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New EU Succession Regulations To Affect Foreign Wills And Cross-Border Estates

Anyone who has been involved in cross-border inheritance or estate planning will be aware that it is a complex process especially when someone owns property in more than one country. This is because the various assets in the same estate can be subject to the laws of different countries.

However new regulations are due to come into force on 17th August 2015 which are intended to harmonise the differing, and sometimes conflicting, laws of the EU countries in relation to the succession of assets.

The intended effect of the new European Succession Regulations (Regulations) is to make things less complicated so that instead of different laws of different countries applying to different assets, just one country’s laws will govern the succession of all the assets in the deceased’s estate.

So which country’s laws will be applied?

The default position is that the law of the country in which the deceased has their habitual residence at the time of death will apply and will govern the succession of the whole worldwide estate.

People will however be able to opt for the laws of the country of their nationality (or one of their nationalities if multiple) to apply to their estate instead by properly setting this out in their will.

The Regulations also state that the law chosen does not need to be the law of another EU Member State. This would therefore enable, for example, an Australian national who is habitually resident in Spain to choose Australian law to apply to his estate.

It is important to note however that these regulations deal with the laws of succession only i.e. who inherits the assets of the estate. It does not deal with any tax matters, including inheritance tax. National law will continue to determine how inheritance tax is calculated and whether it is the estate or the beneficiary who is liable for the payment of the tax.

All EU countries will apply these regulations with the exception of the UK, Ireland and Denmark who have opted out. Although the UK is therefore not a signatory to these regulations, the regulations are still of considerable relevance to UK residents and nationals with assets in participating EU countries.

After 17 August 2015, an English national (for example) will be able to create a Will that stipulates that English law is to apply to his/her entire worldwide estate, including property in other participating EU member states. As such, any EU member state which is a signatory to the regulation would be required not to apply its own succession rules to those assets, and apply English succession law instead.

Often we get asked if will therefore still be necessary to make a separate will covering the assets of each country. Our advice is always to seek the advice of a properly qualified lawyer to advise you, as the position may be different dependent on each individual’s circumstances. They may also be additional benefits to having more than one will when it comes to the practicality of administering your estate.

The Regulations also provide for the issue of a European Certificates of Succession. This is a document similar to a Grant of Probate and provides proof of who is entitled to the assets of the estate. The ECS will be issued by the authorities of the participating Member State in which the deceased was habitually resident and will be recognized by all of the participating Member States.

For example, the beneficiaries of a Spanish National, who dies habitually resident in France, with assets in France, Italy and Spain will be able to deal with all the assets on the basis of the one Certificate which will be recognised not only in the country issuing it (France) but also (in this example) Italy and Spain.

However because the UK has not opted in to the Regulations it is not bound by them or subject to their application. Therefore where a UK national who is habitually resident in France has chosen UK law to apply to his estate it may still be necessary to obtain a UK grant of probate to administer any UK assets.

If you require any advice in relation to these new Regulations and how they may affect you or if you need assistance with making a Will contact Worldwide Lawyers who can put you in touch with a lawyer to advise you.

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You may already have a Will which complies with the requirements of English law however if you have assets in another country your English Will may not have the results you intend due to conflicts with the laws of that country.

There are many cross-border issues that can prejudice the successful operation of your English Will. For example:

  • Many countries do not recognise the concept of a trust. Therefore if your Will creates a trust over assets in a country that does not recognise trusts, this could inadvertently give rise to a gift to your executors.
  • Some countries operate the marital regime of Community Property whereby on marriage the possessions of the couple are merged in a joint estate and disposed of by means of a joint Will.
  • Other problems may be created because of the different ways in which different countries apply their inheritance laws. You may be considered to be a citizen of one country, habitually resident in another and domiciled in another, with each country seeking to apply its conflicting laws to your Will.
  • The most common issue however is likely to be forced heirship. Law in England and Wales provides that a person making a Will has testamentary freedom to leave their assets to whomever they wish. Many other countries however have some form of forced heirship laws which require a person to pass a fixed portion of their estate to certain relatives, usually their children or spouse. These rules will apply regardless of what is in their Will.

Forced heirship laws do not however always apply to the estate of a foreign person, or at least do not apply to particular assets. In relation to your assets abroad, English law distinguishes between different types of assets. English succession law is applied to your movable assets (i.e. your investments, cash, bank accounts, personal possessions etc.) but allows the succession law of the country where your immovable assets are (i.e. your land and property) to be applied.

The following examples show how each countries succession laws might apply to a person domiciled in England and Wales with immoveable assets in the following countries:

Scotland: Even as close to home as Scotland forced heirship may present an issue. Scotland has forced heirship provisions called Legal Rights. However, provided you are not domiciled in Scotland when you die, your English Will should be able to deal with your assets in Scotland.

France: France has the most strict and powerful forced heirship provisions. These can require certain percentages of the deceased’s estate to pass to children in preference to the surviving spouse. Movable estate in France can pass in accordance with your English will, however your French property and land may not.

Spain: Spanish nationals are required to leave certain portions of their estate to their children and certain other relatives. Spanish inheritance law does allow citizens of England and Wales the freedom to leave all their estate to whoever they like.

Switzerland: Although there are forced heirship requirements for Swiss nationals, if your English Will contains wording specifically applying the succession law of England and Wales, then your English Will could be effective in dealing with your Swiss estate.

Brazil: In Brazil, children and the surviving spouse are automatically entitled to 50% of the deceased’s estate. If there were no children in the marriage, then parents or grandparents would also be able to claim a share of the estate. If you are domiciled in England and Wales, succession of assets situated in Brazil will be governed by English law unless this is less favourable to the spouse and any children, in which case Brazilian law will apply.

Louisiana: The only state in the USA which has a forced heirship regime. Here the forced share may be claimed by forced heirs that are 24 years of age or younger. The fixed share is at least 50% of the estate of the deceased. Any property of a person domiciled in England and Wales which is located in Louisiana can however pass in accordance a Will made in England and Wales once probate has been received.

Various conflicts and complexities can arise from cross-border estates. There may also be tax implications for example where your spouse is not able to inherit the assets located abroad making the any spouse exemption to inheritance tax unavailable.

It is generally recommended that an additional Will should be made in relation to foreign assets as this can help to eliminate ambiguities and make it cheaper and quicker to administer the estate. However, if you intend to rely on an English Will to deal with foreign assets, care must also be taken to ensure that the wording does not preclude this. Any foreign Will should be carefully drafted to ensure that it does not conflict with or revoke your English Will.

Clearly legal advice needs to be taken from a lawyer who specialises in the succession law of the country in which your assets are held. It is recommended that this advice is taken not only when considering making a Will but before you purchase property abroad.

Contact Worldwide Lawyers for legal assistance with Wills, Probate and estate administration abroad.

Inheritance (WWL)(landscape)