EU Succession Rules Harmonise Cross-Border Inheritance

In 2015, the EU introduced new succession rules to simplify cross-border inheritance matters

To benefit from the new EU succession rules, overseas nationals with assets in an EU Member State need to take action in a will.

According to The European Commission some 450,000 cross-border successions occur in the EU each year. These are estimated to be worth in excess of €120 billion. Effective from August 17th 2015, to solve confusion and prevent disputes, the EU introduced new EU succession rules. These rules allow individuals across participating EU member states to choose which country jurisdiction to apply to the devolution of their estate.

Forced heirship

Many countries in the EU, including Italy, have laws governing ‘forced heirship’. Forced heirship rules are similar to UK Intestacy rules. However, forced heirship is applicable even if there is a will. The key point is that Italian forced heirship rules take precedence over a will.

In practice, this means that close family members inherit the deceased’s property regardless of the contents of the deceased’s will. This can often be in preference to the deceased’s spouse or partner. Sometimes, this creates conflicts within families who are unfamiliar with forced heirship cultures. Particularly  if the deceased had children from previous relationships. According to Italian forced heirship rules, these children must also inherit a share of their deceased parent’s estate.

EU Regulation 650/2012 is also known as Brussels IV

The UK did not opt into Brussels IV when it was still a member of the EU. However, UK nationals with assets in EU countries that adopted the changes, which is all of them except for Ireland and Denmark, can take advantage of Brussels IV.

Brussels IV allows any overseas national who owns property in a participating EU member state to choose either the law of the country of their habitual residence, or the law of their nationality to govern succession of their EU estate. Or, if they have multiple nationalities, they can choose one of their nationalities to govern succession.

Electing a country law provides a way to circumvent forced heirship laws.

EU succession rules allow you to elect a country law in your will

If for example you are a UK national habitually resident in England with a holiday home in Italy. You can now update your English will with a choice of law codicil. This would cover the Italian property with an election for the inheritance laws of England and Wales to apply to it. It means you don’t need a separate Italian will for the Italian  holiday home.

That said, it is highly advisable to have either a bilingual Italian will or an official Italian translation of your English will.  Preferably, the translated version would be in the hands of a solicitor or notary. This will make things easier, less time-consuming and costly in the long run for the executor of your estate.

Before taking action, it’s important to understand all the implications of the EU succession rules

Before making any changes to your will, it is important to understand Brussels IV and all its implications. For example, Brussels IV does not impact inheritance tax.

As previously mentioned, Brussels IV is applicable to all foreign property owners. However, if you are habitually resident in Italy it is essential that you make or update your will in Italian. In your Italian will, you should clearly state which country’s law you wish to elect. Otherwise, because you are resident in Italy, the laws of Italy will automatically apply when dealing with succession. Again, it is important to understand the Brussels IV regulation and its impact.

Interestingly, Brussels IV does not restrict the choice of law to EU nationals. For example, a US national with property in a participating EU Member State could elect for US law to apply to the succession of their property; an Australian could nominate Australian law; a Canadian, Canadian law, and so on.

Finally …

As ever, the key is in the planning. If you want freedom of choice, you have it. Just don’t leave it until it’s too late!

Cross-border inheritance law is a complex matter. We recommend you seek independent legal advice regarding your personal situation. For more information about Italian succession and inheritance, you may find our Italian Succession Guide useful.

At De Tullio Law Firm, we have over 55 years of expertise managing cross border succession and estate planning matters throughout Italy. We are a full member of STEP, the world’s leading association for trust and estate practitioners. If you need advice, help or have any questions on cross-border inheritance matters, please get in touch.

Partition of An Italian Estate

Co-heirs and inheritance

An estate comprises assets and rights. Partition of an estate refers to the division of all the assets between all the beneficiaries. Where there are two or more heirs, this establishes a condition of joint ownership of rights and duties concerning an inheritance.

Each co-heir inherits a portion of the deceased’s estate. This allocation is either in accordance with the deceased’s will or, where the deceased died intestate, according to law. Likewise, in the same proportion, co-heirs inherit any debts the deceased left and take on any outstanding liabilities.

Each co-heir has the right to request the partition of an estate at any time unless otherwise stipulated by the deceased in a will. Importantly, all co-heirs, or their universal or successors (legatees), must take part in the partition. If beneficiaries fail to participate in the partition, it renders their inheritance rights invalid. This cannot be rectified later by absentee co-heirs.

In order to achieve partition of an estate Italian legislation provides three methods.

– Amicable (bargaining) partition

– Judicial partition

– Testamentary partition

Amicable partition of an estate

An amicable partition is a contractual undertaking between co-heirs. Because the purpose is to convert co-heirs’ legitimate rights into individual assets in the estate, all co-heirs need to agree who gets what. At the same time, co-heirs need to ensure that the value of the assets (known as de facto quotas) equate to the value of the joint ownership quotas.

Judicial partition of an estate

Should co-heirs disagree regarding partition of an estate, each of them can refer it to a court. A judge will therefore rule how the estate should be divided. The process goes through these stages:

Formation of the inherited estate

This involves an assessment of the entire estate including any assets that the deceased gifted to the co-heirs. The entire calculation forms the partition of an estate to prevent any unequal treatment among the co-heirs.

Appraisal of the assets

An evaluation of all assets according to their market value. The testator may have nominated an executor or an organisation in a will, to conduct the appraisal. Where assets that need division, fall into the same category, it may not be necessary to value them all. In other cases, the estimate of individual assets is essential in order to create portions of value corresponding to the quota for each co-heir. By law, this would also be the case if the decedent was intestate.

Possible sale of indivisible assets

In order to make up quotas for co-heirs, it may be necessary to sell real estate property or to assign property to a co-heir in return for a sum of money.

Formation of the portions due to each co-heir

Following reconciliation of the whole estate, the court assigns inheritance quotas for each co-heir.

Assignment or attribution of quotas.

The court decides who gets what assets. Where inherited quotas are equal, assets will be assigned as lots. Attribution refers to asset apportioning if quotas are of unequal size.

Testamentary partition of an estate

A testator can stipulate in a will, the portions to assign to each co-heir, or can simply lay down terms in order to set quotas.

It may occur that the effective value of a testator’s assets does not cover the quotas stipulated in a will. Again, where a dispute arises regarding partition of an estate, co-heirs have the same recourse: amicable or judicial partition.

Finally …

Italian inheritance is a complex matter. In addition, if you own assets in more than one country, this can further compound the complexity. We recommend you seek independent legal advice regarding your personal situation. If we can be of assistance, please get in touch.

For more information about Italian succession and inheritance, you may find our Italian Succession Guide useful.

At De Tullio Law Firm, we have over 55 years of expertise managing cross border succession and estate planning matters throughout Italy. We are a full member of STEP, the world’s leading association for trust and estate practitioners.

You may also be interested in Legitimate Heirs. Rights of “Forced Heirs” in Italian Inheritance