Will and estate disputes and foreign assets

Roman considers the complex issue of foreign assets against the backdrop of a will or estate dispute and the potential impact of EU Regulation No 650/2012.

Increasingly, I am dealing with contested will, probate disputes and claims under the Inheritance (Provision for Family and Dependants) Act 1975 where a large proportion of the deceased’s assets are located abroad.

The rules surrounding foreign assets and their relationship with the law in England and Wales can be complex and varies depending on where the assets are located.

As a very general rule, in the majority of states within the EU, ‘movable’ assets such as cash, investments, stocks, shares and personal items are governed by, and will devolve (pass down) according to, the law of a person’s ‘deemed domicile’ at the date of their death. Conversely, ‘immovable’ assets, such as land and property, will usually devolve according to the lex situs i.e. the law of the country in which they are located.

Most countries have their own very distinct succession laws. For instance, in England and Wales the doctrine of testamentary freedom to dispose of your estate as you wish is a very important one.

Conversely, in France, a person may often dispose of a proportion of their assets as they wish, with the remainder passing under French ‘forced heirship’ rules. Next door, in Switzerland, how an estate is administered will depend upon whether there is a valid will or not as well as a person’s domicile. Paragraph 2 of Article 90 of the Federal Swiss Code on Private International Law states that foreign citizen may, by a last will or inheritance contract, subject their estate to the material law of their country of citizenship. As such, if a person died domiciled in England and Wales and made a will there dealing with their assets both in England and Wales and Switzerland then the Swiss Court would most likely accept the will as applying to the Swiss assets, subject to the precedence of matrimonial property rules.

However, Swiss domicile rules differ to domicile rules in England and Wales. As such, a person’s domicile, for the purpose of the devolution of their estate, may vary from country to country and conflict of laws rules may apply.

3,638 miles away, in Yemen, the devolution of a person’s estate is governed by Sharia’a law such that their estate must pass to various family members in defined shares.

The rules on domicile can be tricky and can have huge repercussions. For instance, in England and Wales if a person has been left out of a will and wishes to bring a claim for reasonable financial provision under the Inheritance (Provision for Family and Dependants) Act 1975, they can only do so if the deceased died domiciled in England and Wales. Domicile can be challenged. However, where there are also foreign assets, one must not be too hasty. For instance, a successful challenge on domicile may lead to unexpected tax consequences; here in England and Wales our inheritance tax rates are notoriously high compared to rates in other countries. As such, a successful challenge on domicile to enable a claim to be brought may prove a pyrrhic victory if it results in a large tax bill where, otherwise, there would not have been one.

Then there is the issue of marriage and its effect on wills and property purchased during the marriage. In England and Wales, subject to any arguments about beneficial ownership and trust claims, an asset is owned by the person who bought it and, unless there is anything to the contrary in the will, a marriage automatically revokes an earlier will. However, over in mainland Europe, many states have matrimonial property regimes which often dictate that any property purchased during marriage, whether by one or other spouse, is owned equally, unless the couple have specifically contracted out of such regime. Further, in some states, such as France, marriage does not automatically revoke an earlier will.

In an attempt to bring some form of cohesion to succession rules in Europe, the European Parliament and Council formally adopted EU Regulation No 650/2012, commonly known as “Brussels IV” or the EU Succession Regulation. This is due to come into force fully on 17 August 2015 and its aim is to resolve conflict issues in respect of private international law. As such, the regulation will govern the devolution of the estate of a person who dies after that date where assets are within the states who have signed up to the regulation. Although the UK has not signed up, the regulation may still be relevant where assets are located abroad.

Broadly, the EU Succession Regulation will seek apply a single law which will apply to a person’s moveable and immovable assets according to the law of their habitual residence, a country to which they were more closely associated or in accordance with the law of a country which they have elected under their will.

This should simplify matters somewhat although given that the UK is not a party to the regulation it still means that extra care will need to be taken when considering contesting a will or inheritance where there are foreign assets.