Good news for holiday home owners?

01 September 2015

One of the perils of holiday home ownership has always been differing succession rules in different countries under which ownership of property passes on death. It has always been good practice as a result of this to obtain local advice and in all likelihood put in place a local will, so as to minimise the risk of complications upon death.

From 17 August, changes to European Law, referred to as Brussels 4, will potentially make ownership of property in other EU states easier as under the new rules, you will be able to select the EU legal system under which you wish property to pass. Whilst the UK (together with Ireland and Denmark) have opted out of these rules, the new rules will apply to properties situated in other EU states. The default position is that the law of the country is which the deceased was habitually resident will be that which applies, however, this can be overridden either by making an election or where the deceased’s links to another state are very much stronger than the links with his or her country of habitual residence.

One of the main benefits that come from this is that UK citizens with holiday homes in Europe are no longer bound by the “forced heirship” rules that exist in many European states under which property must be inherited by certain family members (commonly the children). This may also open up the possibility of UK inheritance tax planning that was previously not possible.

Whilst Brussels 4 is unmistakably good news, care will still be required so as to ensure that local tax laws, together with UK Inheritance Tax are properly managed. There is a clear consensus amongst professional advisers that there are aspect of these new rules for which it is “too early to tell” as to the practical implications. For the avoidance of doubt, there still appears to be room for conflict of law, particularly relating to the concept of trusts often used in UK wills, which are not generally recognised under the legal jurisdictions of much of mainland Europe.

Brussels 4 is a reason to revisit any arrangements that you have made regarding the ownership of your holiday home and perhaps more generally regarding circumstances where for example, individuals have returned to their country of origin, leaving UK family as potential beneficiaries.

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We strongly advise that your seek advice based on your specific circumstances, for more information please contact a member of our construction and real estate team or your local office contact. Alternatively, please email your enquiry to us.

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