On the borders

The 2019 conference started with Richard Frimston of Russell-Cooke, who gave an update on EU matters. Richard explained the state of play regarding same-sex marriage and registered partnerships in relation to the EU Succession Regulation (otherwise known as Brussels IV) with reference to Coman, in which the Court of Justice of the European Union (CJEU) ruled that the term ‘spouse’ includes the same-sex spouse of an EU citizen who has moved between member states.

Daniel Harris said that we should not assume that as most of our clients are British (English nationals), the MPR Regulation will never apply to them

Jo Summers, partner at PWT, looked at investment in the UK post-Brexit. She argued that the UK would remain an attractive market to international investors. Jo also cast doubt on whether this was the right time to extend non-resident capital gains tax to commercial property and indirect interests in property and to introduce a new stamp duty land tax charge for non-UK residents, which would cover individuals, companies and trusts (this is subject to a consultation, which closes next week). She argued that the annual tax on enveloped dwellings is now defunct, given the new inheritance tax transparency rules.

Daniel Harris, partner at Stone King LLP, examined the new EU regulations for matrimonial property regimes (MPRs) (Regulation (EU) 2016/1103) and the property consequences of registered partnerships (Regulation (EU) 2016/1104). He warned that assets under an MPR pass outside a will and so, from a planning and succession perspective, must be considered in conjunction with Brussels IV. Also, he said that we should not assume that as most of our clients are British (English nationals), the MPR Regulation will never apply to them. Wrong: there are certain instances where an MPR will be applicable, such as for UK expats marrying overseas, or for those UK nationals executing documents prepared for them by well-meaning local lawyers who accidentally ‘fall’ into MPRs.

The rest of the day was taken up with a panel discussion I chaired, bringing together lawyers from France, Italy and Spain to discuss two case studies illustrating the European probate succession process. The case studies involved a married couple with properties in Spain, France, Italy and the UK. The panel looked at the various estate planning options and succession issues facing the husband, Eduardo.

As there is no definition of the term habitual residence in Brussels IV, it should be interpreted autonomously

I dealt briefly with the concept of habitual residence. As there is no definition of the term in Brussels IV, it should be interpreted autonomously. It is understood to be the ‘main centre of interest’ of the testator and should not cause any difficulties for the practitioner. I referred to more complicated concepts such as ‘work commuters’ – workers who reside in one state during working days and in another at the weekend – and ‘Mallorca pensioners’, who live in two different states for several months at a time. In these cases, social connections to family and friends should carry more weight in determining habitual residence. In cases where the country of habitual residence is harder to establish, the nationality of the testator or the state in which the majority of their assets are held can be important deciding factors.

Alessia Paoletto (Italy) considered the advantages of Eduardo having a single situs will (efficiency of administration, promotion of formal validity, privacy considerations) against those of a single multi-jurisdictional will (simplicity, reduced costs of estate planning).

The panellists provided example clauses for Eduardo’s will, which included assets held abroad. Diane Le Grand de Belleroche (France) proposed the following clause, if Eduardo were French and wanted French law to be applicable to his succession: “I choose French law, as the law of my nationality, as my succession law for all my assets, rights and obligations, including any not disposed of by this will.”

Alessia provided a property legacy clause: “In this clause, my Italian assets shall mean my property of every kind in Italy. I give free of inheritance tax (as defined) my Italian property to my wife / husband absolutely.

“Subject to above, I give free of inheritance tax my Italian assets to such of my children as shall survive me, and if more than one, in equal shares absolutely.”

Juan José de Palacio Rodríguez (Spain) stressed that liability for the payment of tax lies with the beneficiaries, which is often a problem for executors appointed under the English will. Alessia’s clause would help in dealing with the administration of Eduardo’s estate.

The speakers highlighted that in their jurisdictions, certain family members have the right to claim a portion of the estate, regulated by the forced heirship rules. Clawback is applicable, so when the deceased has gifted part of their assets to someone prior to their death, these assets will be taken into account when calculating the forced share. Alessia remarked that Italy has a statutory period of 10 years to claim.

To close the session, we discussed the validity of lasting powers of attorney (LPAs). One thing that Spain, Italy and France have in common is that none of them has an equivalent, which can lead to difficulties in LPAs made in England and Wales being recognised. Alessia mentioned that in Italy, it is possible to keep acting on behalf of someone by means of a power of attorney after the donor has lost capacity. In all three jurisdictions, legal proceedings are required to obtain a declaration of incapacity, based on a medical examination.