Anyone owning property in different EU countries leaves an administrative headache for their heirs, with each member state applying its own inheritance laws. For example, someone resident in Britain but who has a holiday home in France must deal with their French asset separately, and woebetide the estate spread over several jurisdictions.
But all that is about to change. The EU is to simplify succession rules across the 27 states. Under plans due to come into force shortly after June, all inheritance issues will be governed by the law of the country where the deceased habitually lived just before they died. Simple.
This really should save heirs from having to reach for the pain killers. The idea is that now they can be armed with a Certificate of Succession to wave at authorities wherever that second, third or fourth home happens to be.
Some might say not a moment too soon. As a result of increasing mobility there are currently around 12.3 million Europeans living in other EU countries. This results in around 450,000 estates with an international element each year, roughly 10% of the total estates in Europe.
There is much at stake in the planned change, as the value of these estates is put at about 123 billion Euros. As things stand, wealthy Europeans with properties in several countries suffer from having to deal with all the different rules in all the different countries. It can be an utter nightmare: slow, bureaucratic and expensive.
In response to this the European Commission proposed in 2009 new streamlining regulations to simplify the process.
The changes provide a single straightforward criterion for determining both the jurisdiction and the law applicable to a cross-border estate. This will be the law of the country where the deceased habitually lived before they died. It will also be possible for individuals living abroad to choose the law of their country of nationality to apply to the entirety of their estate. So, in future, unless they elect to have the law of their country of nationality apply to their estate, the deceased’s habitual place of residence will determine the rules which will govern the taxation of and the inheritance to an estate.
The proposed European Certificate of Succession will allow a person to prove that they are heirs or administrators of an estate throughout the EU, thus avoiding additional administrative and legal complications.
At the moment, for example, a UK resident with a house in France, is faced with French law applying to the house, and the added complication of administering their estate in France. Furthermore, the estate will be governed by French forced heirship rules, meaning that all children must inherit a portion.
In addition, the probate process is also complicated, so a person should currently also have a French will dealing not just with the house, but with all the moveable French assets, for example any antique furniture in the house and French bank accounts.
Although the moveable assets are currently dealt with in the end under UK succession rules, having a French will certainly makes the probate process less complicated. Similar complications arise when the residency is reversed: With a UK resident but French domiciled individual. They might have a French will dealing with their worldwide estate, except UK assets. They may also have a UK will for their UK immoveable assets. However, French succession law governs the devolution of the moveable assets in the UK as well so a French lawyer would need to check the will as to validity. Imagine this legal tautology repeated across several national jurisdictions to get a sense of how complex inheritance becomes with assets in several countries.
In short, the position is at the moment is a complete headache, even if all you own is a holiday home in Brittany.
It is likely to be adopted by the end of June and will enter into force shortly afterwards but will only apply to people who die 3 or more years after its entry into force. In addition to this the UK has opted out, along with Ireland and Denmark, at least for the time being. But the UK government has confirmed that it may step into line once concerns about what constitutes “habitual residence” have been resolved. Indeed, the expectation is that the UK will opt in.
The single criterion for determining jurisdiction and law applicable will ensure that heirs and administrators will face a far simpler process of
succession, which should also be faster and cheaper. At the moment, the rules vary so considerably from one member state to another that there is no option but to employ legal help in each. This means that in practical terms, there is great level of uncertainty and distress for people who wish to plan succession of their estate and for their heirs.
There will be no obligation to use the Certificate of Succession. But it is good to know that soon one will be out there.
Elizabeth Lyon is an associate at London law firm Wedlake Bell