Minors' financial assets: managing, protecting and transferring

The assets of a non-emancipated minor are managed by the parents under the statutory administration regime (French Civil Code art. 382). Where parental authority is exercised jointly, each parent is a statutory administrator. For routine acts of administration, article 382-1 provides that each parent is deemed, vis-à-vis third parties, to have received from the other the power to act alone. The most serious acts, however, require the agreement of both parents and, for some of them, the authorisation of the guardianship judge.

Article 387-1 of the French Civil Code makes several acts of disposal subject to the prior authorisation of the guardianship judge, including the private sale of real property or of a business, contributions to a company, borrowing in the minor's name, waiving a right, settlement or arbitration agreements, the outright acceptance of an inheritance, the acquisition or leasing of the minor's property, and the granting of security without consideration to guarantee a third party's debt. The provision also covers any act involving securities or financial instruments that commits the minor's assets on a lasting basis through a significant change in their composition or a significant depreciation of their capital value. Prudent portfolio management therefore requires assessing, transaction by transaction, whether the judge's authorisation is required.

Article 387-2 of the French Civil Code lists acts that the statutory administrator may not carry out, even with the authorisation of the guardianship judge: disposing of the minor's property or rights without consideration, acquiring from a third party a right or claim against the minor, carrying on a trade or a regulated profession in the minor's name, and transferring the minor's property or rights into a fiduciary estate. These prohibitions protect the child against transactions deemed, as a matter of principle, contrary to his or her interests, and they apply even where a third-party administrator has been appointed.

A gift made to a non-emancipated minor must be accepted on the child's behalf. Article 935 of the French Civil Code allows the minor's parents, or other ascendants even during the parents' lifetime, to accept the gift for the child. The acceptance of an unconditional gift falls within statutory administration and may be made by one parent alone. One important rule attaches to the representation, however: the same person cannot be both the donor and the representative of the minor donee. Where a parent or grandparent makes the gift, it must therefore be accepted by another ascendant.

Yes. The donor may provide, in the deed of gift, that the transferred property will be removed from the parents' statutory administration and entrusted to a third-party administrator of the donor's choosing (clause excluding statutory administration). That third party then exercises the powers conferred by the gift or, failing that, those of a statutory administrator. This clause does not, however, allow the public-policy safeguards to be circumvented: the third-party administrator may no more carry out the acts prohibited by article 387-2 of the French Civil Code, nor the acts requiring authorisation without complying with the conditions laid down by law.

A life insurance policy can be taken out in a minor's name, the child being represented by the parents as statutory administrators; the minor can also be designated as beneficiary of a policy taken out by a third party. Subscribing to and funding the policy fall, as a rule, within statutory administration, but surrenders and certain transactions may, depending on their scope, qualify as acts of disposal subject to the rules of article 387-1 of the French Civil Code. The drafting of the beneficiary clause and the possible insertion of an ancillary pact (mandatory use, reinvestment, temporary inalienability) must be coordinated with the family's wealth strategy.

An early transfer can take the form of a gift of the bare ownership of securities or cash to the minor, with the donor retaining the usufruct. The child thereby receives value with a partial exemption from transfer duties, the bare ownership being valued under the scale of article 669 of the French Tax Code according to the usufructuary's age. Upon extinction of the usufruct, in principle at the donor's death, the child acquires full ownership without further taxation. Where the dismemberment concerns cash, the specific rules of the quasi-usufruct must be anticipated and the agreements between usufructuary and bare owner documented.