This alert will be particularly interesting to individuals who own a residence in Europe. When an individual dies owning property in a foreign jurisdiction, it is possible that different inheritance rules apply to the foreign property. In July 2012, the European Union passed Regulation (EU) No. 650/2012 to simplify inheritance rules as they apply to individuals with ties to more than one country. The Succession Regulation, as it is known, is now in force for estates of individuals who die after August 17, 2015.
Now is a good time for anyone who owns property in Europe, who is a U.S. citizen residing in Europe, or who is a citizen of a European country residing in the U.S., to review his or her estate plan. There may be more flexibility in designating which beneficiaries will receive property now that the Succession Regulation has come into effect.
Under the Succession Regulation, the laws of a person’s “last habitual residence” apply to determine the succession of the person’s property. But, if the person was “manifestly more closely connected” with a different country than the one where he or she last resided, looking to all of the relevant circumstances, then the laws of that other country will apply. A person may choose the laws of the country of his or her nationality to govern succession by expressly declaring that choice in his or her will (or by demonstrating the choice in the way he or she has disposed of property in the will).
Some European countries have “forced heirship” rules mandating that a certain portion of a person’s estate (or only the person’s property located in that country) must be distributed to his or her dependents in proscribed shares – even if the person writes a will disposing of the property in a different manner as he or she wishes. This is specifically relevant for individuals who own residences in both the U.S. and Europe. Previously, the European country’s forced heirship rules applied to the European residence unless the owner used a complex work around, but under the Succession Regulation the owner now may choose to have U.S. laws determine the disposition of his or her entire estate, which could eliminate forced heirship for the European residence depending on the circumstances.
Note: The United Kingdom, Ireland and Denmark are not bound by the Succession Regulation.