Posted by Rod Smith, Partner
Brexit: Do I need to update my will if I own property abroad?
The EU Succession Regulation, known as Brussels IV, came into force on 17 August 2015. Its intention was to simplify issues relating to succession across the EU. Whilst the UK, Ireland and Denmark opted out, it’s still relevant to any UK resident individuals who own assets in any other EU member state.
Why does Brussels IV matter?
Knowing which country’s law will apply to your estate is important. Many countries in the EU do not have testamentary freedom and instead deploy forced heirship rules.
Each country has its own rules and before Brussels IV the conflicts concerning these rules were both complex and confusing. Brussels IV aims to introduce common conflict of law rules for the EU member states which signed up to the Regulation and to reduce the confusion.
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 will be overridden are:
- If you are “manifestly more closely connected with another country” when you die; or
- You have chosen to apply the law of your nationality instead. A choice of law can be made by Will . The choice of law does not need to be explicit but it’s helpful if it is; 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 even includes Wills made before Brussels IV.
Applying the facts for each individual case will determine which law should apply. Nevertheless, it’s important to understand the potential implications. You should also have the most efficient structure in place to reduce any inheritance tax due in each jurisdiction, that is in each distinct system of law (for example, England and Wales is a separate jurisdiction to Scotland.)
What are the advantages of making a choice of law in my Will?
The short answer is certainty. We live in an era of global families with fluid domestic, social and working lives. In this context habitual residence and manifestly close connections to a country may be difficult to discern and categorise. This will mean delay and additional, unnecessary, costs.
Even making a Will to cover your worldwide assets may constitute an indirect choice for the law of your country of nationality. To eliminate any uncertainty, take specialist advice and make a direct choice of the law you want to apply.
Does Brussels IV affect the way in which my estate is taxed?
Brussels IV only applies when determining who can benefit from your estate. It does not affect taxation. Generally speaking, assets located in another jurisdiction will be taxed in accordance with the rules of that jurisdiction, subject to any double taxation treaties.
Some common UK structures, such as trusts, are not recognised in other EU countries and can lead to unexpected and expensive tax consequences. Your estate needs to be analysed in the round which may mean taking advice locally.
I have read about claims being successfully made in the UK by those left out of Wills. Does the same apply in EU countries?
Claims against your estate in another EU member state may still be possible if forced heirship rules are circumvented by the terms of your Will.
How does Brexit affect me?
Even after Brexit, Brussels IV will still affect UK nationals with assets in another member state. This is because the UK did not opt into the Regulation and so is already considered a third state for the purposes of the Regulation.
So do I need to do anything?
Yes, you should regularly review your Will taking into account all the factors raised above.
For more information, contact our Private Client team:
0800 923 2073 Email us