New law warning for UK nationals owning property in France
Action should be taken now to deal with the new 2015 European inheritance rules ADVERTORIAL FEATURE
Many UK nationals owning property in France will not be aware of a recent change in the law which now allows them complete freedom to leave their French assets to their beneficiaries under their will.
This is a significant change because prior to 17th August 2015, French ‘forced heirship’ laws mandated that the bulk of a deceased person’s estate had to go to their children equally – regardless of their wishes in their will.
Since 17th August however, most British property owners are now free to give their French property to whomever they wish – provided they take the appropriate action.
Does the fact that the UK has opted out of the new law mean it doesn’t apply to UK donors?
No; even though the UK has opted out of the regulation, it still applies to donors who are UK nationals who own property in France.
What does the regulation say?
The key piece of legislation is EU regulation 650/2012 (otherwise known as Brussels IV) and as with any EU regulation, it is directly enforceable in the courts of any signatory country. In other words, it becomes that country’s laws and overrides any contradictory ‘local’ laws.
Article 22 of the regulation is key for UK donors because it states that any British national who has property in any participating EU State can ‘elect’ to have the law of their nationality govern the devolution (who gets what) of their EU estate.
Making an election
An election has to be made in the donor’s will for UK law (English & Welsh, Scottish or Northern Irish as appropriate) to apply.
Is a donor’s ‘habitual residence’ significant?
The regulation states that the devolution of a donor’s estate will be governed by the laws of the country of their ‘habitual residence’.
Now, on this basis you would be forgiven for thinking that the EU assets of UK resident donors should pass under UK law – but because the UK has opted-out of the regulation this is probably not the case – as explained below.
The UK opt-out & adverse consequences
The reason for this is that under the terms of the regulation it is not clear whether the opt-out states (including the UK) will be considered ‘third states’ or ‘member states’. Without going into the technicalities, the significance of this is that if they are ‘third states’ UK law will not apply, but if they are ‘member states’ UK law will apply.
Remember that an express election overrides all of the ambiguity and so the way for donors to ensure that UK law is applied, is for them to make an election for the laws of their nationality to apply to the devolution of their property.
Should donors always make an election?
No, there are particular circumstances where an election would not be appropriate and as each case is different, donors do need to seek bespoke specialist advice.
What effect does the new regulation have on inheritance tax?
The new law does not directly affect inheritance taxation and so tax will still be levied in those EU jurisdictions where 100% charity exemptions do not apply.
For further information contact – Daniel (Dan) Harris or Simon Lofthouse in the cross-border unit by email [email protected] – or by telephone on 01225 326761
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