EU Property and Forced Heirship Rules
In the post-Brexit world, the EU Succession Regulations are still relevant to those who own property in the UK and an EU member state bound by the Regulation. This is because many European countries operate (in varying forms) reserved or forced heirship rules. It’s conservatively estimated that over 1.5m Brits still own property in France or Spain, and many have sought to avoid these laws when they look at the potential impact on inheritance.
Forced Heirship Rules
Those of us who live in England and Wales invariably find the concept of forced heirship alien. We’ve been raised to believe in testamentary freedom, where essentially, it’s a person’s right to choose who inherits without fear of challenge. Attention must be paid to those eligible for ‘reasonable financial provision’ under the Inheritance (Provision for Family and Dependants) Act 1975.
In France, reserved (or forced) heirship has prevailed since Napoleonic times. The regulations were introduced to protect close family members, particularly children, following their parent’s death.
Under French law, an individual’s ‘reserved heirs’ are their children or, if childless, their surviving spouse. If there is only one child, at least half of the estate must pass to that child; if there are two children, then two-thirds (in equal shares); and if there are three or more children, then three-quarters of the estate must pass to them (equally). When a person dies without any children or other descendants, the surviving spouse becomes the reserved heir and is entitled to share the estate with the deceased’s surviving parents or, if none, to receive the entire estate.
Further south in Spain, Spanish Succession Law regulates forced heirship by stipulating that descendants such as children must automatically inherit at least two-thirds of their parent’s Spanish estate, with priority over a surviving spouse.
EU Succession Regulation (EU/650/2012)
Often referred to as Brussels IV, the EU Succession Regulation (introduced in 2015) does not affect every aspect of your estate when you die. It only applies when determining who can benefit from your estate.
Since the Regulation was introduced, those Brits with assets in France or Spain making Wills (who still have close ties to England or Wales) can elect to apply English and Welsh law to distribute their assets abroad. This has proved a valuable strategy for those who own and live in a property in France or Spain and are keen to avoid prevailing forced heirship rules.
Addendum to the French Civil Code
However, a new French law that came into force in August 2021 and applies to the estates of people who die on or after 1 November 2021 has complicated matters.
A new section has been added to the French Civil Code that has created a new right for children whose inheritance rights have been breached by applying foreign inheritance
law. This means that those Brits with assets in the EU Member States can’t necessarily rely on using English or Welsh inheritance rules. For example, if, at the time of death, you or any of your children are citizens of or habitually resident in France, and the law applicable to your estate does not contain any mechanism which provides your children with a minimum inheritance, then each child/heir/beneficiary is now entitled (under this new Regulation) to a proportion of your French assets.
Undoubtedly, you can take steps to avoid some of the issues created by international inheritance laws. However, what you might think are obvious solutions (such as transferring a property to a child/children) can have unintended consequences. Sometimes, tax liabilities increase.
What is clear is that succession law and tax regimes abroad are very different to the rules that apply here. So, professional advice and planning are essential to ensure your estate goes to the right hands at the right time.
If you’d like to discuss this or any aspect of your Will or estate planning, please contact us. 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.