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August 25, 2015updated 11 Jan 2016 2:01pm

What Brussels IV means for wills and inheritance in Europe

By Spear's

Determining which law will govern matters arising from a deceased person’s estate is of significant importance: the laws of succession can vary dramatically between states as can inheritance tax liability.

Under the law of England and Wales, individuals generally have the right to dispose of their estate upon death, via a valid will, in any manner that they choose. However, several countries have rules in place which restrict this right by requiring a certain portion of the estate to be left to direct descendants or spouse of the deceased.

These ‘forced heirship’ rules cannot be overridden by a will and may consequently deter individuals from purchasing property overseas.

Regulation (EU) No. 650/2012, more commonly referred to as Brussels IV, became binding in all but three of the EU member states on 17 August 2015. The UK is one of the three (together with Ireland and Denmark) that has chosen to opt out, however the regulation will still affect those English nationals with assets in one of the member states that has opted in.

Brussels IV will introduce a number of changes, one of the most important being that individuals will now have the opportunity to choose the law to apply to their estate as a whole.

Article 22(1) gives individuals (who need not be resident in a Brussels IV member state) the right to choose the law of their nationality (whether at the time of making the choice or at the time of death) as the law to govern their estate as a whole. If the individual has more than one nationality then any of the nationalities may be chosen.

Brussels IV requires the choice of law to be made in a will or an equivalent document disposing of property upon death. The choice may be by an express declaration in the will or alternatively it may be implied where the will makes reference to the laws of the individual’s nationality.

Generally speaking, the chosen law will govern matters arising from the estate as whole, however it is important to note that there are some aspects of the estate which will fall outside of Brussels IV, as well as an exception which enables a state to refuse to apply the laws of another EU member state on grounds of public policy.

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Scotland is one of the countries in which forced heirship rules apply. While Brussels IV will not be binding in Scotland directly, it may give individuals with assets in one of the Brussels IV (as well as Scotland) the opportunity to choose an alternative law to apply to their estate thereby avoiding the forced heirship rules.

Brussels came into force on 17 August 2015 and will therefore only apply to the estates of individuals who die on or after this date. Valid choices of law made prior to this date which comply with the requirements set out in the Brussels IV will still however be valid.

The new regulations will not directly affect the inheritance tax (or equivalent) position in any of the EU member states. Under the law of England and Wales, individuals who die while resident and domiciled in England and Wales will continue to be liable to pay inheritance tax on their worldwide assets, regardless of location.

It is important to note that the application of inheritance tax in England and Wales is dependent on who inherits the individual’s estate, with transfers to a surviving spouse being exempt from inheritance tax. If an individual chooses to elect a choice of law under Brussels IV which in turn effects who will inherit the estate then this may well effect the amount of inheritance tax due.

For UK nationals with assets exclusively based in the UK, Brussels IV will be of little concern. Those individuals whose estate is connected to a Brussels IV member states or individuals looking to purchase property overseas should give real consideration to the above provisions.

The ability to make a choice of law will gives individuals the opportunity to benefit from a particular country’s law and inheritance tax position while enabling them to avoid the potentially undesirable effect of another. This added control may lead to increased confidence in purchasing property overseas.

Catherine Robson is a solicitor at SA Law

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