EU adopts new rules on inheritance law

September 2012

After many years in gestation, EU Regulation 650/2012 on “jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of Succession” which is also referred to, more simply, as “Brussels IV” was adopted on 4 July 2012.

The purpose of Brussels IV is to facilitate the free movement of persons within the EU by removing the obstacles faced by EU citizens in asserting their rights in the context of cross-border successions (where assets of the deceased are situated in different countries). In particular it provides certainty as to which law will apply in governing a succession and also enables persons to choose the law of the country of their nationality to govern their succession. It applies to both testate successions (where a Will has been drawn up) and intestate successions (where there is no Will) but does not include tax matters.

For anyone who has had the misfortune to be involved with a cross-border estate, it can be a complex and frustrating process not least because the inheritance laws of different countries may apply to different assets in the estate. The Regulation now provides a general rule that the “law applicable to the succession as a whole shall be the law of the State in which the deceased had his habitual residence at the time of death” unless the deceased (prior to his death!) chose the law of the State to apply in accordance with Article 22.

Article 22 provides “a person may choose as the law to govern his succession as a whole the law of the State whose nationality he possesses at the time of making the choice or at the time of death.” Furthermore the effect of Article 20 is that the law chosen does not need to be the law of another Member State which would therefore enable, for example, an Australian national who is habitually resident in France (for the purposes of the Regulation) to choose Australian law to apply to his estate. Article 23 provides that whichever law applies will govern the succession as a whole.

There is no definition of “habitual residence” in the Regulation although guidance can be taken from Recital 23 of the Regulation which states: “In order to determine the habitual residence, the authority dealing with the succession should make an overall assessment of the circumstances of the life of the deceased during the years preceding his death and at the time of his death, taking account of all relevant factual elements, in particular the duration and regularity of the deceased’s presence in the State concerned and the reasons for that presence. The habitual residence thus determined should reveal a close and stable connection with the State concerned taking into account the specific aims of this Regulation.”

Article 4 of the Regulation provides that the Courts of the Member State in which the deceased had his habitual residence at the time of death shall have jurisdiction to rule on the succession as a whole. The Regulation also sets out a mechanism for the issue of European Certificates of Succession. These will be issued by the authorities in the Member State in which the deceased was habitually resident and will provide proof of entitlement in the estate to all Member States. For example, the beneficiaries of a German National, who dies habitually resident in France, with assets in France, Germany and Spain will be able to deal with all the assets on the basis of the one Certificate which will be recognised not only in the country issuing it (France) but also (in this example) Germany and Spain.

The Regulation will apply to the succession of persons who die on or after 17 August 2015 although there are certain transitional provisions which are now in force and mean that if a person chooses the succession law which will be applicable prior to 17 August 2015 that choice will be valid, subject to it complying with the provisions of the Regulation. The Regulation is binding on all 27 EU member states (and here is the bad news!) except for the UK, Ireland and Denmark, although the UK and Ireland do have the option to opt in in the future.

The reason why the UK government decided not to opt in is because it would have meant the UK having to apply “claw back” provisions in the UK which it considers would cause too much uncertainty in relation to lifetime gifts. (The law of some of the Member States of the EU requires a fixed proportion of the estate of the deceased to be given to certain persons (reserved heirs) and allows for the reserved heirs to recover assets that have been given away during the lifetime of the deceased in circumstances where the lifetime gift is in excess of the fixed proportion of the deceased’s estate.)

Does Brussels IV therefore have any relevance to UK nationals? If they are habitually resident in France the answer is yes. If they wished, they could make a French Will determining UK law to apply and in so doing would avoid French inheritance rules applying to their estate. (Any choice of law provision would have to state “UK” law as that is the State relating to the nationality of British subjects but as between English, Northern Irish and Scottish law Article 36 of the Regulation provides a mechanism for resolving the question: if you wished English law to apply it would be as well to specify in your Will that you were born or brought up in England). In these circumstances and, in so far as there are assets located in any Member State (apart from the UK and Denmark) they may be administered on the basis of documentation issued by a French Notaire or French Court, applying English law.

However whilst the Regulation does provide those UK nationals who are habitually resident in France with the ability to choose the applicable law and thereby enable those with both their own children and step children to treat their step-children equally with their own children, the Regulation may not assist where there are still assets in UK. Article 39 provides that “a decision given in a Member State shall be recognised in the other Member States without any special procedure being required.” However because the UK has not opted in to the Regulation it is not bound by it or subject to its application. Therefore where a UK national who is habitually resident in France has chosen UK law to apply to his estate it may still be necessary to obtain a UK grant of probate to administer any UK assets.

The Regulation is not applicable to persons residing in the UK who own French property, for although a French Notaire or French Court may decide (post 17 August 2015) in accordance with Regulation 21 (1), that the law applicable to the succession is UK law (being the State in which the deceased was habitually resident) the Regulations provide that in circumstances where the applicable law is not the law of a Member State (and because the UK has not opted in it is not regarded as a Member State) the question of applicable law is to be referred to the private international law rules of that State except where the person has chosen the law of a State (which is only an option to UK nationals actually residing in France). Private international law rules of English law would apply French law to any property situated in France and therefore French law will always apply to French property owned by UK residents.

© Edward Coxall – Mayo Wynne Baxter LLP