EU Succession Regulation: The answer for cross-border estates?

Cross-border estates arise increasingly for private client practitioners. Jurisdictions with differing succession laws apply their own private international law (PIL) to determine the applicable law, which is often expensive and time consuming. However, could this become a thing of
the past for the half a million cross-border estates dealt with in the EU each year, as the EU Succession Regulation (Brussels IV) comes into force on
17 August 2015?

Streamlined succession

Brussels IV aims to streamline succession rules for EU citizens. One law will apply to the entire succession of an EU citizen, bringing clarity and removing obstacles to the free movement of persons. Brussels IV will
apply to testate and intestate succession, does not distinguish between moveable and immoveable property, and
will be binding in all EU member states except the UK, Ireland, and Denmark (who opted out).

The key provisions are:

• The state where the deceased was habitually resident will provide the law applicable to their entire succession and the courts with jurisdiction for succession matters;
• That may be overruled if the deceased was manifestly more closely connected with another state, or chose to apply the law of their nationality instead;
• Decisions made in a Brussels IV state will be recognised and enforced in other Brussels IV states; and
• European certificates of succession may be issued, confirming status and rights of personal representatives and/or beneficiaries.

There are various matters expressly excluded from the scope of Brussels IV that many English lawyers would regard as succession law – for example, rights and assets passing by gift or survivorship and matrimonial property regimes, among others.

Choice of law

Although UK courts will not apply Brussels IV, those preparing wills and administering estates must be conscious of how the rules will impact cross-border estates of clients connected with other EU member states. While it is not yet clear, we expect the UK to be treated as a ‘third state’ by other EU member states. They may apply our laws to the succession of EU citizens habitually resident here or, if elsewhere, who have made a valid choice for our laws to apply.

Succession planning should
be undertaken with a greater degree of certainty. However, practitioners must now understand the law of where clients are habitually resident as well as their nationalities – both of which are unfamiliar to English lawyers. Simply advising clients to have a will in each jurisdiction where they hold assets is no longer the answer.

It’s a key opportunity to encourage clients with cross-border estates to review their wills. It could be advantageous for nationals of Brussels IV states who are habitually resident in non-Brussels IV states to allow habitual residence law to apply to their worldwide estates, avoiding forced heirship rules.

An existing will under the testator’s national law may automatically constitute a choice of law election by reference to specific laws or implication.
This may not be the best choice. Clients with cross-border estates may prefer new wills specifically excluding national law to prevent inadvertently being caught by Brussels IV.

However, election for a particular law may be useful to circumvent forced heirship rules. Election also helps avoid doubt about which law was intended to apply to a succession.

A choice of law is made by a disposition of property on death (DPD). UK practitioners would recognise this as a will, but it may not be – trusts may contain DPDs. Elections must govern one’s succession as a whole, so carefully ensure no other DPD contradicts the election. Choices before 17 August 2015 continue to be valid, provided the DPD is valid.

Death of renvoi?

Renvoi is a concept of PIL which applies in determining the applicable law. If state A regards the laws of state B as applicable, that may include its rules of PIL (which may pass back to state A or on to a third state, known as a renvoi).

Under Brussels IV, renvoi is largely extinguished within the EU, but remains relevant in certain circumstances. If Brussels IV determines the applicable law to be a ‘third state’, it generally includes their PIL rules, renvoi being accepted.

Choice of law elections provide greater certainty. If possible renvoi causes concern, making one may be advisable.

Brussels IV should reduce conflicts dealing with EU cross-border estates, simplifying estate administration. However, this area remains a minefield
and without careful advice the potential advantages may be lost.

Before electing, consider
the practicality of the relevant jurisdictions administering
the chosen law. The impact of election on pre- and post-nuptial agreements affecting succession is also relevant. SJ

Sarah Roberts, pictured, and Sarah Barton are solicitors at Thomas Eggar