The EU referendum – will the outcome affect your estate planning?
Estate planning (sometimes referred to as succession planning) is a process used in order to mitigate your estate’s liability to inheritance tax and to ensure that your assets are left to those you choose (rather than under the intestacy rules). This can be an emotive topic and it’s important to get it right. Unfortunately, the forthcoming EU referendum will lead to uncertainty in some areas of law, but will the outcome have any impact on estate planning?
Inheritance tax and the law of succession
Inheritance tax is permitted by the Inheritance Tax Act 1984 and is not derived from any EU regulation (although there are some ancillary matters – such as the recognition of charities throughout the EU for charitable tax exemptions instead of only charities based in the UK – which have been created by EU regulation). Therefore, whether the UK remains part of the EU is unlikely to have any significant effect on the way in which UK inheritance tax is applied to the majority of estates.
In England and Wales, there is a statutory set of rules laid down by the Administration of Estates Act 1925 (as updated in October 2014) that are enforced if you die intestate (without a will). This legislation is not derived from any EU regulation either. Although the rules are different in Scotland, that legislation is also not derived from EU legislation. Again, whether the UK remains part of the EU is therefore unlikely to have any significant effect on the bodies of succession law.
Recently the EU created the Succession Regulation (EU 650/2012), known colloquially as Brussels IV, which was introduced with the aim of unifying succession laws across EU member states. The intention is to reduce the administrative burden that is placed on a person who owns assets in more than one member state. For example, a person who lives in Germany may own a holiday home in Spain. Prior to the creation of Brussels IV, they would probably have needed a will in both Germany and Spain to deal with the property in each jurisdiction. Brussels IV allows that person to elect which jurisdiction will apply to the whole of his or her estate, meaning that only a single will is required in accordance with the law of the chosen jurisdiction. However, the UK has not opted in to Brussels IV.
Given the UK has not opted in to Brussels IV, whether we remain part of the EU will have little or no effect on the applicability of Brussels IV to the internal succession laws of the UK. Furthermore, as none of our existing inheritance tax and estate planning laws derive from EU regulation, the outcome of the EU referendum will have little impact on your immediate plans. Having said that, you should not delay in putting your affairs in order. You should be pro-active in seeking advice on your inheritance tax liability and ensuring that your estate, including your business, is passing to those you choose. We can help with these areas so please contact us to discuss your will, lasting power of attorney and your inheritance and capital gains tax liability.
This information is for general information purposes only.