All change, please

Being able to leave your property to whoever you wish is regarded as an essential freedom in this country. This is not necessarily the case elsewhere. However the new EU Succession Regulation, known as Brussels IV, came into force on 17 August, offering unprecedented estate planning opportunities for individuals.
It is designed to provide greater certainty to succession laws across the EU.

The changes

Broadly speaking, when someone dies owning property in another EU country, the courts in that country will be obliged to accept the succession law of the country in which the deceased owner was habitually resident, as determining the way in which the property passes.

Alternatively the property owner has the option of electing in their will, which country's succession law should apply, as long as they were a national of that country. So instead of having to pass under the forced heirship laws of the country in which it is situated, the real estate could pass under the terms of a UK will as if it were UK property.

While the UK (as well as Ireland and Denmark) have opted out of the regulation, so that a choice of another national law will not affect English succession principles, it is still relevant for UK individuals who have property in an EU state which has opted in (i.e. all member states apart from the UK, Ireland and Denmark).

It does not prevent UK citizens from electing UK law, which will be binding in the countries that have opted in.
It is therefore important that anyone with property in Europe understands the new regulation, and takes advantage of any planning that can be done now.

What does this mean in practice?

The key points to note are:

• It will be for the person who makes the will to make an explicit choice of succession law.

• They must be a national of the jurisdiction whose succession law they are choosing.

• If a choice is not made, the property will pass according to the succession law of the country in which the owner was habitually resident. For some people, this could be a matter of dispute.

• The old England and Wales principle that real estate must pass under the succession law of the country in which it is situated will no longer apply.

• One succession law must apply to the whole estate. It will not be possible to 'mix and match' different laws to different parts of the estate.

• The new regulation has no effect for tax purposes; it affects only where succession law applies. Issues may therefore arise where trusts are used.

• There may be reluctance in some countries to accept dispositions of real estate made under UK wills which conflict with their traditions, particularly as the UK is not a signatory to the regulation. However the regulation obliges courts in all signatory countries to accept the applicable succession law, whether
  or not it is the law of a state which is a signatory, or even of an EU member state.

Moving forward

Any UK person who owns real estate in another EU country now has an opportunity to reconsider how they would like the property to pass on their death. Possibilities are now open which did not exist before.

Anyone looking to purchase residential property in another EU country, is no longer obliged to adopt complex ownership structures in order to circumvent local forced heirship rules.

Citizens of other EU countries who have come to the UK to live and work also need to give some thought to the regulation. It may affect how their property would pass on their death, particularly if they could be regarded as habitually resident in the UK. 

Rachel Diedrich is an asscoiate in the private client team at Druces

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