What happens to my holiday home abroad when I die?
2015 saw the introduction of a piece of legislation known as Regulation (EU) No. 650.2012 but that has now more helpfully (or confusingly depending on your view) been shortened to “Brussels IV”. The legislation is designed to simplify how your assets across EU member states (known as your estate) pass on death. For UK nationals with assets exclusively based in the UK, Brussels IV will be of little concern. If however you own assets or looking to buy property in a Brussels IV member state (being the majority of EU members) then the legislation will apply to you.
Each EU country has its own rules and succession system in place, dictating where and how assets pass when someone dies. England for example allows individuals to dispose of their estate freely by way of Will. Where someone dies without a Will however, a specific set of rules known as the Intestacy Rules dictate where the estate is to pass and in what shares. In other EU countries, such as Scotland or France, forced heirship rules dictate that your estate must pass in specified shares to close family members, rather than be decided freely by signing a Will. They cannot be overridden and may consequently deter individuals from purchasing overseas property or doing so in a complicated structure.
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. If you have lived in England all your life but own a holiday villa in Spain, your English Will applies to your Spanish assets. You would therefore be able to bypass any Spanish succession laws and leave your Spanish villa under the terms of your English Will.
Alternatively you may have retired to your Spanish villa and, by virtue of living in Spain, could be deemed to be habitually resident in Spain. Here things become a little more complex and advice would be needed to ascertain the position regarding succession and to ensure the correct documentation is in place. You may still want the English succession laws to apply and therefore need to override the habitual residence default.
Article 22(1) gives individuals (who need not be resident in a Brussels IV member state) the right to choose the law of their nationality (whether at the time of making the choice or at the time of death) as the law to govern their estate as a whole. If the individual has more than one nationality then any of the nationalities may be chosen.
Brussels IV requires the choice of law to be made in a Will or an equivalent document disposing of property upon death. The choice may be by an express declaration in the Will or alternatively it may be implied where the Will makes reference to the laws of the individual’s nationality. Taking the example above, you may have already made an English Will and included an express provision for English law to apply despite you retiring to Spain. Alternatively you might need to execute a new English or Spanish Will and make an express declaration that you wish English law to apply.
The chosen law will generally govern matters arising from the estate as whole. It is however important to note that there are some aspects of the estate which will fall outside of Brussels IV. There is also an exception which enables a state to refuse to apply the laws of another EU member state on grounds of public policy.
Post the UK leaving Europe, Brussels IV will still affect UK nationals with assets in another member state in exactly the same way. The UK did not opt into the regulation in the first place and so the UK is already considered a third state for the purposes of this regulation. As a result of this, 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.
It is also important to note that the complex inheritance tax (or such similar estate or succession tax) of each EU member state is not covered by Brussels IV. If an individual chooses to elect a choice of law under Brussels IV which in turn effects who will inherit the estate, then this may well effect the amount of inheritance tax due. Simply choosing a law of succession to apply does not avoid estate taxes that might be due. In the continued example, you may well apply for your English Will to apply to your Spanish villa however there may still be inheritance tax or estate duty to pay in Spain as a result of this application. It is therefore vital to obtain succession and tax advice in both jurisdictions.
If you have assets in an EU member state and don’t have any succession planning in place, our Private Client team can discuss the implications with you and work with our partner firms in each EU country to plan for both succession and any tax that may be applicable.
The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
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