In an increasingly mobile world people often live in a different country from that of their birth and/or own property and other assets in several different countries. Difficulties can be experienced upon death because different countries have different and often contradictory rules about how property can be inherited. As a result administering an international estate can be complicated and costly.
To try and combat this problem, a new simplified succession regime will apply across the EU so that one set of rules will apply whenever an EU citizen dies leaving property in different countries or any deceased leaves property situated in an EU country. The new regime comes into effect from 17 August 2015.
A huge caveat is that the UK, together with Ireland and Denmark, has opted out of this new regime due to certain fundamental differences between our common law system and the civil law code of many of our European counterparts. However, UK-based individuals and estates (and indeed those connected to any non-EU countries) could still be affected by the changes.
The key feature of the new rules is broadly that the law of the country in which the deceased is habitually resident will govern the succession of his estate, unless the deceased has elected that the succession laws of his nationality should take precedence. The country in which the asset is situated will no longer govern the succession rules which apply to it, as it often does at present. Further, it does not matter that the deceased’s place of habitual residence or nationality is not within the EU or otherwise not bound by the new rules. Therefore, UK estates and individuals could be affected in a variety of ways.
By way of example, if an Englishman dies with property in France but with the rest of their estate in England, the French property will pass according to the succession rules of the country in which he is habitually resident, i.e. English law.
Under English law, the French property, in accordance with a doctrine known as ‘renvoi’, will, as at present, pass in accordance with French succession rules whilst the rest of the estate will be governed by UK succession laws. This is significant because French law contains elements of forced heirship, whereas under UK law property can be left to whomever the deceased wishes under his Will.
However, if a UK national (i.e. English, Scottish or Northern Irish) owns property in the EU they can opt for their national law to apply on their death. In these circumstances the doctrine of renvoi is specifically excluded. Therefore, to elaborate on the above example, if the Englishman with French property opts in his Will for English law to apply to his worldwide estate, then the whole of his estate including his French property can be left to whoever he wants and the French forced heirship rules can be avoided.
It will be apparent that in these circumstances, assuming that the deceased does not want to be restricted in how his estate can be inherited, he would be well advised to ensure his Will applies English law to the whole of his estate. A testator could make such a provision in his Will now, even though practically it will only have any effect if he dies on or after 17 August 2015.
The new provisions are complex with various nuances and exceptions and it is possible some EU member states may raise objections to some outcomes on public policy grounds, so obtaining advice is still essential. It should, also, be noted that, crucially, the taxation of cross-border estates, which often causes as many problems as succession issues, remains unchanged at present.