EU reg 650/2012 – new inheritance rules that are confusing people about inheritance “tax”

EU reg 650/2012 – new inheritance rules that are confusing people about inheritance “tax”

I’ve had a few queries now about a new “inheritance tax law” that the EU is bringing in next year, so thought it would be useful to post an explanation.

First of all, there is no new “inheritance tax law”, but rather a regulation – 650/2012, known as Brussels IV – about “succession regulation”. This is a crucial difference. The EU regulation, which will come into force on 17 August 2015, will “address the diversity of laws applying to succession issues, and simplify the procedures related to cross-border inheritance”. It has nothing to do with inheritance tax, and national tax laws in the country of inheritance will apply the same as now.

With regard to the regulation itself, the UK opted out but it still applies to UK nationals resident in Spain. As Blevins Franks explain in their newsletter HERE, the general rule is that the law applicable to the succession is that of the state where the individual had his habitual residence at the time of death. Spanish inheritance law requires a parent to leave two-thirds of their estate to their children, by-passing the surviving spouse. The regulation provides, however,  for an individual to elect, by way of a statement in his will, for the laws of his country of nationality to apply instead. British nationals can therefore elect for UK succession law to apply, where you are generally free to distribute your estate as you wish (Scotland and Northern Ireland law does have some restrictions).

This regulation is therefore a positive opt-in issue which must be determined by a legal Spanish will, something that is easy to organize via a lawyer, a notary direct, or a non-professional adviser. The key point is that apart from the distribution of assets (a dispersement which must not conflict with the provisions of an existing will from the testator’s home country), a clause must be inserted opting for the testator’s national law to apply. Anyone without a Spanish will, or those with existing wills where this clause has not been used, is well advised to update their provisions.

The other key factor in the regulation, though, is the one I mentioned at the start, namely that the law does not apply to inheritance taxes. There is still not going to be any provision whereby inherited Spanish assets can be taxed according to UK inheritance tax rates and conditions.

11 Comments

  1. Hi Janet, wondered if you could advise us please.
    We have a property inTenerife and are about to make a Spanish Will.
    We are Scottish, so not sure if this differs from English Law.

    Our Scottish Will states our property goes to the Remaining spouse then divided equally between our family on the others spouce’s death.
    Is there anything we need to have written into our Spanish Will ?
    Is there much difference between Spanish wills and UK wills .
    What sort of paperwork do we need to bring from Scotland?
    We are just looking for some advice incase thee is something we should be aware of please.

  2. Author

    For these purposes Scottish can be taken as British. A standard open Spanish will, which is written in accordance with the provisions of your UK will, and which expressly contains the clause that you wish UK law to apply, is what is necessary. As to paperwork to make a Spanish will, just ID.

  3. Hi Janet,
    Also a query regards spanish succession. Do the rules of renvoi apply to a scottish person living in spain and are the rules under Scots law the same as English law where the inheritance law defaults to that of the country of residence i.e Spain?

    Thanks,
    Paul.

  4. Author

    As far as I’m aware, for the purposes of inheritance tax in Spain, Scotland is considered as part of the UK, which it is, of course.

  5. Hi Janet
    I have a UK will but live in Germany. My estate is in the UK and France. Do I need to make a German will with an election asking for UK sucession to apply or can I add it to my UK will. If so would a UK will be caccepted in Germany.

  6. Author

    I’m sorry, Alan, I have no idea and can’t comment on Germany.

  7. Hello Janet

    ‘A standard open Spanish will, which is written in accordance with the provisions of your UK will’.

    Can the Spanish will simply state that you want your Spanish assets dispersed in accordance with your English will or do you have to detail/replicate each bequest as per your English will?

    (This is in addition to the statement that you want English law to apply)

    Thanks, Mara.

  8. Author

    You need to say how you want your assets (just your Spanish assets in a Spanish Will) dispersed, over two levels – the simplest form is testator to spouse, and (second level) to any children if spouse predeceases.

  9. Hi Janet, you have been recommended to me by Philip Dean. My concern is over inheritance tax. I have been under the impression for a number of years now that there is a tax free allowance of €16,000 and then a tax of 40% on the balance when I die and leave a property equally to my children. Is this the case or am I misled over the 40%? If so, please give me a scenario if I leave a property valued at €100,000 to my children would they have to pay 40% on the taxable balance of €84,000? This will help me to decide whether to invest here or in UK. Renting at present.
    Many thanks. Wendy

  10. Author

    Hi Wendy, have a look at the info page on inheritance tax HERE … see if that helps to answer your question.

  11. Many thanks Janet. It sure is complicated! I think I will have to sit down with a lawyer to be able to understand exactly my position.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.