For a client who owns property, or who has certain strong connections, in more than one country, the succession rules governing the inheritance of his or her estate can be very complicated. Fortunately new rules have recently been agreed to assist those with cross-border affairs involving countries in the European Union.
A principal question to be answered when considering cross-border inheritance is which country’s succession law applies. The answer can be found in the Private International Law (PIL) rules of the respective countries. Unfortunately, two countries’ PIL often differ and do not provide the same answer. For example, in some countries, it is the law of the nationality of the individual that applies while, in others, it is the law of where the person is resident.
In England, our PIL for succession matters looks both to the law of where a person is domiciled, meaning where they consider to be their true home, and to the law of where the assets are located. That is, the distribution of moveable property on death is determined by the law of the owner's domicile but for immoveable property it is determined by the law of the location of the property. English law therefore allows the law of different countries to determine the succession of different parts of the same estate.
To make things more complicated, the reference by the law of one country to the law of another can sometimes include that country's PIL but, on other occasions it does not.
What does this all mean? As one can imagine, these situations often lead to confusion which, in turn, can lead to dispute, delay and expense.
One objective of the EU is to simplify cross-border relations and movement of goods and persons between EU member countries. In order to try to harmonise the rules regarding succession within the EU, the European Commission has been considering this issue for a long time. The result is an EU Regulation, known as Brussels IV (the regulations), which came into force on 17 August 2012. Most of the provisions, however, do not become effective until 17 August 2015.
The regulations re-set and unify the PIL of almost all EU countries on the central questions of which law applies, which court has jurisdiction and the recognition of court decisions on most succession matters. There is also provision for a European Certificate of Succession which seeks to simplify the authority needed to administer EU wide estates by having one certificate which will be recognised in all the participating countries. I refer to ‘almost all’ rather than ‘all’ the EU members as the UK, Denmark and Ireland have decided not to sign up (for reasons I do not propose to discuss here).
The regulations will still be of great significance, however, to those who are connected both to the UK and to any of the 24 EU members who have signed up. And, furthermore, one of the provisions can be taken advantage of now.
A central theme of the regulations is that it will generally be the law of the place of the deceased’s habitual residence that will control the succession of the estate for deaths after 17 August 2015. The relevance of this can best be seen with an example.
Giovanni has been living in London for several years. At the moment, (ie before the regulations come into full effect) Italy will look to the law of his nationality (Italy) to govern his succession (unless specific conditions apply, which we will presume is not the case). Civil law countries such as Italy protect the rights of the deceased’s family members in succession by giving them entitlement to a set proportion of the estate. Under those rules Giovanni cannot freely dispose of all his estate. England, on the other hand, has only very minor protective measures reserved for limited occasions and individuals generally have complete freedom to leave their estates to whomsoever they wish.
After 17 August 2015, Italian law will instead look to the law of where Giovanni is habitually resident (England) to govern the succession. This would seemingly allow Giovanni much more freedom to decide his succession and remove the family’s entitlement. It may, therefore, become desirable for someone from an EU civil law country to come to live in England if he or she does not want to be restricted in terms of the succession of their estate.
There is also provision for UK nationals living in EU countries to be able to elect that the law of their nationality controls the succession of their estate and not the law of where they are resident or where their property is. Again, this may benefit those UK nationals who live or have property in a civil law EU country. Such an election can be made now in a will and becomes effective for deaths after 17 August 2015 and should be of great assistance to those in that position.
It is clear that, despite the UK not signing up to the regulations, the effect will be very important for some clients and they need to be understood now. What we do not know is how the courts of jurisdictions of civil law countries which have traditionally protected the family's succession rights will respond if that protection is removed. There is provision for certain effects of the regulations to be ruled out on public policy grounds but opinion is divided as to whether the breach of a family member’s protected inheritance would be sufficient to invoke this. It will certainly be an interesting aspect of the regulations to follow.