With increasing numbers of us owning assets abroad as well as at home, it’s more important than ever to consider our financial affairs from more than one country’s perspective. This particularly applies to Wills and succession.
The introduction of the EU Succession Regulation (known as Brussels IV) means it is now vital to have appropriate advice, to ensure your assets in each jurisdiction are protected for future generations.
Brussels IV has been in place since 17 August 2015. Its intention was to simplify issues relating to succession across the EU, and it affects any individual with a connection to any EU member state. Whilst the UK (and Ireland and Denmark) opted out of this legislation, it’s still relevant to any UK resident individuals who own assets in any other EU member state.
Does Brussels IV affect me?
It does, if you answer ‘yes’ to both of the following questions:
- Do you have a connection with more than one country? For example, do you live in one country and own property or are a national in another?
- Is at least one of the countries you are connected with an EU member state (excluding the UK, Ireland and Denmark)?
If Brussels IV does affect you (or is likely to in future) you need to know which country’s law will govern who inherits your estate when you die.
What does Brussels IV do?
Knowing which country’s law will apply to your estate is important, as many countries across Europe dictate that specified shares of your estate must pass to close family members, rather than be decided freely by the testator.
Each country has its own rules to decide which law applies and, historically, the conflicts between each country concerning these rules has been complicated and ambiguous. Brussels IV’s aim was to reduce the uncertainty and to introduce common conflict of law rules for the EU member states which signed up to the regulation.
The rules came into force from 17 August 2015, but will also affect any Wills in place before that date.
Which country’s law applies to my estate under Brussels IV?
In the EU member states where Brussels IV applies, the law that will apply to your estate as a whole will be the law of the country where you are habitually resident, at the time of your death.
The only circumstances where the ‘habitual residence’ default will be overridden are:
- If you are “manifestly more closely connected with another country” when you died; or
- You have chosen to apply the law of your nationality instead. A choice of law can be made by Will or by Codicil. The choice of law does not need to be explicit – if you have already made a Will in accordance with the law of your nationality, it may be treated as if you had chosen to apply that law indirectly. This applies to Wills made even before Brussels IV comes into force.
For example, if you have lived in England all your life but own a holiday home in France, the default position as of 17 August 2015 is that the succession law of England and Wales will apply to your French assets on your death (as you are habitually resident in England).
Alternatively, if you were born in England but have recently moved to France for work and die whilst living in France (and own assets in France) it may be unclear whether the habitual residence default should apply or whether you are more closely connected with England and Wales. However, if you have already made a Will under the law of England and Wales, you may have made an indirect choice for the law of England and Wales to apply to your succession.
Applying the facts for each individual case will determine which law should apply. Nevertheless, it’s important to understand the potential implications and make your intentions as clear as possible. You should also have the most efficient structure in place to mitigate any inheritance tax due in each jurisdiction.
What are the advantages of making a choice of law in my Will?
Because of the risk of uncertainty in the examples given above, choosing to apply the law of your nationality will ensure your estate is governed by the law with which you are most familiar.
If you are likely to change the country where you are habitually resident, you can achieve certainty by making a direct choice of law in your Will.
Even making a Will in England and Wales (or Scotland or Northern Ireland) to cover your worldwide assets may constitute an indirect choice for the law of your country of nationality. To eliminate any uncertainty, we recommend you take appropriate advice and make a direct choice of the law you want to apply.
What else should I know about Brussels IV?
Brussels IV does not affect every aspect of your estate when you die – it only applies when determining who can benefit from your estate. Generally speaking, assets located in another jurisdiction will be taxed in accordance with the rules of that country (subject to any double tax treaties in existence).
The tax implications of including structures (like any kind of trust or including any age contingencies) can be incredibly costly. It’s therefore vital to ensure you have advice from all the countries concerned, before any Wills are finalised.
Claims against your estate in another EU member state may still be possible if forced heirship rules are overridden in your will.
Doesn’t Brexit mean this won’t affect UK nationals?
Even after the UK has left the EU in 2019, Brussels IV will still affect UK nationals with assets in another member state in exactly the same way. This is because the UK did not opt into the regulation in the first place, so the UK is already considered a third state for the purposes of this regulation.
What if I am a national of an EU member state with assets in the UK?
If you are a national of an EU member state which has signed up to Brussels IV and you own assets in the UK, you cannot choose the law of your nationality to apply to the succession of your UK assets. This is because the UK chose to opt out of this Regulation.
If you own assets in more than one EU member state, you should still consider how the succession of those assets should be dealt with, and you can choose how to deal with your assets elsewhere in the EU, outside of the UK. UK assets will always be governed either by a validly executed Will or, if no Will exists, the intestacy rules.
What should I do now?
If you think Brussels IV affects you or you are concerned it will affect you in future, it’s important to review your Will to ensure you have considered all the options. When updating your Will, make sure you have advice from each of the countries where your assets are located, so the tax implications in each country can be taken into account before any documents are put in place.