Brussels proposes change to will rights

The European Commission is proposing to simplify cross-border inheritance rights.

Under the draft rules, people residing abroad will be able to choose to have their wills carried out according to the laws of their country of nationality. Otherwise, the laws of the land in which the deceased lived will apply to the entire estate, even if it includes properties or assets in another EU member.

The goal is to end contradictory rulings between the courts of several EU countries concerning the same estate. One single authority, in either the country of residence or country of origin, will deal with the entire inheritance.

The EC would also like to introduce a certificate enabling heirs and administrators of wills to prove their status in another country, as not all EU countries recognise each other’s inheritance documents.

Around 450,000 of the inheritances opened in the EU every year involve an international element. The total value of these estates is estimated at €120 billion per annum.

The move – proposed by Jacques Barrot, vice-president of the EC for justice, liberty and security – would be mainly an administrative measure and would not affect inheritance taxes, which will continue to be covered by national law – as will issues such as who inherits or how survivors share assets.

This proposal could ‘well lead to "jurisdiction shopping' for estates in much the same way that we currently see in divorces,' said Baker Tilly’s head of tax, George Bull.

Given that UK inheritance tax liability of an estate is broadly driven by the actual or deemed domicile of the testator at the date of death and the situs of the assets in the estate, Mr Bull’s first reaction was that the EC's proposals will not have a significant impact on the amount of IHT collected by HMRC.

He suggested that the likely effect on the levels of UK income tax and capital gains tax would be modest, ‘if estates administered overseas instead of in the UK realise income and gains abroad instead of in the UK in ways which don't produce a tax liability for UK beneficiaries’.

Mr Bull added: ‘HMRC will wait to see how the proposals develop before deciding whether to legislate for this’.

Issue: 4230 / Categories: News , Inheritance Tax