With the on-going popularity of owning a second property abroad (it is estimated that one fifth of Britons own a foreign property), it is important to understand how your foreign property will pass on death. To ensure that there are no complications when administering your estate, it is extremely important to have a Will in place.
It is estimated that at least 60% of the UK population does not have a Will and it is likely that a number of those also own a foreign property.
According to recent statistics, the top five preferred locations for Britons to own a foreign property (in order of popularity) are Spain, France, Italy, USA and Portugal. All of these countries, except the USA have a "forced heirship" regime which applies to the succession of property on death. This means, for example, that if you own a property in France, succession to that property will be governed by French law irrespective of what your English Will says. French law, unlike English law, does not allow you to leave your property to whomever you like. Your property has to pass to one or more blood relatives (usually children and grandchildren) and/or a surviving spouse, who are referred to as the "protected heirs."
It is important to take appropriate advice from a local solicitor when the property is purchased over what will happen to the property on death, both from a succession and tax point of view. A foreign Will should be put in place to cover your foreign property and it should also dovetail with your English Will to ensure that there are no problems when administering your estate. We often advise clients over this aspect of their estate planning and work with their advisers overseas to achieve this.
From 17th August 2015, the new EU Succession Regulation will bring in major changes for cross-border succession and for English nationals owning property abroad. The Regulation provides that the laws of the state in which the individual was habitually resident will govern how the estate passes, unless the individual chose to apply the law of his nationality. This means that an English national owning a second property in Italy, for example, could under his English Will elect for the law of his nationality to apply to the succession of his Italian property, thereby avoiding the Italian forced heirship regime.
The UK, Ireland and Denmark are not parties to the Regulation, so the effect of the Regulation in these three states is uncertain. Nonetheless, clients should take appropriate advice on whether they should include an election under their English Will for the law of their nationality to apply to their foreign property. In the meantime, making a foreign Will is essential for those with property overseas.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
