Foreign assets and how they are dealt with is bound to be affected by Brexit. With free movement between EU countries, retiring abroad became popular and many UK citizens bought property in the EU. However, for UK nationals who have foreign assets the decision to leave the EU will mean that carefully constructed retirement plans will be thrown into disarray.
At the moment , if you live in one country and have foreign assets such as property/investments in another country which is in the EU, then the EU Succession Regulation known as Brussels IV will affect you. This came into force on 17 August 2015 and applies to all Wills both subsequent and in place before that date.
These rules allow you to choose either the law of the country in which you last lived or the country of your birth, your nationality, when it comes to dealing with foreign assets and the administration of an estate. Your preference should be clearly stated in any Will and be considered valid if it meets the requirements of the EU country in which you last lived or the law of your nationality.
In summary it is the law of the EU country where you last lived or the law of your home country that will govern the inheritance of all your assets, regardless of their location and of whether they are movable (for example, a car or a bank account) or immovable (for example, a house).
It’s important to make sure the most advantageous jurisdiction is chosen as it will have a marked effect on the way in which an estate with foreign assets is administered and distributed. For example, In France if your Will is not currently up to date then your spouse will only inherit a quarter of your estate and the rest will be left to your children.
With Brexit these laws will most likely change because whilst EU countries will continue to give their citizens the ability to choose how their estate is governed, the UK will probably lose this option. Consequently, UK citizens with foreign assets in the EU may lose the right to use English law to govern the disposition of their English and foreign assets which may put them at a disadvantage.
In addition, an estate may be subject to a more disadvantageous tax regime. For example, Spanish non-resident tax law states that EU/EEA residents are granted beneficial tax treatment compared with those from non-EU countries. When Brexit occurs UK citizens will lose their EU residency status which could result in their foreign assets being subject to a more punitive tax regime.
There is also another potential confusion as the Succession Regulation does not define ‘last habitual residence’ or permanent home which could give rise to both the UK and an EU country claiming jurisdiction over an estate with foreign assets and applying their own national inheritance law.
As with all things Brexit there is a lot of uncertainty and little clarity about what will actually happen. Whilst it is possible to outline some of the potential issue arising from Brexit is not possible to define as yet potential solutions.
The purpose of most Wills is to mitigate tax. There is one piece of advice that remains constant and that is to seek professional advice when writing a Will to ensure it covers both UK and foreign assets. Local solicitors will be able to ensure your Will complies with jurisdictional laws and protects your assets from foreign tax claims.