UK residents with assets in other European states could be caught out by new succession rules.
Succession planning for families involving property in different countries has never been simple. However, a new European Union (EU) law should now make it easier to settle succession issues involving cross-border assets. Though the UK has opted out of the new rules, they may still affect Britons who own property or other assets in another EU member state. These individuals should consider the possible impact of the new law on their estate.
When it comes to disposing of your property through your Will, the underlying principle in England and Wales is ‘freedom of testamentary disposition’. “In other words, you can leave your property to any person or organisation you like, in whatever proportion you choose,” says Tony Müdd, divisional director at St. James’s Place. “In most of the rest of Europe, wherever there is a civil code, some form of ‘forced heirship’ holds sway. Though implementation can differ from state to state, this means that part of the estate must be divided among the family, and the deceased cannot control what happens to their property.”
The European Succession Regulation, better known as ‘Brussels IV’, doesn’t change that, since it leaves internal succession laws of individual member states unaffected. But it does simplify cross-border succession by providing a single criterion for determining what law applies where nationals of one state own property in another. Brussels IV applies to the estate of anyone who dies after 17 August 2015, and it applies in all the EU member states except the UK, Ireland and Denmark, which have opted out. The UK opted out partly because of concerns over possible clawback of lifetime gifts in forced heirship jurisdictions.
In Brussels IV member states, only one national law will now determine how an estate is dealt with, though citizens of the opt-outs are still affected if they own property in a Brussels IV country. From now on, the law of the state in which the deceased was “habitually resident” will apply to succession for assets across the Brussels IV zone. That state need not itself be a Brussels IV state. There are two exceptions to this rule:
If the deceased was “manifestly more closely associated” with another state (to be decided on a case-by-case basis), in which case the law of that other state will apply; or
If the deceased elected in their Will that their own national law should apply to all their assets in the Brussels IV area.
The law also allows a Brussels IV state to refuse to apply the law of another country if that would be “manifestly incompatible” with its own public policy.
“Anyone who lives in or owns assets in a Brussels IV state should get expert advice on the new law and how it may affect their succession planning,” advises Müdd. “UK nationals who would prefer English laws to apply to succession on their death should ensure their Will is revised accordingly.”
Will writing involves the referral to a service that is separate and distinct to those offered by St. James's Place. Wills are not regulated by the Financial Conduct Authority.