The laws established under the EEC (since 1958) and under the EU (since 1993) have not to date applied to the rights of succession for the citizens of the Member States. However, that is about to change. With the exception of the UK, Ireland and Denmark, from 17 August 2015 the EU Succession Regulation (No 650/12) comes into effect.
Known as ‘Brussels IV’, it was made on 4 July 2012, but there has been the period of just over 3 years for the Member States affected by it to prepare for its implementation.
In place of the Member States individually deciding whether to apply their own succession laws, there is instead to be a uniform approach to that task by the 25 ‘European’ countries, from Finland in the north to Cyprus in the south and with a combined population of over 430 million. Hence, while the UK seeks to be exempt, Brussels IV’s impact elsewhere in Europe will be enormous.
For the vast majority of UK citizens there will be no particular need to have any regard to the changes that will apply from later this year. However, it would be a mistake to treat them as having little importance within this country. While the UK is not bound by Brussels IV or subject to its application, the same does not necessarily apply to UK citizens or the citizens of other Member States who are residing here.
The Principal Provisions of Brussels IV
Jurisdiction: the basic provision is that the courts of the member state in which the deceased had his/her habitual residence at the time of death shall have jurisdiction to rule on the succession as a whole. That means that no succession issues are referred back to the courts of another country.
The law: the next general principle is that the law applicable to the succession as a whole shall be the law of the state in which the deceased has his/her habitual residence at the time of death.
Altering the applicable law: anyone can change the law under a choice of law provision in Brussels IV, provided he/she chooses the law of a state whose nationality he/she possesses at the time of making that choice or at the time of death.
Change of jurisdiction: where the deceased has chosen the law of his/her nationality, the parties concerned can also agree that the courts of a member state whose law has been chosen shall have exclusive jurisdiction to rule on any succession matter. Further, courts with jurisdiction can decline that jurisdiction in certain circumstances. In such an event jurisdiction will remain with the courts of the member state where the deceased had his/her habitual residence at the date of death.
Recognition, enforceability and enforcement of decisions: a decision given in a member state shall be recognised in the other member states without any special procedure being required. While there are grounds for non-recognition, there can be no review of the substance of a decision. There is to be a European certificate of succession to give Pan-European status to the decisions of a competent court.
The 83 articles, supported by a lengthy preamble, contain exemptions and special rules so inevitably in every individual’s case consideration needs to be given as to whether they apply or have relevance. Also, Brussels IV’s provisions do not apply national laws regarding taxation and other areas of civil law, such as matrimonial property regimes and many forms of trust or inter vivos gifts.
Within the UK there are different jurisdictions, and this article confines itself to England and Wales, although those governed by Scottish and Northern Ireland’s legal systems equally have to take account of the same issues.
Brussels IV majors on the place of habitual residence at the date of death. For various reasons many UK citizens have chosen to live outside the jurisdiction of their country of nationality and, if the new home at death is in another member state governed by Brussels IV, then issues of succession will be determined by the courts of that country and, unless he/she has made a choice of law declaration, its law. That means that wherever the assets the courts with jurisdiction under the habitual residence provisions will assert exclusive control and will apply that country’s law or the deceased’s declared choice of law. Other member states (with the exception of the 3 non signatories) will abide by that, even if there are assets of the deceased within in their own borders. To change jurisdiction requires the agreement of all concerned in the deceased’s estate – in practice not an easy task - or a determination to that effect within the courts where at the time of death an individual was habitually resident.
This creates a clash with English law. The courts here are not bound by or subject to Brussels IV. They are required to apply English law which, subject to various exceptions, operates on the basis of the deceased’s domicile rather than habitual residence, so it applies the law of domicile to the succession to movable assets (e.g. stocks and shares, bank accounts and personal possessions) where there is an intestacy; where there is a testamentary document, for the legatees of movables in certain circumstances the doctrine of election can apply (and which is best explained elsewhere). For immovables (e.g. interests in land) our law insists that all rights are governed by the law of the country where they situated (lex situs).
A core consideration is that other member states do not operate the concept of ‘domicile’ as it is understood here. Elsewhere in Europe it has a restricted meaning and under Brussels IV the preferred term is ‘habitual residence’. Brussels IV does not define ‘habitual residence’, but essentially it is a matter of fact. It can be more easily acquired than a change of domicile. Under English law one is treated as retaining one’s domicile of origin (principally a parent’s domicile at the time of birth) in the absence of a decision to change to the domicile of another country. Many people who leave this country and set up home abroad do not abandon an English domicile.
It follows that there is serious potential for conflict as to how to deal with assets, immovable or movable, in this country or in another member state. It follows that for UK citizens here who also live in another member state or have assets there it is essential, as well as addressing taxation issues (which are unaffected by Brussels IV), to set up an English Will; and either to have a testamentary document in one of the member states, being where he/she is habitually resident, that governs the assets within all other member states (apart from the UK, Ireland or Denmark); or to have separate testamentary documents in each of those other member states, although it needs to be understood that the law to apply to them will be the country of habitual residence or, for a UK citizen, English law, if a choice of law election is made.
As previously mentioned, Brussels IV has no direct impact on other areas of the law for the 25 member states that have adopted it. However, while a lifetime gift and transactions are in general excluded, they can become an issue for countries that operate a ‘clawback’ to satisfy their own forced heirship laws (i.e. they override the testamentary powers of those subject to their jurisdiction for the benefit of a class of family members).
All such issues and non-succession areas of the law can be material to sensible estate and succession planning and will need appropriate attention and in many cases professional guidance.
Non-UK Citizens residing in England
For most non-UK citizens who have come from another member state for employment purposes they will have retained their domicile of origin (as applied by English law), even if habitually resident here. If they are habitually resident here, wherever their assets are, under Brussels IV the courts of their retained domicile within other member states have no jurisdiction to deal with succession issues, even for assets within that other country, unless one of a number of exceptions can be established. Under English law the courts maintain exclusive jurisdiction over immovable assets here and decline to apply English law to immovable assets abroad, applying lex situs. Well established methods of resolving conflicts have over many years been put in place, but it is not entirely clear how English courts will resolve the new approach that will apply in other member states, but not here.
It follows that those habitual residents here without an English domicile in practice need to make an English Will and a testamentary document in their home country that are consistent and meet the requirements of both English law and Brussels IV. Just how that is done depends on the individual circumstances, but presumably in the other membership state it may require some form of declaration of choice of law and recorded evidence that enable the courts to work out which countries’ courts should have jurisdiction and what set of laws should apply to the deceased’s estate’s various assets. This could have serious consequences for the surviving spouse or partner and their children.
An example of the inconsistency that will take effect, because this country is a non-participant in Brussels IV (and it also elected not to incorporate habitual residence as a definition for the purposes of estates subject to claims under the Inheritance (Provision for Family and Dependants) Act 1975), is that for EU citizens habitually resident here but not domiciled here, even if the bulk or indeed all their assets are in this country, there is no possibility of any claim against that estate under the 1975 by those who would otherwise be entitled to pursue such a claim, if the deceased was or became domiciled here.
To add another issue to the mix, for English capital taxes, especially inheritance tax, domicile is more akin to ‘habitual residence’, so the risk is our taxation laws will apply, whatever other country has jurisdiction and the applicable succession laws (subject to double-taxation treaties with relevant individual member states). Individual advice from experts within the countries with powers to tax assets is essential.
What is self evident is that there are most likely many people living and working here who have come from another member state or who are UK citizens living and working abroad whose testamentary arrangements are in need of careful review, but who are wholly unaware of the consequences of both Brussels IV’s implementation and the very fact that they have set up permanently or otherwise a home elsewhere without understanding that different laws may apply both to their assets here and, if it is elsewhere, in their own home country.