EU Eases Cross-Border Successions
Tuesday 03 July 2012
New rules will make cross-border successions easier, but they will not alter your liability to French inheritance tax.
News that the EU Council of Ministers last month finally agreed to relax inheritance rules has been greeted with unbounded joy in many quarters.
This eagerly awaited measure will mean that EU citizens living in a different country than their own will be able to choose which legislation applies when their heirs settle legal inheritance matters.
So expatriates living in France will not be bound by the country's enforced inheritance rules, as they will be able to choose the country in which they want settlement of their estate to take place.
The UK has chosen to opt-out of this measure, so those from the UK with second homes in France will not be able to benefit from the new rule. In such cases, real estate in France will continue to be governed by French inheritance laws.
The same applies to Irish and Danish nationals with a holiday home in France, as they too have decided to opt out.
Nevertheless, holding the property through a French property company, called a Société Civile Immobilière does enable non-residents to escape enforced inheritance laws.
Tax Remains Unchanged
Despite the relaxation of the rules for expats in France, Mervyn Simms of French financial advisors Siddalls points out that, ''the proposals do not affect the operation and application of French inheritance tax rules. So avoiding French succession law could actually create a larger French inheritance tax bill for selected beneficiaries''.
Under French rules if you leave assets to those outside of your immediate family (including step-children) they could face an inheritance tax bill of up to 60%.
Within the immediate family French inheritance taxes are actually very generous and there are options that can be adopted to reduce liability.
‘’The key as always’’, says Mervyn Simms ''is to take advice about your individual circumstances and the choices that are available to you’’.
As Member States have three years to align their national laws for the new rules to become effective, it may be some time before the detail of the necessary legal changes is published, when it will then be possible to see the exact mechanics of how they will be operated.
In France the enabling legislation may not be a straightforward process, for the rights of children are enshrined in the French Constitution, which it may be necessary to amend.
Strictly speaking, the new regulation provides a single criterion for determining both the jurisdiction and the law applicable to a cross-border estate: the deceased's habitual place of residence.
So adopting your own country rules is not automatic or mandatory. If you do not draw up a will or a succession certificate, your succession will be dealt with under the law of the country in which you were resident.
However, provided appropriate inheritance planning is undertaken, it will also be possible for those individuals living in France to have the law of their country of nationality apply to the entirety of their estate.
The decision will substantially ease the legal burden for beneficiaries where a person dies with property in more than one Member State as it will permit expatriates in France to plan their succession in advance in full legal certainty.
Figures compiled by the European Commission show that there are about 450,000 cross-border succession cases every year involving deceased owned property or bank accounts in different Member States, or cases in which beneficiaries are confronted with differing national rules on what courts and authorities have jurisdiction to deal with the case.
The approval also paves the way for the introduction of the European Certificate of Succession, which will allow people to prove that they are heirs or administrators of a succession without further formalities.
This will represent a considerable improvement from the current situation in which inheritors sometimes have great difficulty exercising their rights.
This article was featured in our Newsletter dated 03/07/2012