European Succession Regulation No.650/2012 (known as Brussels IV) came into force on 17 August 2015 and attempts to harmonise the approach to succession across the EU and, even though the UK, Denmark and Ireland have opted out it still affects them.
It is however important to note that it does not legislate on the tax position upon death, which is still governed by the individual Member States.
Under UK succession law the jurisdiction of the Country of domicile governs the succession of your assets, except where land or property is owned abroad, then the law in the country in which the land or property is situated governs the succession of that land or property. It is not unusual these days for persons to have perhaps interests in a holiday home in Europe, whilst still being domiciled in England. If the holiday home was in a Member State which had laws dictating who could inherit that land, known as forced Rules of Heirship, then more than one Will was often the best way forward, but this may not necessarily be the case now.
The Regulation provides that the jurisdiction of where a person is habitually resident governs the succession of their estate, unless it can be shown that they were more closely connected to another country. So for example a person working abroad has changed their habitual residence, but not necessarily their domicile; they may be still closer connected to their country domicile. It is confusing and there is little guidance in the Regulation, so each situation would be individual.
Further under the new Regulation persons are able to opt to elect to use the law of their nationality, instead of habitual residence, which may mean they have more freedom to leave assets to who they select, but at the same time it is important to ensure Inheritance tax position is considered, as this has not been changed in the EU MS by Brussels IV.
It is generally agreed by English Probate Practitioners that this new Regulation is poorly drafted resulting in a lack of clarity in many areas as to how it may be applied, of that it may have unintended consequences.
Jane is English, married, owns her home with her husband, owns other assets in England in her sole name, and a holiday flat in France in her sole name, where there are Forced Rules of Heirship. She wants to leave her whole estate to her four nephews, as her husband is financially secure in his own right, but under French Succession Law she may be unable to leave her flat this way. At present she has a French Will leaving the holiday flat according to French Succession Law, and an English will leaving the rest of her estate to her 4 nephews equally. Under the New Regulation she can elect English Law to apply to her whole estate, and have just one will in England to deal with her whole estate being left to her 4 nephews.
This sounds a good option on the face of it, as she is not forced to leave her holiday flat to persons other than she wishes. However the Inheritance Tax Laws are different in France to those in England, and the election MAY mean that her estate pays more IHT if her French flat is left to her nephews.
Another issue caused by the drafting of Brussels IV is the position where the law of an EU MS, that has opted out of Brussels IV, conflicts with the law of the country that claims jurisdiction due to the habitual residence of the deceased, or the law of the country in which assets are owned by the deceased’s estate.
An English person domiciled and habitually resident in England dies leaving assets which include land in Italy and England. There is no Will. Under English Law and Brussels IV there is agreement that English courts have jurisdiction, and the whole estate passes under English law. However under English Law the land in Italy has to pass in accordance with the Law in Italy, being forced Rules of Heirship, but under Brussels IV Italy does not accept jurisdiction over this Italian land.
Looking at the same example, the same deceased, same circumstances except he is habitually resident in Italy at the time of his death. Here Brussels IV will state that the Law of Italy (forced Rules of Heirship) has jurisdiction over the succession of the whole estate, but English Law says English Law has jurisdiction over the Succession of everything bar the Italian land. There is a conflict as English Intestacy Rules and Italian Rules of Heirship differ.
A further problematic area is that where a person who is domiciled in England or Wales dies, there may be a claim against their estate under The Inheritance (Provision for Family and Dependants) Act 1975. If that same person is habitually resident in another EU MS (that has signed up for Brussels IV) and that EU MS has jurisdiction over succession it may be that the courts in that EU MS have to deal with an application under the English law under The Inheritance (Provision for Family and Dependants) Act 1975. They clearly will have neither the knowledge or expertise in this area, and may even refuse to deal with such an application.
Clearly these problems were not intended and it is hoped that the ongoing redrafting will assist, but in the meantime if you think you are someone who may be effected by this EU New Regulation it is important to review your will.