A new EU Regulation could make life (and death) easier for British people who own property or other assets in Europe – but only if they have taken a few simple steps to update their Will, advises a leading international property expert.
Sarah Bogard, a Partner and French property law specialist at law firm Furley Page, explains that up to now, a person dying with some cross border element to their estate can leave a headache for the Executors and heirs given the conflict of laws between the different countries concerned.
The aim of the new Regulation – known as Brussels IV – is to harmonise and resolve these conflicts of succession laws across countries in the EU. It was passed in 2012 but will start to apply fully to all deaths occurring on or after 17 August 2015 where there is some connection with an EU country. It will have a major impact on the way estates will be distributed and administered on death.
There is certainly a need for a simpler approach, says Sarah. For example, the law of England and Wales provides that land and property pass in accordance with the succession laws of the country where the asset is situated, whereas movable assets (eg a bank account or personal items) in the same estate pass in accordance with the laws of the country of the deceased person’s last domicile.
While in England and Wales we benefit from testamentary freedom, many civil law countries, such as France, protect the inheritance of close relatives, particularly children, by granting them statutory inheritance entitlements, even if a Will is made to provide otherwise.
Sarah says: “In the case of someone domiciled in England owning a holiday home in France, both English and French succession laws would have to be considered to work out which assets pass to which heirs and beneficiaries.
“This person could find that after his death the ownership of the property is divided – under the French system of ‘forced heirship’ – among family members that he did not intend to, or might not have expected at that time, to benefit. By contrast, English succession law offers relative freedom in determining who receives your assets after your death.”
The solution under Brussels IV is that the succession laws of the country of a deceased person’s last habitual residence will apply to the estate as a whole. It applies to assets situated in most member states – the exceptions being the UK, Ireland and Denmark, who have either opted-out or currently not chosen to opt-in.
“However – and this is important for people living in Britain and those with British nationality wherever they live – any person can elect by Will for their own national law of succession to apply instead,” explains Sarah.
“This is relevant for British people because even though the UK has not opted into Brussels IV, a Brit living in the UK with a property in, say, France, can elect for English succession law to govern all their assets, including the French property, whereas before 17 August 2015 French law would apply.”
So how easy is it to update your Will to comply with the new Brussels IV rules? “Care will need to be taken when including a declaration in a Will. Where a declaration of choice of law of your country of nationality is appropriate and can be made successfully, this can help to avoid an unwanted application of fixed inheritance rights of another country.
“However, one trap for the unwary will be the fact that Brussels IV makes no change to the application of inheritance tax. While the option of a choice of law declaration might be good for the distribution of your assets, it could create a detrimental tax consequence. For example, French law has IHT-efficient inheritance options for a family where there is a surviving spouse and children of a previous relationship. They can circumvent a 60% IHT rate which would apply on a transfer from step-parent to step-child. If English law is to apply, then without careful planning it could make the French IHT position worse.”
What about Wills made before 17 August 2015? “A properly executed Will made before this date will continue to be valid, but it must be reviewed for its impact on what succession laws are to apply from 17 August. Even if you haven’t made an express choice of law declaration, your Will may imply a choice of law declaration, and this is not going to be the best option for everyone. It is vital that each case is looked at individually.”
Sarah stressed that if you have an estate which will be affected by Brussels IV then now is the time to review your Will and, if you haven’t got a Will, to make one quickly. “Get advice on how this Regulation will impact on your own estate to make sure you structure your affairs in the best way for you and your intended beneficiaries.
“If you live in Britain and own property or other assets in the EU or indeed if you live abroad and have connections with another EU country (eg by nationality or ownership of assets) then I would urge you to make 2015 the year when you review your affairs and make sure your Will is fully up to date,” adds Sarah.
Sarah Bogard specialises in advising clients on the ownership of property in France and is also a Chartered Tax Adviser and member of the Chartered Institute of Taxation. She and her team advise on all aspects of English and French Will drafting, tax and estate planning. Sarah regularly gives seminars on making a Will and is a contributor for French magazine French Property News. Her French legal work includes helping beneficiaries with the administration of an estate following death which comprises French assets, and advising on matters of French succession and Wills. A fluent French speaker, her work regularly involves liaising with Notaires in France.
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