☏ +34 93 665 85 96  |  ✑ info@spectrum-ifa.com
Viewing posts categorised under: Succession Planning

Making a Will and EU Succession Planning in Spain/Europe

By Chris Burke - Topics: Barcelona, Inheritance Tax, Spain, Succession Planning, Uncategorised, Wills
This article is published on: 15th June 2016

15.06.16

The Laws on making a Will in Spain/Europe changed on the 17th August 2015. These changes could greatly affect what would happen to someone’s estate/inheritance when they die and it’s therefore important you understand what these are and how they could affect you.

The reason for these changes in that is essence European states have differing laws on who inherits an estate. Many of these are complicated and unclear, making it uncertain who will inherit exactly what.

For this purpose, EU Succession Regulation introduces common rules on which State’s laws apply if there is a conflict between countries’ succession laws.

The following countries are bound by the new regulation:
Austria, Belgium, Bulgaria, Croatia, Cyprus, the Czech Republic, Estonia, Finland, France, Germany, Greece, Hungary, Italy, Latvia, Lithuania, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, and Sweden.
Notable Absentee’s are the UK, Ireland and Denmark.

Where you are ‘habitually resident’ that country’s laws will apply

To give you an example, a person dies leaving assets in France, Spain, and Germany and resides here in Spain. Due to the fact they are resident in Spain, the assets will be governed by Spanish law.

So what are the rules of Habitual Residence?

How long you are in and how often you visit a state/country as well as the conditions and reasons for you being there. Simply put, for most people, more than 183 days in one country, living or retired there makes it your main residence.

Making a Choice of Law

This default position can be overridden if you choose to apply the law of your nationality via a Will. For example – a German national dies leaving assets in France, Spain, and Germany. They are habitually resident in Spain but have stated in their Will that German law will apply to their estate. All of their assets will be governed by German law.

What about the UK?

As the UK is not bound by the Regulation, UK assets can never be governed by the law of another EU state. However, those states bound by the Regulation have to allow the application of UK laws to assets in their state if someone so chooses.

How might this affect me?

Many EU states have laws of ‘forced heirship’ under which certain assets (such as holiday property) can only be inherited by certain people. The inheritance laws in England and Wales allow you greater freedom to leave your estate to whomever you wish when you die. If you have assets in any of the states bound by the Regulation it may affect which laws will apply to them.

Who does it affect?

All foreigners who have their habitual residency in Spain and die on or after the 17th of August 2015. Spanish nationals may disregard these changes as they are unaffected by the changes.

Examples of which Will you may need

• I am a British/Irish national and NOT resident in Spain. I Don’t Plan to become Resident in Spain.

In such a case this Regulation does not affect you. It only affects existing residents in Spain or else those who at some point in the future plan to take up residency in Spain. There is no need for you to make a new Spanish Will.

A WORD OF WARNING HERE! If you are not truly a resident in Spain i.e. spend less than 183 days a year here, then that’s perfectly ok and you have nothing to worry about. However, if you are PRETENDING you are not resident in Spain, be very careful. More and more people are getting caught out by various means, and fines can be punitive. The reasons for wanting to be UK resident are currently negligible compared to being a Spanish Resident. Inheritance tax is almost nothing if anything in many cases here in Catalonia at present, and the other taxes you pay here are again currently very similar to that of the UK. Why run the risk of getting caught?

Examples of who this may affect?

• A non-resident Scottish man who inherits Spanish assets will also pay Spanish inheritance tax.

You cannot opt out or choose your own national Inheritance tax laws on inheriting assets located in Spain. You have to pay Spain’s IHT.

Other potential questions might be:

• Can I choose my own national tax law besides opting for my national succession law? The short answer is no

The regulation entitles you is to choose freely the Succession Law of your own nationality (i.e. England and Wales or Scotland’s) in lieu of Spain’s compulsory heir rules which, following this new Regulation, applies by default if your habitual residency is in Spain at the time of your death on or after the 17th of August 2015.

VERY IMPORTANT – PLEASE NOTE!!!

You CANNOT choose which Inheritance Tax Laws apply to your Spanish estate. It is mandatory to pay Spanish inheritance tax on Spanish Assets, still.

For example, an Englishman resident in Spain and inherits Spanish assets will pay Spanish inheritance tax.

To clarify on Wills……
You are simply choosing the rules of which country you wish the Will to follow. Either way, Spanish assets will STILL be liable to Spanish Taxes.

For example, in Spain assets left automatically go to certain relatives, whether you want them to or not e.g. the husband dies, 25% of any Property goes to any children, whether you want it to or not. This could then cause problems with selling properties, realising assets etc.

What do I need to do?

It is essential to co-ordinate Wills and Tax Planning (look no further) in each country concerned to ensure that your estate will pass to your chosen beneficiaries in the way that is best for you and your estate.

Chris, a partner of the Spectrum IFA Group, makes sure that not only are his clients assets managed correctly, but they are kept up to date and given the best advice for most eventualities that affect many people almost daily, that they do not think about or aren’t aware of.

Where there’s a Will

By Pauline Bowden - Topics: Costa del Sol, Inheritance Tax, Residency, Spain, Succession Planning, Tax, Uncategorised, Wills
This article is published on: 7th June 2016

07.06.16

Many people avoid drawing up wills because it requires them to contemplate their own mortality. If you are a foreigner with property and/or other assets in Spain, you should make a Spanish will.

You should also have a will for each jurisdiction within which you hold assets. For example, if you have a bank account in Gibraltar, Isle of Man, Jersey etc, you also need a will in that country.

Each of these wills needs to clearly state that they are for the disposal of assets in that country only and that you want your will to be governed by UK/ other EU country law. Only if you state this, will that disposal of assets be governed by your own national law and not that of Spain.

It is now possible to have your Spanish will made out in two columns. One side in Spanish and the other in English. This is checked by a Notary Public and signed by you, the Notary and your interpreter, if your Spanish is insufficient for you to read the Spanish side of the document yourself. The Testamento Abierto (Open Will) is kept by the Notary, an authorized copy will be given to you and the Notary will send a notification to the Registro Central de Ultima Voluntad in Madrid.

It is important to discuss with your legal or financial adviser in Spain, details of the heirs named on your Spanish will. The more direct descendants that are named in your Spanish will as heirs, the less the Inheritance Tax you should have to pay.

Unlike the UK and many other countries, in Spain it is the person receiving the inheritance that is taxable, NOT the deceased person’s estate.
There are many differences between the UK law and Spanish law on Inheritance and Gift tax and although the UK and Spain have many reciprocal arrangements for double taxation, there is no such arrangement for Inheritance Tax.

To die intestate (without a will) in Spain, makes the process of sorting out the deceased’s estate much more time consuming and costly. For the sake of a small amount of money and an hour of your time, you can leave your affairs in order, to help those left behind.

UK Inheritance Tax V French Succession Tax

By Lorraine Chekir - Topics: Assurance Vie, France, Inheritance Tax, Succession Planning, Uncategorised, United Kingdom
This article is published on: 19th May 2016

19.05.16

This is an area that many expats find very confusing: what and where to declare, what and where to pay, where to even start!

It doesn’t help that UK and France have completely different rules. In the UK the estate pays the tax and the net proceeds are paid to the beneficiaries. In France, the proceeds are paid to the beneficiaries. The beneficiary will then complete a Succession tax form and pay the inheritance tax, the amount of which is based on their relationship to the deceased.

What many expats do not realise is that if you are a French resident and inherit from someone who was a UK resident you need to complete and submit a French Succession tax form to URSAAF within 12 months of their death. No actual tax is payable in France as there is a tax treaty in place between the two countries.

Let’s look at a couple of different scenarios:

You are a UK resident and own a property in France. When you pass away your estate will be taxed in the UK on your worldwide moveable assets. However, your property in France will be subject to French inheritance tax.

If you are a French resident, when you pass away French inheritance tax will apply to your worldwide assets. If you still have UK assets, it may be that you will also pay some inheritance tax in the UK, however there is a tax treaty in place to ensure that you do not pay tax twice on the same assets.

Inheritance Rules:

In the UK the law says you can make a will naming whoever you wish as your beneficiaries. If you have not made a will, then the rules of intestacy apply and the distribution of your estate is based on these. If you have no living relatives, even long lost and distant, then everything you have will go to the Crown. Anyone born in Scotland would have some restrictions on who they could leave their estate to.

In France you cannot freely dispose of “la réserve” which must be held for your children. You are only free to dispose of as you wish the “quotité disponible”. A spouse is not a protected heir in France, however unless you specifically disinherit them, they are entitled to a quarter of your estate. The amount freely disposable from your estate will depend on the number of children you have.

  • If you have one child they are entitled to half of your estate with half freely disposable
  • Two children are entitled to two thirds with one third freely disposable
  • Three children are entitled to three quarters with one quarter freely available

Since August 2015 it has been possible, in your French will, to adopt the inheritance rules of your country of nationality. This means if you are from the UK then you can adopt UK inheritance rules and leave your estate to whoever you wish. However, it is important to note this applies to inheritance rules not tax, French inheritance tax will still apply. I think this change in legislation will be of particular importance to people in second marriages with children from previous relationships and maybe from the current relationship also. For some reason, the UK and Ireland have chosen not to sign up to this change, which means if you are from the EU and living in the UK your estate will be subject to UK inheritance rules and tax.

Inheritance Tax Rates:

In the UK, the first 325,000 GBP of a person’s estate is free of inheritance tax. From the tax year 2017/18 if you have a family home that will pass directly to your children, then an additional allowance of 100,000 GBP will apply, rising to 175,000 GBP by 2020. This means that by 2020, married couples and those in civil partnerships with a family home to pass to children, could pass a total of 1m GBP free of inheritance tax. Inheritance tax in the UK is 40% of everything above your allowance.

In France, each person can leave 100,000 Euro to each of their children free of inheritance tax. Above this there is a sliding scale starting at 5% and rising to 45%. However as a guide, between 15,932 Euro and 552,324 Euro, the rate payable by the beneficiary is 20%.

For siblings, the first 15,932 Euro of what you leave them is free of inheritance tax, then they pay 35% on the next 24,430 Euro and 45% on everything else

Nieces and nephews can have just 7,967 Euro free of tax then pay a whopping 55% on the rest.

Everyone else (including non-married partners) can inherit a measly 1,594 Euro free of tax and will pay a massive 60% on amounts above this.

An important tax planning tool is the Assurance Vie. Providing it is set up before age 70, you can name beneficiaries and each beneficiary can inherit 152,500 Euro free of inheritance tax, amounts between 152,500 Euro and 852,500 Euro will be taxed at 20% and anything over this at 31.5%. As you can imagine, this could make a huge tax saving, especially for non-married partners, nieces, nephews and beneficiaries not related to you, with potential tax savings of up to 60%. The great thing is, it remains your money until you die which means you have full access if you need it, unlike when you put money in a trust in the UK to try and reduce your inheritance tax liability. In addition, it is the nearest thing the French have to an ISA as your money grows tax free.

If you want any more information or would like some advice, please contact me on the number or email below.

I also hold a free financial surgery in Café de la Tour in Les Arcs on the last Friday morning of each month where you can discuss your own situation in confidence over a cup of coffee.

This article is for information only and should not be considered as advice and is based on current legislation. 04/05/2016.

Overseas rental property – have you thought about this………?

By Gareth Horsfall - Topics: Inheritance Tax, Investments, Italy, Succession Planning, Uncategorised, wealth management, Wills
This article is published on: 13th May 2016

13.05.16

Financial markets are very quiet at the moment. From my view point the financial world appears to be almost at stand still.

The world appears to be awaiting the UK vote on whether to leave Europe or not!

In the meantime, life goes on and whilst the UK celebrates the Leicester City win of the Premier League with a Roman manager, I continue to get contacted by various people asking my opinion on how they should manage their finances as residents and non residents in Italy. The majority of those people also have rental property in their home country as part of their overall financial arrangements.

A review of taxation on overseas rental property for Italian residents

The most common question I am asked is how income from property held overseas is taxed in Italy. Is it exempt from Italian tax because tax has been paid on it overseas first and is it subject to the same taxes as Italian domestic rental income?

I would like to dispel any myths and confirm that, as a resident in Italy, you do have to pay Italian tax on the profit from any rental income on properties held overseas.

The law for Italian tax residents clearly states that the net profit (after allowable expenses in the country in which the property is located) must be declared in the Italian end of year tax return. The net profit is then assessed as income by adding it to the rest of your income for the year and then tax paid at your highest rate of income tax in Italy (that could be as high as 43% depending on your cumulative income for the year).

Let’s not forget the IVIE tax as well which is 0.76% of the property council/cadastrale/rateable value (or whatever you choose to call it) of the property.

If tax has been applied in the country of origin, this can be reclaimed through your tax return. You are protected through a double taxation treaty as long as your country of origin has signed one with Italy.

To clarify, any rental income from properties held overseas must be declared in Italy. This is the NET income (after allowable expenses) and this net figure is added to your other income to determine at which rate of income tax it is assessed in Italy.

But wait a minute. Have you thought about this?

Now, this is all well and good but as most landlords of properties overseas discover, if they are relying on the income from the property to live on then any income benefit can quickly be diminished by additional tax to be paid in Italy.

Do you have useful relatives?

Do you have trustworthy relatives/family members in the country where the property is located? If so, then you might think about gifting the property to them (effectively signing it over to them) and getting them to send the rental income to you as a gift.

The recipient of a gift is not taxable in Italy and therefore you could have a non taxable income stream

However, before you start looking to sign your properties over to family members you need to think of a number of tax consequences of doing this. Mainly the inheritance tax obligations that it imposes on your estate, any tax considerations and administrative burdens it now places on the holder of the property (they would have to be the sole recipient of the money and the sole named owner of the property). That person would have to receive the money in their accounts and submit their tax returns accordingly. They would have to send the money to you under a word of mouth agreement and you would have to trust the other party implicitly, not to mention a number of other tax questions it may pose.

However, assuming those problems could be overcome you might find that you could have the rental income from your overseas property paid to you in Italy, without detraction of Italian tax but through a gift arrangement.

Cross border financial planning at work!

Are your investments tax compliant in Spain?

By John Hayward - Topics: Costa Blanca, Inheritance Tax, Investments, Residency, Spain, Succession Planning, Tax, Uncategorised
This article is published on: 30th March 2016

30.03.16

Many UK nationals resident in Spain will have premium bonds, ISAs, unit trusts, and other vehicles which, although tax efficient in the UK, are not in Spain and are therefore non-compliant for tax purposes. Tax on the growth on these investments may need to be paid in Spain each year, whether withdrawn or not. The advantage of a Spanish Compliant investment, “wrapped” within an insurance policy, is that tax is only payable on gains when these are withdrawn. The gains are charged at SAVINGS TAX rates and NOT INCOME TAX rates. Tax savings can be significant when investments are organised in line with Spanish regulations.

Tax increase on pension funds

The lifetime allowance on pensions will reduce from 6th April 2016. For those who have pension funds over £1 million, 55% tax will be payable on the excess taken as a lump sum. A 25% charge will apply to income although, for a higher rate taxpayer, this extra tax could mean an overall rate of 55% as well. For every £10,000 of income, £5,500 would go in tax. There are people who have not reached this level of pension fund. However, let´s say that there is currently £800,000 in pension savings. With 5% increases each year, in 5 years´ time the funds will be worth over £1 million. There are ways to protect against this charge, up to certain limits and with restrictions. This is one of the reasons why a QROPS arrangement could be suitable for those living overseas as these additional tax charges do not apply to QROPS.
Source: www.gov.uk

Additional Spanish Succession Tax for non-EU membership

With effect from 1st January 2015, any non-resident who inherits a Spanish asset, and is an ascendant (parent or grandparent), descendent (child or grandchild), or a spouse of the deceased, will be treated in the same way as a Spanish resident, receiving the same allowances and benefits. The tax will then be dependent on the autonomous region in Spain where the deceased was resident or where the asset is situated. This treatment only applies to EU citizens. The EU referendum on 23rd June in the UK could have a serious impact on what future taxes could be due for residents of the UK who inherit Spanish assets.
Source: www.legaltoday.com

Recent financial updates affecting expats in France

By Spectrum IFA - Topics: France, Income Tax, Inheritance Tax, Pensions, Residency, Social Charges, Succession Planning, Uncategorised
This article is published on: 15th September 2015

15.09.15

There are lots of things happening at the moment in the financial world that affect us as expats living in France. So this month, I am providing a summary of various topics.

Social Charges

This has to be one of the hottest topics around the expat dinner table, at the moment! It all started with the European Court of Justice (ECJ) ruling in February that France should not apply social charges on ‘income from capital’ for French residents who are insured under the social security scheme of another EU/EEA State. For those who want more on the detail of the ECJ ruling, this can be found in my previous article on this subject at www.spectrum-ifa.com/french-social-charges-on-worldwide-investment-income/.

However, despite the fact that the ECJ had made its decision, we still had to wait for France to accept the ruling. Happily, this came through on 27th July 2015, from the Conseil d’Etat, which is France’s highest court. This means that people affected by the ruling can now claim back social charges paid in 2013 and 2014, on investment income and gains. The claim should be made by 31st December 2015, otherwise you will lose the right to get back those paid in 2013.

As concerns social charges due for 2015, the good news is that I have already seen evidence from some clients’ tax bills that the social charges have not been applied. On the other hand, we all know that one tax office can do something completely different than another and so some of you may find that you have a bill for social charges! If so and you don’t think that you are liable, you should contact your tax office to dispute the bill.

The main group of people who will benefit from the ECJ ruling is those who hold a Certificate S1 for their health cover. Beyond this, those working in another EU/EEA State, but living in France will also benefit. However, a grey area concerns early retirees, who do not have a Certificate S1 and instead have private medical cover because the text of the ECJ judgement actually refers to being insured by another State’s social security system. So we will have to wait for the next round of Social Security legislation, which will be debated during the final quarter of this year, to see how they will be affected.

French Tax Changes

The debate on the draft finance bill for 2016 is scheduled to commence on 13th October.

As documents are published, we will carry out our own analysis. So keep an eye on the French pages on our own website at www.spectrum-ifa.com/financial-advisor-france/ for information. Alternatively, you can contact me directly for information.

EU Succession Regulations

These Regulations have now been in effect since 17th August 2015 and more information can be found in my previous articles at:

www.spectrum-ifa.com/the-eu-succession-regulations/

www.spectrum-ifa.com/eu-succession-regulations-the-perfect-solution/

So if you have not made a French will, as a French resident, the default position is that the succession rules of France will apply to your entire worldwide estate. In effect, this should include any UK property that you own, but since the UK has opted out of the Regulations, it is unlikely that an English court will easily accept a French court deciding that the UK property should pass to the ‘protected heirs’, instead of to the surviving spouse, if that is what you specified in a UK will! So we cannot be clear about what will happen in practice.

There are lots of other complicated situations that may arise and at the very least people should take the opportunity to revisit wills and succession planning. If you would like to have a confidential discussion about your situation, please contact me.

Pensions

The major reform in UK pensions that has taken place this year has generated lots of enquiries from people who are looking to cash-in their pension pots. Many people are not aware of the severe tax implications of doing this and thankfully, we are often able to find alternative solutions for them to meet their objectives.

We all wish to have a financially secure retirement and careful planning is an essential part of achieving this objective. At Spectrum, we can provide you with the necessary advice to reach your goal.

Investment Markets & Interest Rates

Volatility has been felt in investment markets over the last month, mainly as a result of actions taken in China relating to interest rates and currency devaluation. What has also been demonstrated is the fact that the global recovery is still fragile. This has caused central bankers to rethink interest rate policy and anticipated increases in US and UK interest rates may be pushed further back.

At Spectrum, we have a range of solutions to suit all levels of attitude to investment risk and if you would like to have a review of your financial situation, please contact me.

 

Client Seminars

All of the above subjects are being covered at our Autumn Seminars taking place across France – “Le Tour de Finance Bringing Experts to Expats”. The date for the local seminar is Friday, 9th October 2015 at the Domaine Gayda, 11300 Brugairolles and there are a limited number of places remaining. If you would like to come to the event, please contact me as soon as possible to make your reservation.

If you are further away, we have other events are taking place earlier during that week at:

  • Endreol (Provence) on 7th October
  • Aix-en-Provence on 8th October
  • Avrillé 49240 (Loire) on 11th November
  • Dinard, Ille-et-Vilain, (Brittany) on 12th November (the 100th Le Tour de Finance event)

If you are not able to come to one of our seminars, but you would anyway like to have a confidential discussion about any aspect of financial planning, please contact me either by e-mail at daphne.foulkes@spectrum-ifa.com or by telephone on 04 68 20 30 17.

The above outline is provided for information purposes only and does not constitute advice or a recommendation from The Spectrum IFA Group to take any particular action on the subject of investment of financial assets or the mitigation of taxes.

The Spectrum IFA Group advisers do not charge any fees directly to clients for their time or for advice given, as can be seen from our Client Charter at The Spectrum IFA Group Client Charter

Impending changes to French inheritance laws

By Graham Keysell - Topics: France, Inheritance Tax, Succession Planning, Tax, Uncategorised
This article is published on: 17th August 2015

17.08.15

In England, we are used to being able to decide who should inherit our assets when we die. However, once you are considered a French resident, the ‘Code Civil’ stipulates that a set proportion should go to your ‘protected heirs’ (i.e. your children).

For example, if you have two children, they are entitled to 2/3 of the value of your estate. It is only the remaining proportion that you have some control over. If you are not married, and there is no will, the entire estate will pass to the children.

Whatever your will might say (e.g. leaving 100% to your spouse or a friend), these ‘protected heirs’ can insist on receiving their percentage. It is possible to insert a clause in a will whereby your spouse has lifetime ‘use’ of the matrimonial home. They can also continue to receive income from any investments for life, but they cannot sell any assets, (or spend any money), destined to go to the children (e.g. money in a bank account).

Unmarried couples face a tax bill of 60% of any inheritance, after an allowance of the first 1,594 euros. The same applies to anyone you are not directly related to.

‘PACS’d couples have the same rights as husbands and wives and are not liable to pay inheritance tax.

Recent changes in legislation have improved the rights of the spouse to a certain extent, but the situation is still far from ideal.

The good news is that France has signed up to a recent EU law under which citizens of other countries will be allowed to opt for the inheritance laws of their country of birth. This is due to take effect from 17th August 2015.

Providing you have written a will stipulating that your estate should be disposed of under English law, you are at liberty to leave your assets to anyone you want (and in any proportion). This will take precedence over the Code Civil and completely eliminate the question of ‘protected heirs’.

It is worth mentioning that Scottish inheritance law has some similarities with the French ‘Code Civil’. Anyone born in Scotland would still have some restrictions on whom they could leave their estate to (although the limits are far more generous for spouses and it would almost certainly be preferable to take advantage of the new laws).

For reasons best known to themselves, the UK and Irish governments have not signed up to this EU legislation. Nevertheless, this in no way prevents UK citizens living in France taking advantage of the new rules.

If you have any assets (e.g. a bank account) in the UK, it is usually advisable for you to have both English and French wills. Whilst not compulsory, it does make the winding up of the estate far simpler (and cheaper!).

Wills do not need to be complicated and it is quite likely that a standard version for both English and French wills would suit your purposes. Anyone who would like to discuss this with me can contact me on graham.keysell@spectrum-ifa.com.

There are other factors to bear in mind before deciding whether it is in your interests to take advantage of the new legislation. If you have a ‘classic’ French will and are on good terms with your children, they can simply sign away their rights to the inheritance. Mentioning the new law may confuse the notaire in charge of winding up the estate.

Also, you could lose the valuable tax-free limits that your children would otherwise be able to take advantage of.

Personally, I believe the people most likely to benefit from the change in legislation are those who have children from previous relationships, those who want to leave money to their beneficiaries in unequal shares and those who want to leave money to people other than their direct descendants.

You should bear in mind that this new ability to leave your money to anyone you wish in no way affects the inheritance tax rates. As previously mentioned, there is no inheritance tax between spouses. However, after an allowance of €100,000, children will pay a sliding scale of tax (usually with the majority of the excess being taxed at 20%). If you leave your money to third parties, or charities, they can expect to pay 60%.

Assurances Vie policies are frequently used to avoid inheritance tax. Providing these are set up before age 70, each named beneficiary can inherit up to 152,500 euros, totally tax-free, and it is not considered part of the estate. Any sum in excess of this is taxed at a flat rate of 20%. This is particularly beneficial if you were leaving money to an unmarried partner, a charity, nieces and nephews, etc where they would avoid paying the 60% tax!

This is one of the reasons that these policies account for the majority of the investments in France (as well as being the nearest thing the French have to a UK ‘tax-free ISA’).

This report is intended simply as a summary of some aspects of French succession law and inheritance tax. It is based on my understanding of current legislation, which may be subject to change. No liability can be accepted for any change of interpretation or practice relating to any tax or legislative measure that may affect the accuracy of the content.

The EU Succession Regulations

By Spectrum IFA - Topics: France, Inheritance Tax, Residency, Succession Planning, Uncategorised
This article is published on: 20th July 2015

20.07.15

What a month it has been since I wrote my last article. The Greek crisis has waxed and waned and as the prospect of increases in UK interest rates comes closer, now the Sterling Euro exchange rate has hit new highs. All of this while the temperatures continue to soar in France and the effects of the canicule are felt!

August is almost upon us and this means that the long-awaited EU Succession Regulations will come into effect. From that point, as French residents, we will be able to opt for the succession rules of our country of nationality to apply (whether or not that country is within the EU). If you do nothing, the default position is that the succession rules of your country of habitual residence will apply. However, regardless of which country’s succession rules are to apply, this will not change the tax situation. French succession taxes will still be due, which can be up to 60%, depending upon your relationship to your beneficiaries.

I am not going to go into the detail of the EU Succession Regulations here, as I have done this before and so I invite you to read my article on this at: www.spectrum-ifa.com/eu-succession-regulations-the-perfect-solution

As the months have passed since writing that article, I have discussed the implications of the Regulations with several legal professionals who operate at an international level and so they are already highly experienced in dealing with cross-border succession situations. Unfortunately, the further clarification on the practical application of the Regulations that we were hoping for has not appeared and so still we can only wait for the results of actual cases.

What is clear though is that if you elect the succession rules of your country of nationality, then your French property and any other assets that you own would be administered by a French notaire trying to apply another country’s law and this is likely to cause complications, delays, additional expenses and delays. So I, like many other professionals, hold the view that if there is a tried and tested ‘French way’ to achieve your objectives, then this should still be used. The ‘French way’ is another subject that I have written about in detail and the full article can be read at: www.spectrum-ifa.com/inheritance-planning-in-france

There will be cases where the EU Succession Regulations will be welcome for some couples. Typically, this might include situations where children are estranged from parents or step-children just will not accept the step-parent, regardless of the length of the relationship. The Regulations will be a relief for couples in such situations, as they will be able to circumvent the French forced succession rules, but they will still need to address the taxation issues that may occur. As concerns financial assets, this is an area where we can help.

Everyone’s situation is different and this is why it is very important
to seek professional advice on this subject.

 

Are you concerned about the EU Succession Regulations and how this affects you? If you would like to have a confidential discussion about this please contact me from the contact box below.