Monday 17 August 2015 was a significant date in the world of European succession law. It was the date on which the EU Succession Regulation came in to force. For those EU member states that signed up, this was the date on which the Regulation rules on the inheritance of an estate were adopted.
However, not all member states signed up. Most significantly, for us, the UK did not sign up to the Succession Regulation, so the new rules do not apply in Scotland (or in England & Wales for that matter) (we have previously blogged that a consultation in Scotland concluded that the rules (or parts of them) should not be adopted in Scotland). Other member states that opted out are Ireland and Denmark.
All other EU countries have signed up. An individual’s estate (or particular assets) that were previously subject to the laws of succession of those countries, continue to be subject to those laws, but those laws are now qualified by the terms of the Succession Regulation.
As noted below, an election in your Scottish will may be the best way to deal with succession to foreign assets.
What does the Succession Regulation say?
The Succession Regulation provides that the estate of an individual shall devolve in accordance with the law of the country in which they are habitually resident, unless that individual has specifically elected for their estate to devolve in accordance with the law of their nationality. So:-
- The estate of a Frenchman who was habitually resident in France at the time of his death will devolve according to French succession law (which includes forced heirship provisions).
- The estate of an Italian who was habitually resident in France at the time of his death will also devolve according to French succession law unless that Italian has specifically elected for the law of Italy to apply.
- The estate of a Frenchman who was habitually resident in Germany at the time of his death will devolve according to German succession law, unless that Frenchman has specifically elected for the law of France to apply.
What was the rule before?
Before the introduction of the Succession Regulation, heritable property (i.e. houses, land and buildings) situated abroad was usually subject to the rules of the country in which it was situated. If that country had forced heirship rules, those rules might apply to the property, regardless of the provisions in your will.
What does ‘habitually resident’ mean?
For most people, it is clear where they are habitually resident. A person living in Scotland is habitually resident in Scotland. However, some people may move from country to country, for personal reasons or for work. In this situation, habitually resident will usually be decided by reference to the country to which that person had the closest ties.
How does this affect a Scotsman (or other UK national) with a home abroad?
If a UK resident has a property abroad, the law of Scotland, and of England & Wales, is that the law of the country in which the property is situated will apply (this is known as lex situs).
If that property is situated in any of the EU countries who have signed up to the Succession Regulation, then the law of that country is now that the law of the UK (where we refer to “UK law” in this blog we do colloquially and for ease of reading, but of course it would refer to the relevant part legal system within the UK ) should apply (if the deceased was habitually resident in the UK).
A grey area
As mentioned above, the UK rule is that lex situs should apply, so the UK courts would send the matter back to the country of location to decide. There is a question mark as to whether that country would then apply their own law, or the law of the relevant part of the UK, as the UK has opted out of the Succession Regulation and this does not expressly state which law should apply in this situation. It is thought that the country of location would still apply the UK law, but it will take a judgement from the Court of Justice of the European Union to get certainty.
The solution, if the UK resident is a UK national, is for them to elect specifically for the law of the relevant part of the UK to apply. The Succession Regulation expressly states that renvoi will not apply in this situation. Renvoi is the concept of the UK sending a question of law back to another country to decide. So, in the scenario above, the UK might still send the matter back to the country of location to decide, but the decision would be that the property should devolve according to the law of the relevant part of the UK.
What about a UK national living abroad?
Under the Succession Regulation, if a UK national lives abroad, but wants their estate to devolve according to the law of the relevant part of the UK, then they must expressly elect for the relevant UK law to apply.
Why do you want UK law to apply?
Put simply, you want UK law to apply because UK law currently allows you to decide who should receive any heritable property you own (wherever situated) at the time of your death, whereas many European countries have forced heirship provisions which dictate that certain relatives (most commonly a surviving spouse and children) receive a certain share of your estate, no matter what your will says. For example, you might want your whole estate to pass to your life partner, but this might not be permitted. Some countries go even further and provide for lifetime gifts to be clawed back in certain situations.
What about Scottish legal rights?
Scottish legal rights apply only to moveable property, that is everything except heritable property.
If you own moveable property abroad, it will be subject to UK succession law on your death, if you are domiciled within a constituent part of the UK (a UK legal concept not dissimilar to habitual residence) at the time of your death. The Succession Regulation does not change this. Therefore, Scottish legal rights would continue to apply if you passed away with a Scottish domicile. To avoid Scottish legal rights under the Succession Regulation, it would require a change of habitual residence.
Holiday homes in Ireland or Denmark
Because Ireland and Denmark have not signed up to the Succession Regulation, then property situated in those countries will devolve according to the law of those countries.
Irish law includes provision for a surviving spouse and/or children to receive a share of your estate, regardless of the provisions in your will.
Non UK nationals with UK property
Because the UK has not signed up to the Succession Regulation, then any heritable property situated in the UK will devolve according to the law of the relevant part of the UK. It is not possible for the owner to elect for any other rule of law to apply.
However, as both Scottish and English law give full freedom to the testator to decide who should receive the property on their death (currently), this does not restrict the testator in any way. For administrative reasons, it is recommended that anyone owning property situated in any part of the UK puts in place a UK will.
Remember that although the Succession Regulation may change the succession law which applies to property abroad, it does not change the tax position. A property in France may be subject to the French equivalent of inheritance tax, even if it passes in accordance with UK law.
In some cases, the application of UK law may increase the tax liability. This will depend on the tax rules of the country in question.
What do you need to do? The new role Scottish wills in international succession
If you own heritable property abroad, you should take advice as to whether or not you need to have a will in place in that country. A key goal in that advice will be identify the administratively least burdensome way pass the property your beneficiary/ies as soon as possible after your death.
If you are a UK national and want the relevant UK law to apply, then you should make sure that the will expressly elects that you would like your estate to devolve in accordance with the succession law of the country of your nationality. This election could be possible through your Scottish will and we recommend that a positive election of which law is to apply is the best course of action.
In all cases, you should speak to your regular contact at Brodies so that they are aware of your situation. It is recommended that the position in Scotland and the other country be reviewed to ensure the optimal arrangements are in place.
This blog was written by Ruth Saunders – email@example.com or 01224 392 278
If you think you may be affected by the above in any way, or would like more information, you should speak to your usual contact at Brodies, or to Ruth, or Alan Eccles, partner on 0141 245 6255 or firstname.lastname@example.org. Alan and Ruth are part of the writing team on the textbook, International Succession (a new and updated edition being due for publication by the Oxford University Press in August 2015). Ruth also holds the Society of Trusts and Estates Practitioners Advanced Certificates in International Succession and in UK Taxation for International Clients.
On August 26, 2015