ROME- On August 17, new regulations came into force which are intended to harmonise the differing, and sometimes conflicting, laws of the EU countries in relation to the succession of assets.

 The intended effect of the new European Succession Regulations (Regulations) is to make things less complicated so that instead of different laws of different countries applying to different assets, just one country’s laws will govern the succession of all the assets in the deceased’s estate.

 Having been involved in cross-border inheritance/ estate planning for a number of years now, I am aware that this is a complex process especially when someone owns property and assets in more than one country. This is because the various assets in the same estate can be subject to the laws of different countries not only on death but on an annual basis as exists in Italy.

 Whilst performing my duties as a financial consultant, I ensure that moveable assets (such as savings and investments) are held in tax efficient vehicles, I also look for the solutions that have the facility to mitigate some local inheritance laws at the same time.

 With careful financial planning and input from tax lawyers, it can now be possible to reduce inheritance tax and annual taxes for those living in the EU who are either not aware of, or choose to ignore the local or European laws which govern the disposal of their estate upon death.

So which country’s laws will be applied when you die?

 The default position is that the law of the country in which the deceased has their habitual residence at the time of death will apply and will govern the succession of the whole worldwide estate.

 People will however be able to opt for the laws of the country of their nationality (or one of their nationalities if multiple) to apply to their estate instead by properly setting this out in their will.

 The Regulations also state that the law chosen does not need to be the law of another EU Member State. ’This would therefore enable, for example, a US national to choose American law to apply to his estate even though he/she is an habitually resident in Italy

 It is important to note however that these regulations deal with the laws of succession only i.e. who inherits the assets of the estate. It does not deal with any tax matters, including inheritance tax. National law will continue to determine how inheritance tax is calculated and whether it is the estate or the beneficiary who is liable for the payment of the tax.

 It is actually possible for an Italian tax resident to opt to choose the distribution of assets under the laws of the UK and combine that with the favourable IHT tax position of Italy.

 IHT is charged in the UK at 40%, however, everyone is entitled to a tax free amount (also known as the “nil rate band”) which is currently £325,000 (or up to £650,000 for married couples and registered civil partners if the “transferrable nil rate band” applies).

 In Italy however, you can pass 1 million Euros of your assets to your wife and each of your children without any IHT falling due. It is important to understand that natural succession rules exist in this instance so if you married, had 2 children and you had an Italian will written, your estate could be distributed 50% to your spouse and 50% to your children. If you did not have a will the estate would automatically be distributed as 1/3^rd to your spouse and 2/3rds to your children. Please note that unmarried partners have no legal rights to inherit in Italy.

 Using certain regulated investment portfolio bonds to hold your liquid assets can eliminate the above position but again professional advice needs to be taken to plan this.  

 All EU countries will apply the new regulations with the exception of the UK, Ireland and Denmark who have opted out. Although the UK is therefore not a signatory to these regulations, the regulations are still of considerable relevance to UK residents and nationals with assets in participating EU countries.

 After 17 August 2015, an English national (for example) will be able to create a Will that stipulates that English law is to apply to his/her entire worldwide estate, including property in other participating EU member states. As such, any EU member state which is a signatory to the regulation would be required not to apply its own succession rules to those assets, and apply English succession law instead.

 Often we get asked if a will is therefore still be necessary to make a separate willcovering the assets of each country. Our advice is always to seek the advice of a properly qualified lawyer to advise you, as the position may be different dependent on each individual’s circumstances. They may also be additional benefits to having more than one will when it comes to the practicality of administering your estate.

 The Regulations also provide for the issue of a European Certificates of Succession. This is a document similar to a Grant of Probate and provides proof of who is entitled to the assets of the estate. The ECS will be issued by the authorities of the participating Member State in which the deceased was habitually resident and will be recognized by all of the participating Member States.

 For example, the beneficiaries of a Spanish National, who dies habitually resident in France, with assets in France, Italy and Spain will be able to deal with all the assets on the basis of the one Certificate which will be recognised not only in the country issuing it (France) but also (in this example) Italy and Spain.

 However because the UK has not opted in to the Regulations it is not bound by them or subject to their application. Therefore where a UK national who is habitually resident in France has chosen UK law to apply to his estate it may still be necessary to obtain a UK grant of probate to administer any UK assets.

 If you require any advice in relation to this article, with your financial  planning  needs or investment advice, please contact me directly at paul.howard@blacktowerfm.comor call me on either  +39 0642272227+39 3319386322