Owning assets abroad – the impact of the EU Succession Regulation
If you own property such as a holiday home, in another European country this can raise difficult questions in respect of your Will and determining who will inherit the property on your death. The EU Succession Regulation aims to simplify matters.
The position prior to the EU Succession Regulation
In the past, a UK citizen with property in another European country has had to consider the laws of that country when preparing their Will and therefore who will inherit their property. Often, UK citizens have found it necessary to have separate Wills made under the local law for each country in which they own property. Unfortunately, the position can vary from country to country and indeed can be different within the same country depending on the exact nature of the property and how it is held.
For example, for Mr Smith who is resident and domiciled in England and owns a holiday home in France, the question as to who will inherit his property on his death could be governed by English law or French law (depending on the manner in which the property is owned). If French law applies, this would mean that France's forced heirship regime might restrict the persons to whom Mr Smith could leave the property. If English law applies, Mr Smith would be free to leave the property to whoever he wished.
In the past, understanding the position country by country has been time consuming and costly. The EU Succession Regulation seeks to improve the position.
The situation now
The EU Succession Regulation (or Brussels IV) came into force on 17 August 2015 and has been adopted by all EU member states with the exception of Ireland, Denmark and the UK. It aims to simplify the administration of a person's estate on death. Even though the UK has opted out of the Regulation and has voted to leave the EU, its provisions will continue to affect individuals 'habitually resident' in the UK who have property in other European signatory countries, as well as UK passport holders living in the UK or in other European signatory countries.
In countries where the Regulation applies, the default position is that the law of the country in which you are 'habitually resident' when you die governs succession to your estate as a whole. However, the default position is overridden if:
- you are more closely connected with another country when you die (for example, because you have only just moved out of it); or
- you choose to apply the law of your nationality instead. You can make the choice in a Will or codicil. If you have already made a Will in accordance with the law of your nationality, you may be treated as having chosen to apply that law even if your will doesn't mention this.
If you are a UK national, you can choose to apply the law of the jurisdiction within the UK with which you are most closely connected (that is, England and Wales, Scotland or Northern Ireland).
The most important change introduced by the Regulation is to apply the laws of a single country to a person's estate on death regardless of which European signatory country the property is in.
What this means for you
In general terms, Mr Smith, our UK passport holder referred to above can now make a Will under the laws of England and Wales in respect of his worldwide property, which should be accepted and applied in other European signatory countries where any of his property is located. This removes the need for Mr Smith to make Wills under the local law in other European signatory countries.
Alternatively, if Mr Smith is 'habitually resident' in England at the time of his death but has not made a Will then the relevant laws of England and Wales, including the law of intestacy, should apply to determine who inherits Mr Smith's property located in all European signatory countries.
In some cases it may not be necessary to make an election, and the laws of succession in another country might be in line with the inheritance provisions that you had intended. However, if you own property in another European country, it is certainly worth checking this and discussing the options available to you. These could include making an election of law under the EU Succession Regulation, or having a separate Will to deal with your assets in that country. Each case needs to be assessed on its own merits.
It should also be noted that the Regulation does not deal with how estates will be taxed on death. Therefore, where an individual dies owning assets in another European country, they will still, in many cases, be subject to taxation under that country's laws.
In light of the changes introduced by the EU Succession Regulation, if you have property in another European country or are a UK citizen living in another European country you should consider reviewing, and possibly updating, your Will.
If you require advice or an initial discussion about how the Regulation might affect you, please contact Josh Boughton, Laura Harper or another member of our Succession and Tax team.