25 October 2018 - Events
For clients owning property in continental Europe, one big problem has always been what happens to the property on death, and the tax implications then. Most continental European countries including Italy, France and Spain impose ‘forced heirship’ rules, so that owners of real property situated in the country must leave a share of the property directly to their children on death and cannot leave all of it to their spouse. This often means the spouse cannot then deal with or sell the property without having to get the children’s agreement; and this can also give rise to additional US Estate Tax or UK inheritance tax.
From 17 August 2015, the situation is changing for the better. New EU rules taking effect then mean that citizens of the US or the UK can make a choice in their will to apply their national law to foreign property in an EU state. This would enable them for example to leave the whole property to their surviving spouse, so it only passes to the children on the second death. This will also be likely to improve the tax position, and avoid the need for some rather complex, and less advantageous, arrangements put in place in the past (such as ‘usufruits’).
The choice of the law can be included in wills signed now, though it would only take effect for a death on or after 17 August this year.
As always there are some complexities and advice should be taken. In general we expect the new Regulation – known as ‘Brussels IV’ – to solve what is at present a major potential headache for a great many people owning European property.