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Protecting the second home

Graham Dragon

Do you have clients who own holiday homes or other properties in Europe? If so, you have probably advised them that they do not have to worry about the possibly complex provisions of the succession laws of France, Spain, or wherever else these properties may be situated. The reason for this is a European Union regulation fondly known as Brussels IV.

Under the succession laws of many European states, a specified percentage of any property you own in those countries must be passed on to certain people decided by the state, not by you. In most cases those beneficiaries are your children. This includes any illegitimate children you may have whose existence may not even be known to the rest of your family. No matter what you say in your will, the local succession law determines what actually happens. That is the case unless you invoke Brussels IV in your will. Brussels IV allows you to follow English succession law instead (or Scottish, or Northern Ireland law if you reside in either of those countries).

The effect of Brussels IV is that you can leave your European properties to whomever you wish. You can even put them in trust, protecting them from creditors and ensuring they can only be enjoyed by those you define in your lifetime – usually just members of your own bloodline. That is, as long as your foreign properties are within the EU, but not in Denmark or Ireland.

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It has probably not escaped your notice, though, that as Brussels IV is a piece of EU legislation, it may not apply to your clients for very much longer.

With many aspects of EU legislation we have to wait and see what the negotiators who will be appointed by our government manage to agree with the EU.

I do not plan to predict the outcome of negotiations on any other matter. But I will stick my neck out and say it is extremely unlikely the benefits we currently have under Brussels IV will survive those negotiations.

The reason I can be so certain of this is that the UK exempted itself from Brussels IV. We obtain the benefits of Brussels IV in 24 of the 27 EU countries because those countries have agreed to apply this regulation. But no European country can obtain the benefits of Brussels IV in the UK as we have chosen not to apply it here. For example, the children of a French citizen would expect to be entitled to between a third and a half of his estate, but this would not apply to any property he owned in the UK even if his will tried to invoke Brussels IV.

Is it likely that, with all the other pressing matters they must decide, our exit negotiators will get the EU to agree that Brussels IV will still apply to any properties our citizens own in the Union, even though it will not apply and never has applied to properties their citizens own in the UK? I think not.