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New EU Inheritance Rules Simplify Succession Planning for Overseas Property Owners

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New rules entitled ‘Brussels IV’ which came into effect on August 17 2015 will strip away some of the anomalies, complications, compulsory obligations and legal fees that often arise when an owner of foreign property dies.

It is becoming increasingly common for lawyers to advise and administer estates that include foreign properties because many people own or are considering buying one abroad, often as a holiday home to pass down to loved ones.

Naturally, they want to know that their executors can carry out their wishes quickly and efficiently. However, if your estate falls across more than one country when you die, the reality until now has been that its administration can be complex, time consuming and expensive.

Succession laws between different states are often conflicting. While English law generally allows you to choose who is in your will, those of many European countries dictate the beneficiaries and precisely how estates will be divided between them.  This brings uncertainty if you own a property abroad, with part of your estate possibly not distributed as you want.

The new law applies to those dying after 17th August 2015 with interests in more than one European jurisdiction, allowing them to choose which law governs succession to their estate.

Essentially, this means that you can have the option to avoid the forced division that some nations impose and apply English law to your entire estate instead. The idea is to usher in more certainty and unity between succession laws, making for simpler, less costly administration of wills covering foreign holdings.

Brussels IV applies to all EU member states, except Denmark, Ireland and the UK, who have opted out, which is not a problem as long as your property is in a country that has signed up.

Incorporating the rules into your own estate planning is easily done by updating an existing will or making a new one. While this is simple, deciding whether the rules are suitable for your particular circumstances is not quite as straightforward.

Issues to consider include:

  • You must choose only one country’s succession laws for your entire estate, not one set for some assets and another for others - so you should be sure that your chosen law is the one that best suits your needs.
  • While you can select which law governs your estate, you cannot choose which tax law applies. There will always be tax implications and if that is a concern, then it is important you proceed in the most tax efficient manner. Specialist advice will be needed to help you best decide.
  • There may well be rules in your chosen succession law that you find less favourable. Under English law, certain people are entitled to claim against your estate if they feel you have not made reasonable financial provision for them, while other countries may not. For example, if choosing an English will - which avoids forced rules that may have favoured your children - it is possible that any offspring could bring a claim.
  • Brussels IV does not apply to gifts, some pensions or to certain trusts and assets passing by survivorship - for example, a joint bank account goes automatically to the surviving joint holder on death. As such, it is vital to be aware of exactly which assets will pass according to chosen law and which by separate succession rules.

So, if you own a property or any other assets in an EU country or you are thinking about buying one, it is vital to seek out independent, professional legal advice from an experienced practitioner. Read our recent ‘Yorkshire Post’ article on this subject.

For more information on wills and related issues, please contact Michele Todd on telephone 0114 2906207 or email her at micheletodd@hlwkeeblehawson.co.uk.

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