Holiday Homes and Brussels IV
Do any of your clients own foreign properties? Are any of those properties in Europe? Even if your current clients do not have holiday homes in France, Spain, Italy etc, do you think it likely you will come across clients needing advice who do?
If so, are you familiar with the implications of Brussels IV? Or even heard of this European legislation? Brussels IV is a vital piece of legislation which you should really get your head around, as it can make things so much easier for clients who own European properties.
The provisions of Brussels IV come into play on 17th August 2015. However, you can make an election now to take advantage of the new legislation.
I should explain, if you do not already know, that Brussels IV was written in 2012 in order to remove some of the anomalies and unnecessarily high legal fees and complications which can apply when an individual who owns foreign properties dies.
You may well be familiar with some of the succession problems that can arise when clients have overseas properties.
In France, for example, there is the concept of la réserve, which requires you to reserve at least a specified percentage of your estate for your children. If you have one child, half of your estate must be reserved for that child. If you have two children they are legally entitled to a third of your estate, leaving only a third for you to dispose of freely. It does not matter what your will says, French law requires you to follow the rules of la réserve.
Spain has similar rules, but Spanish inheritance law is a little more complicated. If you have property in Spain, under Spanish law you must leave two thirds of your estate to your children. But also under Spanish law, your estate is distributed according to the law of your own country. So if you are English, Spanish law says English law applies to your Spanish property. This sounds encouraging, but what does English law actually say? Under English law, it is the law of the country in which the assets are held that applies. So the question is then thrown straight back to Spain. Usually, Spanish notaries apply English law as it would apply to property in England, but there is no absolute guarantee they will do so. They could still argue that you must leave two thirds of your estate to your children.
Most countries in Europe give your children a similar automatic right to a specified percentage of your estate. Also, this usually includes children outside of your current relationship, which can complicate things further.
You will also find if you own foreign property and Brussels IV does not apply to it, most reputable solicitors recommend you write an additional will in the other country or countries. You will therefore need to take expert legal advice in those countries, which adds significantly to the cost of writing your will.
The good news is that now you can choose to ignore the succession laws in most other European countries if you wish. You just need to add a clause invoking Brussels IV in the right way within your will. If you do not add such a clause, in theory Brussels IV will still apply, but in practice there are then likely to be additional legal costs and it may even turn out that your client is deemed by the other European country to have close enough connections for the law of that country to apply. With the right clause in the will this cannot happen.
Brussels IV applies in all countries that have signed up to it. All European Union countries other than Denmark, Ireland and the United Kingdom have signed. Do not worry about the United Kingdom not being a signatory though – what counts is whether or not the country in which you own property is a signatory.
Why am I writing about a very technical matter in will writing to financial advisers? Surely the clients’ solicitors should be aware of the recent changes and be dealing with them shouldn’t they? Well, perhaps they should, but I suspect most of them will not. This is therefore an ideal opportunity for you in one of two ways:
- Develop a relationship with a friendly local solicitor (or build on an existing such arrangement) and offer to introduce your clients for him to review whether their wills are “Brussels IV” compliant.
- Develop a relationship with a good will writing practice (preferably one regulated by STEP) that will enable you to present good wills and trust structures to your clients.
Decide now which of these two options is right for you. Then start looking through your client bank and identify the clients who may benefit from hearing about Brussels IV. At the very least it will remind your clients of the great, holistic service you provide. It may well also lead to further business, as is usually the case when you find a good excuse to contact clients.