share or with collation. Ambiguous drafting can open the door to litigation.

Numerical example: Suppose an estate of €500,000 with three children. The disposable portion is €250,000 (half). If a child receives a gift of €200,000 by precipitation and outside the share, it is not reportable, and since it does not exceed €250,000, it is not reducible. Hiding it does not result in a penalty. On the other hand, if the gift is €300,000, it is reducible by €50,000, and its concealment may be penalised.

Four tips to avoid this type of dispute

• Have a precise estate settlement statement drawn up by a notary as soon as the estate is opened. This statement lists all gifts and allows the calculation of the disposable portion. This avoids accusations of concealment.
• If you are a donee, keep the deed of gift and prove its nature as by precipitation and outside the share. In case of a challenge, you will be able to demonstrate that the asset was not reportable.
• If in doubt about reducibility, consult a lawyer specialising in inheritance law. A quick calculation can save you a long and costly trial. For example, in Lourdes, a 30-minute consultation can clarify the situation.
• Prioritise transparency between heirs. Even if the law does not oblige you to declare a gift made outside the share, doing so can defuse conflicts. An amicable division is always preferable to legal action.

Further reading: related case law and developments

This decision is part of a consistent line of case law. Already, a decision of the French Supreme Court of 10 June 2015 (No. 14-17.313) had ruled that concealment can only relate to assets subject to collation or reduction. The 2016 decision confirms and clarifies this point.

On the other hand, another decision of 13 September 2017 (No. 16-20.382) recalled that the penalty for concealment also applies to an heir who conceals a disguised gift (e.g., a sale at a deliberately undervalued price). In that case, the gift is always reportable because it is considered a liberality.

The trend of the courts is therefore to limit the penalty for concealment only to cases where the concealed asset should have been shared. This protects heirs who receive regular gifts, but imposes on other heirs the burden of proving that the disposable portion has been exceeded. In the future, judges are likely to be increasingly demanding in demonstrating the reportable or reducible nature of the asset.

Checklist before taking action

1. Have I received a gift by precipitation and outside the share? Check the notarial deed. If so, it is not reportable.
2. Does this gift exceed the disposable portion? Calculate the value of the estate and the number of reserved heirs. If so, it is reducible.
3. Have I concealed this gift in the context of the estate? If yes, and if it is reducible, you risk the penalty for concealment.
4. Am I a co-heir who suspects concealment? Gather evidence of the gift and have the disposable portion estimated by a professional.

Are you in a similar situation? A first 30-minute consultation with Maître Zakine (€45) can save you months of proceedings — and often much more. Book an appointment →