Inheritance: How the new EU Succession Law affects UK nationals in France
If you are a UK national living here in France or you own property here, succession (inheritance) law can be complicated. You may have assets in more than one country, which can trigger the application of multiple inheritance laws and create conflicts of law.
On August 17th, 2015, the new European Succession Regulation, commonly known as “Brussels IV”, was launched. It was devised to end this confusion over cross-border inheritances.
In the UK, you can generally leave your assets to whomever you wish, as stated in your will (Scotland and Northern Ireland have some restrictions). However, French law is very different:
• Assets do not automatically pass in accordance with your will (unless it happens to match French succession law).
• Children are protected heirs, inheriting up to 75% of the deceased parent’s estate. This includes children from an earlier marriage and adopted children, whatever their age – they could be eight or 80.
• In the absence of a will, the surviving spouse is only entitled to 25% in full property (the value of the assets when sold), or 100% in usufruit*, of the deceased’s assets. Spouses are protected heirs only in the absence of children.
(*Usufruit = the right to enjoy the “fruits” – for example, from rent – of an asset for an agreed period but not to sell it.)
French succession law applies to your worldwide assets if you are a French resident and always applies to French real estate, even if you are not resident in France.
How can Brussels IV help? Brussels IV is designed to make sure that the court of a single jurisdiction applies a single law to your entire estate, providing clarity and reducing the chance of conflict. Its three main pillars are:
1. The default position and main 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 across the Brussels IV zone.
2. This default position may be overturned if there is a jurisdiction to which the deceased was “manifestly” more closely connected.
3. The deceased can elect to apply the law of their nationality to all the assets across the Brussels IV zone, citing it in his will or a similar document. If they have more than one nationality, they may choose either law.
In other words, French succession law will continue to apply to your estate, unless you specify otherwise in your will.
Provided the law governing succession falls within one of the above categories, it does not need to be that of a Brussels IV member state. Assets held in a participating state could be handed down in accordance with the law of another jurisdiction – even if it is the UK, Ireland or Denmark, who have all opted out.
How does this affect my tax? It is important to note that Brussels IV does not apply to succession/inheritance taxes. 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 France at the date of your death or if you have assets in France, the French succession tax rules continue to apply. You cannot choose UK inheritance tax instead of French succession tax.
The French taxman will actually benefit from the new regulation. Tax rates are high (up to 60%) for heirs other than your spouse, children and parents (such as siblings, stepchildren and non-relatives), and allowances low (as low as €1,594). So where you use UK law to leave assets outside your immediate family, your beneficiaries could receive a hefty tax bill, unless you take specialist advice and plan for this.
So should I choose UK law? At first glance, this may seem a good idea. However, Brussels IV is untested. As mentioned, the UK, Ireland and Denmark have opted out, and the effect of this on UK nationals in France is not yet clear.
There could be other serious implications for UK nationals. Under the UK/France double tax treaty, UK nationals opting for UK law to govern their succession under Brussels IV could find their estate now liable for both UK inheritance tax and French succession tax. While a credit would be given in France for tax paid in the UK, your heirs could well end up paying more tax. This could seriously affect the tax planning you already have in place.
It is important to understand all the implications for you and your heirs. For your peace of mind, you should seek specialist, personalised advice, to review your existing succession plans and help you establish which law would work best for you.