Will the EU Succession Regulations (Brussels IV) Affect Your Estate if You Own Property Abroad?

The principal aim of the EU Succession Regulations (EU 650/2012) – known as Brussels IV – was to unify succession laws across EU members states.

Brussels IV has been in place since 17 August 2015. 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. The Regulation applies to deaths that occur on and after 17 August 2015.

Why is Brussels IV Important?

A growing number of us own assets abroad as well as at home. Under Brussels IV, if you hold assets in those EU member states who are signed up to the Regulation, the default position is that the succession of those assets on death, will be governed by the law of the country in which the individual died and/or was habitually resident.

However, you may choose, in your Will, to apply the law of their nationality to the succession and administration of their estates.

So, it’s very important to think about your assets in the context of the laws of the country where your assets are held and how you can best protect these your assets for future generations.

Brussels IV, Your Estate and Brexit

Irrespective of the outcome of Brexit negotiations, the Regulations will affect you if both of the following apply:

You have a connection with more than one country. In other words, if you live in one country and own property or are a national in another, then you will be affected;
If at least one of these countries is an EU member state (excluding the UK, Ireland and Denmark), you will be affected.

How Will Brussels IV Affect You?

Even after the UK has left the EU, Brussels IV will still affect UK nationals with assets in an EU member state in the same way. This is because the UK did not opt into the Regulation in the first place. The UK is already considered a third state for the purposes of this Regulation.

So, knowing how the country’s law will apply to your estate is crucial.

For example, some EU countries (such as France and Spain) specify shares of your estate must pass to close family members, rather than be decided freely by the individual(s) who own them.

In the past the differing and often complex succession rules prevailing across Europe have caused confusion and in many cases conflict.

The 2015 Regulations were introduced not only to reduce this uncertainty but also to lay down common conflict of law rules for the EU member states who signed up.

It’s also important to note that whilst Brussels IV came into force from 17 August 2015, Wills in place before that date can be affected.

Deciding Which Jurisdiction Should Apply Under Brussels IV

Basically, the law that will apply to your estate will be the law of the country where you are habitually resident, at the time of your death.

Exceptions

This does not apply when:

You are clearly more closely connected with another country when you died; or
You have chosen to apply the law of your nationality instead.

This choice can be set out specifically in the terms of your Will or by adding a Codicil. You do not need to be explicit. If you have already made a Will in accordance with the law of your nationality, it can be treated as if you had chosen to apply that law indirectly. This applies to Wills made even before Brussels IV comes into force.

Example – Living, Working & Owning Assets in Spain

According to recent statistics over 300,000 Brits own property or live in Spain. Perhaps, in the excitement of the move, many fail to consider the effect on their Will.

If you have lived in England all your life but own a holiday home in Spain, the default position as of 17 August 2015 is that the succession law of England and Wales will apply to your Spanish assets on your death (as you are habitually resident in England).
Alternatively, if you were born in England but have recently moved to Spain and die whilst living (and own assets) there, 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.

Spanish law dictates that property that passes to your family members will have to be divided in certain proportions, which are not of your choosing.

Clearly, it’s very important to understand what the implications are and to make your wishes as clear as possible. You must be careful when relying on an English Will in relation to your Spanish property.

That said, the most important part of Brussels IV was a provision that an individual may choose, in their Will, to apply the law of their nationality to their succession and to the administration of their estate.

Spanish & English Wills. One or the Other or Both.

If you own property in Spain and in the UK is it necessary to make two Wills?

Spanish law recognises a Will made lawfully in any jurisdiction. And an English Will can include your Spanish property.

Prior to Brussels IV, it was commonplace for those who owned a property in the UK and in Spain to have separate Wills drawn up. In 2016 two separate (and controversial) rulings were issued by the Spanish Directorate of Notaries and Land Registrars, recommending that this practice should cease.

In practice however, there are still advantages to having two Wills:

Having a Spanish Will prepared does mean that the Spanish Notary will keep the original document. Also, the document will be prepared in English and Spanish. So, the likelihood of the document being lost or misinterpreted is low;
Brussels IV provides that (unless your Will stipulates the contrary) the law that applies to your estate will be the law of your habitual residence. In other words, if you live in England and own property in Spain when you die, English law will apply to your estate.
If your Spanish assets pass according to the terms of an English will, then it is arguable that you intended English law to apply to your estate.

Therefore, to be certain that English law will apply whatever the circumstances, making a Spanish Will should make your intentions clear to all concerned.

Tax Implications

The Brussels IV regulations only apply when determining who benefits from your estate. When your assets are held in another jurisdiction, they will be taxed in accordance with the rules of that country (subject to any double tax treaties in existence).

As you’d expect, the tax implications of including structures (such as trusts) could be very costly. So, it makes sense to take professional advice (in the UK and beyond as appropriate) before any Wills are finalised. Inheritance tax rules often change, and you could easily miss a tax-saving opportunity.

Be mindful too, claims against your estate may still be possible if succession rules are overridden in your Will.

Our Advice

If you think Brussels IV can affect you (or your family in the future) our advice is to review your Will as soon as possible.

Make sure you seek advice from each of the countries where your assets are held, so the tax implications in each country can be considered before any documents are executed.

If you would like to discuss this or any aspect of your Will or estate planning, please contact our specialist Wills, Trusts & Probate team. We’re here to help.

Please note that all views, comments or opinions expressed are for information only and do not constitute and should not be interpreted as being comprehensive or as giving legal advice. No one should seek to rely or act upon, or refrain from acting upon, the views, comments or opinions expressed herein without first obtaining specialist, professional or independent advice. While every effort has been made to ensure accuracy, Curtis Parkinson cannot be held liable for any errors, omissions or inaccuracies.