MORE and more UK citizens either own or are considering buying a property abroad, whether as an investment opportunity or a holiday home that will eventually pass to loved ones.
In 2013, it was estimated that the number of Britons living for part or all of the year in Spain, France, Italy, Germany and Ireland alone was more than 975,000. And with the increasing popularity of locations in accession states, where very desirable properties and land can be snapped up cheaply, the numbers of those with interests in the EU are set to rise steadily.
There are a number of drivers for this: the increasing spending power of middle and professional classes, who have been largely immune to the ravages of the recession; the readiness of skilled professionals to cross borders for career progression; and the trend for retirees from the UK to move to or spend their winters in the southern European ‘sun belt’.
As such, it is becoming increasingly common for lawyers to advise on and administer estates with foreign properties. Naturally, owners want to know that their wishes will be carried out quickly and inexpensively, but until now there was a big problem: while English law generally allows you to choose who is in your will, those of many European countries dictate the beneficiaries and precisely how estates will be divided between them.
This means that your property abroad may not be distributed as you want.
With some 450,000 cross-border inheritances in the EU every year clocking up a total value of more than €£120bn, any new succession rules that strip away this absence of choice and the costly, time consuming, legal complications caused by the differing, often conflicting legislation of member states is a welcome breath of fresh air.
And so it was that new regulations, called Brussels IV, came into effect this month to hack away at bureaucracies, anomalies, compulsory obligations and fees that frequently crop up when an owner of foreign property dies.
They allow you to choose which law governs inheritance of your entire estate – and avoid the forced succession that some nations impose, by applying only English law instead.
The new rules apply to all EU member states, except Denmark, Ireland and the UK, which have opted out. This is not an obstacle for Britons, though, as long as your property is in one of the countries that have signed up.
So far, it is all looking sensible and positive. However, in life, things are rarely quite as cut-and-dried as they first appear and people would do well to check out the full implications of the changes so that they can make informed choices about how their assets will be divided up.
Bringing the rules into your own estate planning is easily done by updating an existing will or making a new one if you haven’t got around to it yet. However, deciding whether the rules are suitable for your particular circumstances is not quite as straightforward and there are a number of key issues to consider.
You can choose only one country’s inheritance laws for all interests. You can’t select one set of rules for some assets and another for others, so it is crucial to be sure that your chosen law is the one you are happiest with and best suits your needs.
You likewise can’t decide which tax laws apply. Whichever way you opt for, there will always be tax implications and if tax is a concern for you then it is important that you know and act in the most tax efficient manner in each territory you have property.
There may well be terms in your chosen succession law that you find less favourable than others, so do compare your options.
For example, even if you choose for your entire estate to be administered by an English will and so decide for yourself whether or not to favour your children, these family members are entitled to contest the terms and bring a claim for a share.
The new rules don’t cover all assets. They don’t apply to gifts, some pensions and trusts and assets passing by survivorship – for example, joint bank accounts, which automatically go to a surviving holder on death, trumping the terms of any will.
So, if you own a property or any other assets in an EU country or you are thinking about buying there, it is vital that you mug up not only on whether the fresh legislation applies to you, but also which succession law is best for you and your heirs.
Intended to ensure that wills will be carried out as people want, rather than how somebody else says they should be, precisely how much cost-saving will result from the slashed red tape will depend on awareness and uptake.
However, the new rules mean that where’s there’s a will, there’s now a way to choose the beneficiaries of any property that you own abroad.
Colleen Dooney is a wills and probate practitioner with Sheffield-based hlw Keeble Hawson.