Brussels IV is to unify the succession law which applies to an estate, rather than allowing any number of succession laws to (possibly) apply to different assets in different circumstances. The Regulation came into force in 2012 but the provisions only applied with effect from 17 August 2015.
For member states that have implemented the Regulation, the default position is that the law of the country in which the deceased was 'habitually resident' will apply to his or her succession. This law applies unless the deceased was "manifestly more closely connected" with another state, in which case the law of this latter state would apply instead. Exactly what "manifestly more closely connected" means is not clear, but it is thought that this test will only be applied in exceptional circumstances.
The law applied under these tests can be overridden by an election (normally in a Will) for the law of the individual's nationality to apply. If the individual has more than one nationality, he or she may choose between nationalities (for example, a UK resident non-domicile who has taken UK nationality could choose to apply either UK law or the law of domicile). This election will enable an individual to succession plan with complete certainty over which laws will apply to the estate.
For individuals who own property in Europe and are also nationals of countries which do not have a forced heirship regime, such as the UK, electing the law of their nationality (e.g. UK) will allow them to circumvent the forced heirship provisions in the majority of European civil-law jurisdictions.
Although the UK opted out of the regulations, it should not be assumed that UK nationals will not be affected. Those who choose to leave the UK and take up residence in a member state and those who remain in the UK but also own property or assets in a member state may find themselves subject to the regulations. In addition the UK may choose to “opt-in” to the new regulations in the future.
It is important that advisers consider the new regulations when giving advice to individuals. If they are aware that their clients are considering retiring to a member state for example it may be prudent to suggest they make an election in their will now to ensure their choice of law (ie UK) is applied.
The effectiveness of Trust arrangements should not be overlooked. Whilst some member states do not recognise trusts, where the choice of law is UK, Trust arrangements are a widely accepted form of estate planning. Individuals who no longer require access to their property/assets could consider making a gift into trust during their lifetime which will ensure the distribution of those assets quickly to the intended beneficiaries.
Visit our Trustability hub for more information on Trusts
In summary, advisers in the UK and those advising UK expats need to consider the implications of Brussels IV when advising their clients. Taking steps now may ensure that individuals avoid the possibility of Brussels IV impacting their succession plans.