Under English law an individual has ‘freedom of testamentary disposition’. What this means is that, subject to certain circumstances, an individual is entitled to leave his/her assets to whoever they want. However, many jurisdictions do not provide for such freedoms. Many countries, particularly those countries whose laws are based on the ‘Napoleonic Code’ (e.g. France, Spain, Italy, etc.) restrict the ability of a testator to decide how their assets should be distributed after their death.
More commonly referred to as “forced heirship”, these rules give specific rights to certain persons related to the testator to receive a pre-determined share of the testator’s estate regardless of what the provisions of the testator’s Will provides for.
For UK nationals owning real estate in a jurisdiction where “forced heirship” applies, it has always been best practice to seek local law advice in that jurisdiction to ensure that not only are the “forced heirship” rules are not contravened but also to make matters easier when administering those assets. In most cases this will normally involve making a Will in that jurisdiction to specifically deal with that property so as to avoid any unnecessary complications.
EU Succession Regulation (“Brussels IV”)
The EU Succession Regulation (more commonly referred to as ‘Brussels IV’) is designed to counter the problem that different EU jurisdictions have different laws when it comes to dealing with succession of assets and make it easier for individuals to decide which law they want to apply to their assets situated in EU member states. So, if a French national wants French law to apply to his assets in Germany, Brussels IV gives him this ability to decide.
Although Brussels IV came into force on 17 August 2012, most of its provisions did not apply until 17 August 2015 (although there are certain transitional provisions which apply). Further, the UK (and Ireland and Denmark) has opted out of Brussels IV, however it will still have consequences for UK nationals who die on or after 17 August 2015 owning assets in one or more EU member states.
The general rule under Brussels IV is that succession to an individual’s estate is governed by the law of the state in which he/she was “habitually resident” at the time of their death. There is no definition of “habitually resident” within the legislation but the relevant jurisdiction considering this question will consider all relevant factors, particularly the duration and regularity of the individual in the relevant country or state. However, an individual can override this general rule by choosing the law of their nationality to govern the entirety of their estate. The choice must be made in a testamentary document but that choice can either be express or implied. Choosing the law of the individual’s nationality to apply is binding on the EU member state where the asset is situated. The ability to make a choice of law applies from 17 August and applies to UK nationals as well as nationals of EU member states who are signatories to Brussels IV.
If an individual wants to make an express “choice of law” of their nationality to govern the entirety of their estate then they would be able to do so in their Will.
Consider the following scenarios:
- A UK national, living in the England, owns real estate in France. He does not want French succession law to apply. Whilst the individual could rely on his “habitual residence” it might be more appropriate if he made a “choice of law” election in his Will to avoid any confusion at a later stage.
- A British national living in France, owns French and UK real estate. If he wants English succession law to apply to his French assets he might consider make a “choice of law” election stating that English law should apply to his entire estate.
Brussels IV is only concerned with succession law of a deceased’s estate. It will not affect the tax position of the laws of where the asset may be situated or questions relating to matrimonial property regimes. In many cases however, it may still be necessary to seek advice in the EU member state where the asset is situated to check how things will work in practice.
Do I need to take any action?
Brussels IV will fundamentally change the succession landscape for EU member states and for UK nationals owning assets in those states.
It is therefore recommended that you review your Will and current circumstances to take account of Brussels IV.
Please note that the information in this leaflet is necessarily brief and is not intended to be an exhaustive statement of the law or relied upon as legal advice. It is essential that professional advice is sought before any decision is taken.
Stevens & Bolton LLP is not authorised by the Financial Conduct Authority (FCA) but we are able in certain circumstances to offer a limited range of investment services to our clients because we are members of the Law Society. We can provide these investment services if they are an incidental part of the professional services we have been engaged to provide.
© Stevens & Bolton LLP 2015