What is cross-border inheritance?
Cross-border inheritance laws determine which country handles an inheritance (known in legal terms as succession) and, which country’s national law will govern the inheritance. Cross-border inheritance applies if you live in a country which is not your country of origin or if you own assets in more than one country. Likewise, if you are a beneficiary or executor of a family member who lived in a different country from their country of origin when they died. EU Regulation 650/2012, also known as Brussels IV, came in to effect on 17th August 2015.
Brussels IV has implications for all nationals who reside in a participating EU Member State or who have a connection to a participating EU Member State.
Prior to the introduction of Brussels IV, each EU jurisdiction applied its own rules to govern the devolution of individuals’ property.
In order to determine which country laws would apply to an estate, EU states considered various connecting factors. These included domicile, residence, nationality or habitual residence. In addition, in some EU states, applicable succession law depended whether the assets were immovable (property and land) or movable (bank accounts, vehicles, furniture, jewellery and so on).
The fact that each jurisdiction applied different connecting factors often led to costly, protracted and complex conflicts of laws.
Brussels IV simplifies cross-border inheritance matters
Since the 17th August 2015 however, participating EU States have harmonised succession rules. In an effort to simplify cross-border succession, the EU adopted a single, unified connecting factor – habitual residence.
Therefore, the law of the country where the individual was habitually resident at the time of death is the default position. This, regardless of the location of assets in the estate and, whether the assets are immovable or movable.
For example, if you are a British national but you are habitually resident in Italy, Brussels IV means that instead of your assets passing under the laws of England and Wales, Scotland or Northern Ireland, Italian inheritance law will apply to your worldwide assets.
Furthermore, your estate will be subject to Italian forced heirship rules. 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.
Brussels IV provides an opportunity to elect a country law to apply to your succession
Brussels IV allows individuals to make an election for the country of their nationality to apply to the devolution of their entire estate. Or, where individuals have multiple nationalities, a testator may choose to apply one of these nationalities.
Testators do however need to take action. If you own a property in Italy, you can nominate a country law in your will. This is known as a Choice of Law codicil.
If you are in the process of making or reviewing your will, it is therefore worth considering including a properly drafted Choice of Law codicil to apply to cross-border inheritance. You need to carefully consider matters such as foreign matrimonial regimes, usufruct, tax consequences, joint ownership structures and other foreign proprietary rights with respect to your estate.
Another benefit of Brussels IV is the European Certificate of Succession (ECS). This allows heirs, legatees, executors of wills and administrators of the estate to prove their status. The certificate is then valid in all other EU Member States.
Brussels IV also provides potential benefits for non-EU nationals
Interestingly, there are also potential benefits for non-EU nationals resident in an EU Member State. Again, you need to make an appropriate Choice of Law in your will. For example, US nationals could nominate US law to apply to the succession of their property in Italy. An Australian with property in Spain could nominate Australian law. A Canadian citizen with property in France could elect Canadian law, and so on.
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 we can be of assistance, please get in touch.