- Brussels IV: Finally, a Solution for the Skiing Chalet and the Villa in St Tropez
- March 18, 2015
- Law Firm: Withers Bergman LLP - New Haven Office
- Many private client professionals will be wearily familiar with the problems where their UK clients own property in continental Europe. ‘Forced heirship’ rules are imposed so a surviving spouse or civil partner cannot control the property; the property may pass to children of a former marriage despite the client’s wishes; there may be inheritance tax on the death of the first spouse/civil partner; and the UK tax effects of an SCI, usufruit or other civil law concepts have to be considered.
From 17 August 2015, however, the European Succession Regulation (made 4 July 2012, no. 650/2012), better known as Brussels IV, comes into effect and means that nationals of any State - including non-EU States, and EU States such as the UK which have opted out of the Regulation - can make a choice in their will to apply their national law to assets in another EU state. UK nationals therefore can elect for UK law, so their properties on the Continent will pass on death without the application of forced heirship.
This would enable them to leave the whole property to a spouse or civil partner outright, and to the children on the second death only; and enable full UK IHT spouse exemption to apply.
Whilst the UK (and Denmark) have opted out of the Regulation, so that a choice of another national law will not affect English succession principles, the opt out does not prevent UK citizens from choosing UK law which will be binding in the countries that have opted in.
The choice of the law can be included in wills signed now, though it would only take effect for a death on or after 17 August this year. Withers is already assisting clients with amending their wills to make use of the Regulation.
The Regulation states that if there is no election, the law of ‘habitual residence’ applies. Even if this would be England, this cannot be relied on for land abroad, as English law would then provide that the local law applies; but the referral to the local law does not apply if an election for national law is made.