EU Succession Regulation: What is it and how does it affect UK expats?

The EU Succession Regulation (EU 650/2012), also known as Brussels IV, came into effect on 17th August 2015.

The aim was to resolve the complex cross border probate disputes that had arisen as an unintended consequence of the freedom of movement of workers and retirees within the EU.

What does the European Succession Regulation do?

The Regulation unifies succession laws across EU states by having the laws of only one country apply to an individual’s EU situated estate.

Under it, you can elect for the law of your nationality to apply to your estate on your death.  

To do so, you must expressly declare your choice of nationality, e.g. by including a statement in your Will.  

For example, a British national living in France can make a French will declaring the law of England and Wales should apply to all their estate, even assets in France.

If a choice of law is not made, the relevant law is determined by the deceased’s habitual residence, which is the country:

  1. where the deceased was habitually resident at the time of death; or
  2. where the deceased was most closely connected.

Why does it matter?

Different countries have different rules when it comes to succession.

England and Wales, which follow a common law system, allow for testamentary freedom.  This means that you are free to leave your assets to whomever you choose.

Many European jurisdictions, including France, Poland, Portugal and Spain, follow civil law systems. Here forced heirship rules apply. 

These are a set of rules that set out exactly how an estate will pass on in the event of death.

For example, in most of Spain, the natural-born and adopted children of the deceased will have a right to two-thirds of the estate. This applies even if the deceased’s wish is to disinherit children or to simply leave all of their assets to their spouse.

Interestingly, while England and Wales allow for testamentary freedom, Scotland also imposes restrictions on how an estate can be distributed.

Why should you bother having one law apply to all your assets?

The obvious benefit is that, as mentioned above, if you are able to have English law apply, you can leave your assets to whoever you choose.

The other benefit is that if you have assets in more than one country, e.g. the UK and France, it is simpler to have one law governing them all.

What the European Succession Regulation doesn’t do

The Regulation determines which law applies to the succession of the estate of a deceased person.

It does not affect how said estate is taxed.

How does Brexit impact the European Succession Regulation?

The directive is one of the few things not to be affected by Brexit. This is because the UK never subscribed to it in the first place.

However, while Britain never subscribed to it, it does still affect, and benefit, Brits living in the EU.

Challenges to the European Succession Regulation

From the 1st of November this year, amendments to the French civil code have had the effect of overriding the law allowing for an individual’s nationality to be fully applied in certain situations.

This may ultimately be challenged through the ECJ. However, in the meantime, it will prove to be of great concern for those affected.

Action Points

Firstly, and most importantly, succession is a complex area. You should always obtain expert advice from someone who understands both the local and international elements of your situation.

If you have already made a will (or wills) without considering the Regulation, you should have it reviewed to see if it needs changing. This is particularly the case if you would rather have English law apply in order to avoid forced heirship rules.

Life assurance investment bonds and forced heirship

Finally, if you have liquid assets, e.g. cash, shares or funds, you could consider holding these assets within an international life assurance investment bond.

Such structures, which are well established in many EU jurisdictions, include the facility for a policy nomination. This allows for wealth transfer without the need for a will or for forced heirship rules to apply.

On death, the transfer of assets can apply on the provision of the death certificate, without the need for probate.

Additionally, while the EU Succession Regulation should ensure that intended beneficiaries really do inherit, as mentioned above, it doesn’t alter the application of inheritance tax. 

In some countries at least, e.g. with Assurance Vie in France, holding assets in a life assurance structure does have inheritance tax benefits.

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