Foreign Estates: EU succession dimension March 12, 2015

Transcription

1 Foreign Estates: EU succession dimension March 12, 2015 Mark Summers, Partner, Zurich charlesrussellspeechlys.com

2 Agenda Common law vs civil law estates Taxation of estates Principles of conflicts of law in succession Conflicts of succession law in Europe: impact of the EU Succession Regulation (Brussels IV) Examples 10 March

3 Common law vs civil law estates in Europe Common law Typically freedom of testamentary disposition Estate is dealt with by executors during period of administration Probate: grant or letters of administration Executors have power to deal with estate assets once probate granted Assets formally assented to legatees following grant Civil law Typically forced heirship applies to most of the estate Heirs have a direct right to deal with the assets Certificate of inheritance or succession issued Heirs can disclaim including to avoid liability for the debts of the deceased 10 March

4 Taxation of estates post death In common law jurisdictions (UK, Ireland): executors step into the shoes of the deceased (i.e. assume his/her tax status) Executors/estate file separately as a taxpayer from legatees Legatees only taxed once assets assented (but note any basis step up is from date of death) In civil law jurisdictions: Generally the heirs are liable for income taxes from the date of death 10 March

5 Conflicts of law in succession Have you sufficient connection to the jurisdiction of the law governing the Will to open the succession there? Where are the assets and what type? Unity vs dual succession regimes Effect of matrimonial regimes Private international law rules: Habitual residence Nationality Domicile Situs Renvoi 10 March

6 EU Succession Regulation (Brussels IV) EU wishes to harmonise law/procedures across member states Regulation 650/2012 came into force on August ; it will apply from August UK and Ireland opted out and Denmark not bound The main purpose of Brussels IV is to ensure that only one law determines how an estate is dealt with; it not create a single succession law rather a unified system of resolving conflicts of law over succession Courts/legal system of member state in which deceased died habitually resident will have jurisdiction and will apply the law of that state, unless: deceased elected in a testamentary document during his lifetime for courts/legal system of nationality to apply deceased was manifestly more closely connected with another member state, in which case the courts/legal system of that jurisdiction will apply 10 March

7 EU Succession Regulation (2) Basic connecting for all succession conflicts of laws: habitual residence (Art 16) unfortunately undefined Testators will be able to opt for law of nationality to govern their succession (Art 14) UK has three internal governing laws? There is to be unity of succession (i.e. no separate regime for immovable property) (Art 21) Art 19(j) provides for clawback of lifetime dispositions some states have very broad clawback (Belgium = 30 years) Art 25 creates an extra-territorial aspect for estates of deceased with any EU asset and where they residence within the EU in the previous 5 years (note EU nationals moving to the US) 10 March

8 EU Succession Regulation (3) Executors / heirs will receive a single European Certificate of Succession from the jurisdiction where the courts are seised of the succession (Chapter VI) Decisions of the court / jurisdiction seised of the succession under the Regulation may be ignored / overruled in other member states if contrary to public policy (ordre public) (Arts 35 and 40) Renvoi Art 34 (by implication) abolishes where the applicable law is that of a member state Where the applicable law is the law of a non member state (a third state ), the renvoi from that law to the law of a member state would be accepted Pre-existing international succession treaties override the Regulation (examples include Italy-Turkey and Germany-USSR (i.e. Russia and successor states) 10 March

9 Example 1(a) John, a US citizen, living in France dies after August owning: Spanish villa French bank account English apartment US brokerage account French courts have jurisdiction French law governs succession to Brussels IV state assets (France and Spain) Unless law of a US state is elected and renvoi is disapplied English courts will not apply Brussels IV English law will apply to apartment US state courts to apply state law to brokerage account accept application of state law to French and Spanish assets if elected? 10 March

10 Example 1(b) What if the US citizen was married into community property under Californian law to Julie, a French national? France and Spain would recognise the community and it would override Brussels IV England is a separate property regime only jurisdiction Recognition back in the US? 10 March

11 Example 2 Herman, a German national, moves to New York after August and dies shortly thereafter. Herman owns: German house Shares in a Luxembourg private company New York bank account New York cooperative apartment Brussels IV will apply German law to German and Luxembourg assets What if heirs claim to apply German law to New York assets under the 5 year tail for Brussels IV? 10 March

12 Mark Summers Partner Charles Russell Speechlys Mark advises on matters of cross border taxation and international estate planning. He advises wealthy individuals and family offices as well as the private banks and fiduciaries that service them. Mark is expert in structuring clients affairs where they are affected by complex multi-jurisdictional tax and legal issues; he is particularly noted for innovative solutions for clients with US or European connections. Tel: +41 (0) Mark is also expert on matters of UK taxation as it relates to individuals and their wealth holding structures. He regularly advises on the remittance basis of taxation for nondomiciliaries, matters of UK tax residency and the taxation of UK real estate. He also advises on the regularisation of untaxed assets particularly where there is a multijurisdictional dimension. Mark is admitted to practise in England and Wales and is admitted to the EU list of the supervisory commission of lawyers for the canton of Zurich and the Swiss Federation. He heads Charles Russell Speechlys Swiss offices and resides in the Swiss canton of Zug with his family. 10 March

13 charlesrussellspeechlys.com