EU cross-border successions: a success or not?

EU legislation has been passed in an attempt to solve the problems which can arise when a person dies owning assets in more than one European State. If you either live in or own assets in an EU Member State, you need to be aware of the impact of “Brussels IV”.

Although many people have increasingly international lives, succession laws in Europe have not kept pace so dealing with the estate of someone who dies owning assets in more than one country can be difficult. Each EU Member State has its own legal system which operate in very different ways: England, for example, allows testamentary freedom so a person can leave their assets to whomever they wish under their Will. By contrast, countries such as France have “forced heirship” rules which can dictate how certain assets can be left on death, and to whom. Due to time-consuming legal issues arising from these different and often conflicting laws, cross border successions can be costly both at the time of planning and after death. Disputes over which country’s succession laws apply to which assets are unfortunately common, and simplification has long been required.

The solution?

“Brussels IV”, which came into effect on17 August 2015, is an attempt to solve these problems. Brussels IV seeks to apply only one country’s laws of succession to a deceased individual’s assets within the EU, regardless of whether that individual made a Will.

The United Kingdom

UK nationals should be aware that the UK has opted out of Brussels IV (as have Ireland and Denmark) as it was deemed to be incompatible with certain aspects of our current legal system. However, this does not mean that UK nationals can ignore the Regulation - Brussels IV will still attempt to regulate the succession of assets located in EU Member States regardless of your place of death or nationality, and whether or not you have a connection to that State (or indeed Europe!).

How does it work?

Brussels IV sets out a process for determining which country’s succession law applies:

i. Express election

An individual may choose the domestic succession law of their nationality to apply to all their estate. If they have more than one nationality, they can choose which one will apply. The election should be made formally by an express declaration in their Will or equivalent document.

ii. If there is no express declaration:

The default position is that the succession law of the country in which the deceased was “habitually resident” will apply; unless the individual was “manifestly more closely connected” with another State in which case the law of the latter State would apply. Whether an individual is habitually resident in or manifestly more closely related to a Member State will be a question of fact.

However, there is also the possibility of an implied election (even where the Will predates the coming into force of Brussels IV). The scope of this is not entirely clear and it may be complex to apply in practice.

There is also to be a European Certificate of Succession, akin to a grant of probate, to give cross-European authority to those dealing with such estates, although the Certificate will not be issued or valid in States which have not opted in.

Issues

Brussels IV brings some clarity, but it is not without its problems. The legislation does not attempt to change taxation of estates, property ownership structures (including matrimonial property regimes) nor wider legal matters such as guardianship, or post death variations or claims against estates. It does not affect lifetime gifts and also says little about trusts, which may prove awkward where an individual holds assets in a jurisdiction which does not recognise trusts and their Will includes a trust structure.

Advice

Planning for cross-border estates, notwithstanding the progress made by Brussels IV, remains complex. It is crucial that if you own property or are habitually resident in another EU Member State you revisit any succession planning that you have put into place: Brussels IV may have unforeseen consequences on any planning advice that you have received to date. This is also a useful prompt for those yet to put documentation in place, to progress this. As ever, obtaining local advice in each relevant jurisdiction remains crucial to ensure a co-ordinated approach and a full understanding of the succession and tax implications in each jurisdiction. We at Mills & Reeve would be happy to help, and our network of law firms across the world means we can assist you wherever you are based.