(DESPITE THE UK OPTED-OUT OF THE NEW EUROPEAN INHERITANCE REGULATION)

It’s absolutely advisable for UK nationals residing in Spain to determine by a last will that the Nationality Law has to be applied in their inheritances in order to avoid that those will be ruled by Spanish regulation.

1.- THE NEW AND REVOLUTIONARY EUROPEAN REGULATION

The European Union has adopted Regulation 650/2012 , which became effective on the 17th of August 2015. This regulation will have a great impact on the daily lives of the European citizens, especially as it regulates the applicable law in cases of international inheritances.

1.-As a general rule, the applicable law will now be the one of that country in which the deceased had his “habitual residence” at the moment of his death.

2.- This general rule of habitual residence will not be applied, if the country’s law whose nationality one possesses at the time of making the choice or at the time of his death is designated explicitly.

We are facing a regulation of great importance, which can affect many European citizens, who reside in countries different to their origin.

2.- UNITED KINGDOM, IRELAND AND DENMARK, OPTED OUT OF THE REGULATION

The United Kingdom, Ireland and Denmark did not sign the regulation. Nevertheless, any Irish, Danish or UK national who has the habitual residence in Spain will be governed by this regulation.

3.- BE CAREFULL WITH THE SPANISH INHERITANCE LAWS

The Spanish inheritance laws are different to those in the UK. The Spanish law determines who should inherit if someone dies without a will and these rules apply to British expats who have the habitual residence in Spain.

The applicable law to the succession is important as, according to the Spanish Inheritance Law, the descendants have the right to about 2/3 or at least 1/3 of the estate.

Therefore, the application of Spanish intestate laws could lead to unexpected results. The spouse only gets a third or two-thirds (depending on the autonomous communities) of all the assets. This rule can be highly detrimental to the surviving spouse’s interests, especially when there are descendants from a previous marriage of the deceased or family relations that have deteriorated over time.

4.- EXPATS IN SPAIN

4.1.- BEFORE THE NEW EUROPEAN REGULATION

Before the European Inheritance Regulation came into force, the applicable law was the law whose nationality one possesses, this is to say the English-Scottish-Welsh law.  Those stipulate that inheritance is ruled by the state in which the estate is located hence it refers to the Spanish law again (this is the so-called “renvoi”). Since this solution could imply different laws for the same inheritance (British law to the real estate in the UK and Spanish law to the real estate in Spain) the Spanish Courts (precedent) considered that in case the expat had real estate in Spain and the UK (as most of the expats have) the applicable inheritance rule had to be the national law of the deceased (the British one).

4.2.- AFTER THE NEW EUROPEAN REGULATION

From 17th of August of 2015 on, the new European Inheritance Regulation is applicable to the expats who have their “habitual residence” in Spain. Therefore, if they pass away without having made a will stating that they want the English national law to be applied to their inheritance issue, the Spanish Law will be applicable.

In this case that there has been an explicit choice of the English law by a last will, in accordance with the article 34 of the Regulation the “renvoi” from English law to Spanish law is not possible.

5.- TAXES

On the other hand, the Regulation 650/2012 does not change the applicable inheritance tax law and therefore does not change the taxes payable. As a consequence, the regulation does not grant the possibility to choose a more advantageous tax regulation.

6.- ADVICE

If you are a British expat in Spain and you wish your country’s succession law to be applied in your inheritance, it’s quite easy; you should just make a new will in Spain.

Cross-border estate planning is quite complicated, therefore a lawyer’s advice should be taken.