International estate planning insights

1st February 2024

With increased global mobility, the issues that can result from different tax and succession regimes are more relevant than ever.

Understanding and planning for the rules that will apply to the succession of assets in each jurisdiction on death, and how taxes will apply both in your home territory and other regions where you own assets, helps avoid unintended consequences.

In this article, we look at the issues involved with the succession of property on death when you live in one jurisdiction and own property in another.

Succession of assets in UK jurisdictions

There are three jurisdictions in the UK: England and Wales, Scotland, and Northern Ireland.

In England and Wales and Northern Ireland there is testamentary freedom. This gives you the freedom to leave your estate to anyone you choose in your Will. There is no legal obligation to provide for any family member or other individual.

However, some would argue the matter is not quite so clear-cut because legislation exists that could be said to curtail testamentary freedom. In England and Wales, the Inheritance (Provision for Family and Dependants) Act 1975 effectively gives courts the power to alter the provisions of a Will or intestacy if certain types of applicants as set out in the legislation can establish that the deceased failed to make reasonable financial provision for them. Similar legislation to the 1975 Act applies in Northern Ireland.

In Scotland, the law specifies that prescribed rights and shares of a deceased’s estate should pass to specified persons. This ‘forced heirship’ applies to moveable property owned by individuals domiciled in Scotland.

Succession of assets in EU jurisdictions

In the EU, the European Succession Regulation 650/2012 (often referred to as Brussels IV) gives individuals the right for the law of their nationality to apply to the succession of their property in another EU country. This applies to UK nationals too, notwithstanding Brexit.

That said, there are signs that this EU regime, which is designed to enable a deceased person’s estate to be governed by a single succession regime, is not entirely secure.

In 2021, France amended its Civil Code. If a deceased, or child of a deceased, is a national of, or habitually resident in, an EU member state, and the applicable law of succession does not include forced heirship, then a child who receives less than their compulsory share can look to be compensated from the deceased person’s French assets.

The German Supreme Court has also made a ruling undermining the effectiveness of the EU succession regulations (Case No. IV ZR 110/21).

The EU is investigating the impact of these rule changes and rulings.

Whether or not succession provisions are the same across jurisdictions, the EU regulations do not give uniform tax status. Matrimonial property regimes and tax regimes of the country where the property is situated still apply (subject to any double taxation agreements or unilateral relief that may apply). It is also the case that where an individual owns property in a non-EU state, succession, tax and matrimonial regimes may apply.

Taking control of the future

If you have assets in more than one jurisdiction, liaising with your legal and tax advisors in all relevant jurisdictions is vital to ensure succession happens in the way you want.

It often makes sense to have more than one Will. Typically, this will be a Will prepared under the law of your domicile, which deals with your worldwide estate. Additional Wills are also prepared in jurisdictions where you have assets.

A practical advantage of this approach is that having separate Wills for each jurisdiction can ultimately speed up the administration of your estate.

It will be key that these Wills work together so your entire worldwide estate is dealt with, and tax and other relevant local considerations are factored into the beneficial provisions of the Wills.

Without this, there is a risk that provisions of the Wills overlap, or of a Will being inadvertently revoked. This could, after death, lead to confusion and considerable expense in sorting out entitlements. For example, in Sangha Estate of Diljit Kuar Sangha & Ors [2022] EXCH 2157, the construction and proper interpretation of a revocation clause had to be tested in the courts.

Careful coordination of the estate planning by the lawyers and tax advisors in all the relevant jurisdictions gives you the means to ensure a coherent, effective and meticulously executed succession plan.

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