Transcription
This is a phenomenon of unprecedented scale. In the next fifteen years, a significant amount will be transferred by the French to their heirs. When I say "the French," I'm referring to the post-war baby-boom generation, which holds a lot of wealth and is gradually disappearing. This phenomenon has been named, and it raises many fascinating questions. Will France once again become a society of heirs? How will this transfer affect inequalities? And are we taxing inheritance enough? Inheritance is the wealth transferred upon death, during succession. When wealth is transferred during one's lifetime, it's called a gift. Nationally, the total wealth of French households amounts to nearly 15,000 billion euros in 2024. And a large transfer of this wealth is therefore being prepared. Several estimates exist, but according to the Jean-Jaurès Foundation, heirs will receive a total of 9,000 billion euros by 2040. 9,000 billion euros, to give you an idea, is more than two and a half times the amount of the French public debt. So why will so much money change hands? Two factors explain this unprecedented large transfer. Demographics first, because the generation born during the baby boom between 1946 and 1964 is gradually reaching the end of its life. We see this very concretely in the increasing number of deaths in France. We went from an average of 550,000 deaths per year to 650,000 in 2024. And according to projections from Ined, the threshold of 800,000 deaths will be crossed before 2040. Logically, this means more successions. Furthermore, it is these same baby boomers who hold a large portion of the wealth in France. Those over 70 own about a quarter of the national wealth. And if we extend it to those over 50, it's even 70% of the national wealth. This is where the second factor comes into play: In a few decades, the boomers have seen the amount of their wealth explode for one reason in particular. This increase in French wealth is linked to the rise in real estate prices. Marie Gariazzo conducted an investigation into wealth in France for the Jean-Jaurès Foundation. The cost of real estate has evolved twice as fast as the cost of consumer goods and incomes. So, as a result, wealth has been built up very strongly and is today in the primary residences of baby boomers, but also in secondary residences, in rental properties in which they have invested. This real estate wealth, precisely, is concentrated in the hands of a small minority of large owners. In addition to real estate, financial assets such as life insurance or stocks have also contributed in recent years to increasing the wealth of the French and therefore of the boomers. So far, I've mostly talked about the large transfer in the future. But in fact, it has already begun, and some effects are already visible. Where we are already starting to see the effects of the large transfer is in the state's tax revenues. Before going into the details of these effects, here is a mini-lesson on the taxation of transfers in 30 seconds flat. Transfer duties for free were introduced in 1791. It is a very complex system. Here are the main points. Between married and PACSed spouses, there is no tax to pay. Then, the tax rate depends on the degree of kinship. For a direct line succession, meaning between parents and children, there is an allowance of €100,000 which also applies to certain gifts. Beyond €100,000, there are tax brackets that gradually increase from 5% to 45%. As soon as the kinship is less direct: siblings, grandchildren, nephews or nieces. The allowances are lower, and overall these successions or gifts are taxed more. End of lesson. Until the early 2010s, the tax authorities collected between 7 and 8 billion euros per year thanks to inheritance tax. Since then, the amount has doubled. It has reached nearly 16 billion euros. The same applies to gift tax. It has gone from 1 to 4 billion euros in annual revenue. In total, therefore, 20 billion euros enter the state coffers each year thanks to inheritance taxes. Taxes represent about 5% of the succession flow, meaning the sum of gifts and successions made each year. This succession flow is around 400 billion euros today and is expected to gradually reach 677 billion euros in 2040. If nothing changes regarding inheritance taxation, the tax authorities will therefore continue to collect more and more money. Potentially more than 30 billion euros per year by 2040. This is good news for public finances. But the large transfer is likely to disrupt the balance between the French. France is today one of the countries where wealth weighs the most heavily compared to income. And to build wealth, inheritance counts more and more. All the professionals we met tell us that today, it is almost impossible to build wealth solely from one's work income, from salary or... It's a bit. It can be possible through entrepreneurship. But in any case, through salary, it's almost impossible. Today, the share of inherited wealth in total wealth represents 60% compared to 35% in the early 1970s. After the Second World War, one had to work to build wealth. Now, more and more, one has to inherit. Furthermore, inheritance remains very concentrated among a small portion of the population. Within a generation, half of individuals will have inherited less than €70,000 throughout their lives. But this amount reaches €500,000 for one heir in ten and up to €13 million for the top 0.1% of heirs. The problem is that as economic growth is structurally weak, the large transfer risks accentuating social reproduction. Individual destinies will depend less on income trajectory and more on the importance of inheritances received. The risk is the return of a society of heirs like France experienced in the 19th century. At that time, inheritance accounted for more than 80% of wealth. So, Thomas Piketty has an expression for this that is difficult to pronounce. I will try. It's the re-patrimonialization of inequalities. There, I managed to pronounce it. Julien Damon is a columnist for Les Echos. He is very good at pronouncing complicated expressions and especially at popularizing them. Put more simply, wealth inequalities had decreased, they are increasing again. And, I repeat, it is wealth inequalities that most distinguish the French. It is not income inequalities. This is striking when you look at this graph from the Bank of France. The richest 10% of households own more than half of the total wealth, while the poorest 50% of households own only 5% of the total wealth. As you will have understood, the resurgence of inheritance is widening the gap between the rich and the poor within the same generation, but also between the younger and the older. We will see wealth massively change hands to go, let's say perhaps a bit controversially or undiplomatically, from the older to the older. And with a major issue being that young people will not benefit from it. With life expectancy increasing, people inherit later and later. On average after 50 years old, today. And this was absolutely not the case when we imagined the functioning of a welfare state system, the family system with three or four intertwined generations. Today, we are at four, even five intertwined generations, even if five generations is still rare. So, to compensate for these inequalities, inheritance is changing form. Ultimately, we will be less about post-mortem inheritance and more about inheritance that will be distributed, in fact, at all stages of life. And we observe this. The baby-boomer generations and even those who follow a little after are considerably helping their children. And they help them both to access homeownership, to buy a car, to finance their studies, in case of hardship, in case of separation. And this family security is a very important safety net in contemporary French society. Obviously, not everyone benefits from it. The fact is there. Inheritance is profoundly unequal. Very few people benefit from it. And yet, as soon as it comes to touching its taxation, everyone is against it. I'll give you one last figure: 87% of parent-child successions are not taxed because they are less than €100,000. Remember, this is the threshold above which a direct line succession is taxed. In all the polls we conduct, this is something that does not change, it is extremely widespread, the opposition to any increase in inheritance taxes, even though the vast majority of French people would not be affected by these inheritance taxes. In a poll conducted by OpinionWay for Les Echos and Le Conservateur in 2024, nearly three out of four French people believed that inheritance taxes are too high, and 66% wanted a reduction in this tax. This is where we have a major French paradox: on the one hand, there is a very strong demand for social and fiscal justice, we are mostly in favor of reinstating the wealth tax, and at the same time, we are viscerally opposed to increasing inheritance taxes, even though we would not be personally concerned. Yes, it would be wise today to have wealth that can circulate more quickly. Encourage older people to make gifts earlier and even for there to be higher taxation on wealth. But this seems politically unfeasible, so it is problematic, to say the least. Before his re-election in 2022, Emmanuel Macron had proposed to raise the allowances, particularly on inheritance taxes for indirect line transfers. He had finally abandoned this idea due to a lack of budgetary resources. As for inheritance taxation, the last reforms date back more than ten years, under Nicolas Sarkozy and at the beginning of François Hollande's term. They had the effect of increasing taxation. Since then, economists of different leanings such as Thomas Piketty, Olivier Blanchard, and Jean Tirole have proposed to completely revise the succession system. Without success so far. Thank you for watching this video. Tell us your best inheritance stories in the comments. We love reading you. And see you very soon for another video!