Succession planning for EU residents

19 September 2013

A mini revolution is about to take place in the world of Will drafting for EU residents, including British nationals owning assets on the Continent. Not many lawyers seem to be talking to their clients about it yet so naturally I want you, dear blog reader, to be among the first to know.

It’s all because of the EU Succession Regulation (Brussels IV), due to come into force for the most part in August 2015.

The Regulation aims to cut the cost and delay associated with tidying up EU residents’ estates. Generally speaking, the Regulation provides that the laws of the state in which the deceased died habitually resident (which need not be an EU member state) will govern how the estate devolves, unless the deceased chose to apply the law of his nationality.

For anyone habitually resident in England or Wales owning real estate in another EU member state, the Regulation may be helpful as, put very simply, all participating EU member states (which means all EU member states other than the UK, Ireland and Denmark) should recognise that English succession rules apply to all the deceased’s assets. English succession rules are unusual in allowing almost complete testamentary freedom. But in the Eurozone, it is far more common for an EU member state to impose on its nationals a mandatory system of succession which applies to at least part of their estate. Not everyone likes what is prescribed.

However, English private international law provides that, for UK domiciliaries owning non-English real estate, the law of the territory in which the real estate is situated will apply, not English law – strictly speaking, the matter is referred back to that territory (renvoi). So, are we going around in circles? Will UK domiciliaries have to yield up their French holiday home to French forced heirship rules after all? Not necessarily, for the Regulation also provides that any person who has or acquires English nationality can also opt to include a choice of English law clause in their Will, so that English succession laws will apply (ignoring English private international law and renvoi). It is thought that this will permit English succession laws to apply to real estate situated in participating EU member states.

Therefore the Regulation could be good news for English nationals owning real estate in participating EU member states. It could be good news for non-UK domiciled EU citizens, habitually resident in the UK, who do not want the forced heirship rules of the country of their nationality to apply to their English situated assets. It might not be such good news for British nationals habitually resident in a participating EU member state, if they want to continue to enjoy testamentary freedom. For them, an English choice of law clause may need to be inserted in their Wills in order to retain that treatment.

Although the Regulation comes into effect in two years’ time, transitional provisions allow a choice of law clause to be included in Wills drawn up now. So, now is the time to start reviewing EU citizens’ Wills and consider what impact the Regulation is going to have. As always, there will be winners and losers.

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