One of the challenges faced by UK nationals owning second homes in mainland Europe has been how to pass on their property satisfactorily after their death. There is much greater awareness these days of the limitations imposed by many Continental systems of inheritance. These often confer rights on certain family members such as children (forced heirship). Consequently, the ability to leave overseas property to, say, surviving spouse may be severely curtailed.
A remedy now appears to be at hand, one that avoids the sometimes elaborate strategies which have been adopted in the past to circumvent forced heirship. It comes in the form of Regulation (EU) 650/2012, known as Brussels IV for short. This will apply to the estates of individuals who die on or after 17 August 2015, and is binding on all EU member states except for the UK, Ireland and Denmark.
Although the UK has chosen not to opt into Brussels IV at this stage, the Regulation is still relevant to estates that have connections both to the UK and to a participating EU member state. This is because Brussels IV seeks, among other things, to avoid conflict between different national laws of inheritance when someone dies with assets in two or more legal jurisdictions, one of which is an opted-in EU member state. It does this through a set of rules which bind all of the Brussels IV signatories.
One of the core provisions concerns the law which is to determine entitlement (succession) to a person’s estate in the Brussels IV area. Under Article 21(1), the default position is that the applicable succession law will be the law of the state in which the deceased was ‘habitually resident’ at death. However, by virtue of Article 22, a person can choose to apply the law of any nationality that he or she has at the time of making the choice or at the time of death.
This means, for example, that a British citizen with a holiday home in Bavaria (where the German Civil Code would normally apply forced heirship) now has the opportunity to bequeath that property with the testamentary freedom allowed by English law.
Brussels IV inserts a ‘public policy’ exception among the provisions dealing with applicable succession law. This has generated a certain amount of caution among commentators on the true impact of the Regulation, particularly with a country like France, where forced heirship has been a cardinal principle of the Code Civile for more than 200 years. The decisions of courts in the Brussels IV area will be watched with particular interest by advisers in cross-border estates.
We consider Brussels IV to be a generally positive development for families owning property in Europe. In an increasingly mobile world, it offers a long overdue path away from the time-consuming and expensive uncertainty placed on executors and beneficiaries of multi-jurisdictional estates which link the UK with another country of the EU.
The Succession Regulation specifically allows a choice of law to be made before 17 August 2015. Accordingly, those who already own property in the Brussels IV area, or who are likely to do so in the foreseeable future, should review their English Wills now, alongside any separate arrangements they may have in the country concerned. As with any estate planning, the tax implications must be considered, since Brussels IV does not extend to revenue matters.
It offers a long overdue path away from the time-consuming and expensive uncertainty placed on executors and beneficiaries of multi-jurisdictional estates which link the UK with another country of the EU.
To further discuss any of the information detailed above please contact Partner/Head of Trust Management, Stuart Goodbody from our Private Client team.