14 November 2016

On 17th August 2015 new EU Succession Regulations came into force. These new regulations bind all 27 EU member states except for the UK, Ireland and Denmark so do we need to be concerned with them? The short answer to this is, yes (and remains yes, notwithstanding Brexit), if you have or are thinking of acquiring any assets in one or more of the bound jurisdictions.

The law of the land – but which land?

If you have connections with more than one country, you need to know which country’s law will govern who inherits your estate when you die. This is important because the law of many countries provides that certain shares in your estate are reserved for close family members – often called forced heirship. Under English law you can generally leave your property to who you want in your will.

Each country has its own rules to decide which law applies, and interaction of these rules is complex, often making it uncertain who will inherit your estate. The new regulations aim to reduce this uncertainty by introducing common conflict of laws rules for the bound member states.

In those countries, the default position is that the law of the country where you are habitually resident when you die governs succession to your estate. However, if you were more obviously connected to another country, that country’s law will apply, or you can choose the law of your nationality to apply instead.

So if you are a UK national with assets in a member state, you can choose the law of England and Wales to govern succession to those assets and make this election by Will or Codicil. For many people, choosing to apply the law of nationality will ensure that their estate is governed by the law with which they are most familiar.

These new rules apply when someone dies on or after 17th August 2015 but may also change the effect of wills and other estate planning put in place before that date.

England and Wales

Although the regulations do not apply in the UK, they do affect the way that conflict of laws rules in England and Wales interact with the rules of the bound EU member states.

As England and Wales are not bound by the regulations the usual rules here will continue to apply. These state that succession to a person’s immoveable property (broadly land and buildings) is governed by the law of the country where it is located and everything else by the law of the country where they are domiciled (broadly have your permanent home).

An example illustrates the significance of the effect of the new regulations:

Peter is British and has always lived in the England. He owns a holiday cottage in Provence. If Peter does nothing, the likely result is that the cottage will be subject to French forced heirship rules because it is immoveable and located in France. If, however, he includes a choice of English law in his Will, then as France will apply the regulations, they should apply English law to the cottage and so Peter may leave it to whomever he wishes.

It is also worth noting that whilst the regulations do not change the tax law of any country, UK IHT and similar taxes abroad largely depend on who inherits your estate so any changes to who receives your estate will have a knock on effect.

The reality is that there is large degree of uncertainty surrounding the new regulations which stems from the fact that we simply do not know how readily advisors will ignore their own familiar laws and apply another country’s based on an election in an unfamiliar document. This should not however stop you from seeking advice and reviewing your position. As can be seen from the example above, a simple amendment can have a significant outcome.

This article was written by Rachel Pinn.

Key contact

Tom Hewitt

Tom Hewitt Partner

  • Private Wealth
  • Head of Estates and Land
  • Head of Food and Farming

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