A new EU regulation on succession came into force on 17th August 2015. British expatriates living in Spain need to understand how it affects them. They may need to take action to ensure their assets are distributed to their heirs according to their wishes.
A new EU regulation on succession came into force on 17th August 2015. British expatriates living in Spain need to understand how it affects them. They may need to take action to ensure their assets are distributed to their heirs according to their wishes.
European Succession Regulation EU650/2012, known as “Brussels IV”, was devised to provide certainty as to which law will apply in governing a succession. It allows individuals to opt for the succession law of their country of nationality to apply instead of that of their country of residence.
The increased mobility of individuals has created confusion when it comes to the settlement of cross-border inheritances. An individual can have estates in more than one country, triggering the application of multiple succession laws. It can get very complicated and expensive for someone who is a national of one country and lives or has assets in another.
The new law standardises the law of succession across the EU, to simplify and lower the costs on cross border succession issues.
It applies to all EU member states except the UK, Ireland and Denmark, who have opted out. Although the UK is not a Brussels IV state, UK nationals living in Spain can still opt for UK succession law to apply on their death.
Key elements of Brussels IV
The main mission of Brussels IV is to make sure that the court of a single jurisdiction will apply a single law to the entire estate of the individual. There are three main pillars –
- The default position and most important criterion is that the law of the state in which the deceased was “habitually resident” at the time of their death applies to succession of assets located across the Brussels IV zone.
- However, an individual can elect to apply the law of their nationality to all their assets across the zone. If they have more than one nationality, they may choose either law. This selection must be made before death, through a statement in their will or a similar document.
- The default position may also be overturned if there is a jurisdiction to which the deceased was “manifestly” more closely connected.
The administrators of an estate will be able to apply for a “European certificate of succession,” which is intended to replace the standard post-death legal instruments across the EU. Effectively it will become a standard European grant of probate. It will set out the key details of the deceased, the estate and the beneficiaries and should be able to be used to transfer and dispose of assets across the EU. The premise behind it is to stop the need for multiple grants across Europe, which should save time and money.
Spain succession law
The succession law in Spain restricts your freedom to leave your assets to anyone you please. It is designed to protect the family and provide for children, and requires a parent to leave two-thirds of their estate to their children, even by-passing their spouse. Of the rest of the assets, only one third can be freely disposed.
Under Spanish Civil Code, however, property owned by foreigners can be disposed of according to the law of their country of nationality, providing they have an existing will. If they die intestate, Spanish law will apply.
Under the new EU Succession Regulation, it is very important to note that the default position is that Spanish succession law will apply to your estate in Spain, unless you have expressly stated otherwise.
So if you do not have a valid will which states that you have chosen UK law to apply on your death, or other such legal document, your estate may be distributed according to the restrictive Spanish law.
Succession tax
The Succession Regulation does not apply to tax laws. The situation remains as before – where an individual has assets in more than one country, and different inheritance tax regimes apply, the double tax treaty (if any) or the national tax rules will determine where and how succession tax is paid.
Therefore, if you are resident in Spain at the date of your death or if you have assets in Spain, Spanish succession tax rules will continue to apply. Additionally, if you remain UK domiciled, your worldwide estate remains subject to UK inheritance tax.
Succession planning
For a family, ensuring that assets pass to the right beneficiaries at the right time, with the minimum of administration or taxation, can be a complicated process. It is important to undertake a succession planning health check, with help of a specialist wealth manager. You want to ensure that your estate is distributed according to your wishes, with no necessary complications and costs, and with as little inheritance taxes as possible.
Click here for a Sucession Planning Health Check
16 July 2015
