Articles about solicitors and legal services

Britain opts out of European proposals on wills - for the time being

Britain has decided not to adopt EU proposals dealing with wills and cross border estates - at least for the time being.

The proposed measures could eventually make a difference to people who own property abroad or who may live away from their native country. Different countries have widely differing approaches to inheritance and so the administration of cross border estates can become very complex as more than one legal system may apply.

The European Commission is currently considering draft proposals to address the problem by simplifying the regulations on international successions.

The new proposals mean that successions would automatically be dealt with under the laws of the country in which the person was permanently resident before they died. This would apply unless the person had opted out and chosen the country of their nationality instead.

The proposed changes would have no effect on the succession laws of each member country.

The UK has decided to opt out for the time being because of concerns that the new regulations could create some potential problems.

For example, under English law, if a person makes a lifetime gift then, with a few exceptions, it is considered final and cannot be later undone.

However, in some EU countries such lifetime gifts can be "clawed back" in favour of family members.

Despite the decision to opt out for now, the UK may eventually adopt the new regulations when they are finalised as long as certain concerns are addressed.

In the meantime, the main issue for most people will be how to make the most of the current regulations in the UK and ensure that as much of their estate as possible will pass on to their chosen heirs.

It is important to start planning as early as possible. Make sure you make a will and keep it up to date and then look at the provisions provided by the law that could help you pass on your wealth in a tax efficient way.

Currently, there is a £325,000 threshold before inheritance tax becomes payable. It is then charged at 40% on the value of the estate above the threshold. However, there is no tax to pay if a person leaves their estate to their spouse when they die.

Since 2007, married couples and civil partners have been able to effectively double the threshold to £650,000 at today’s rates when the second spouse dies. This won’t happen automatically, however. To take advantage of this benefit, the first spouse’s unused inheritance tax threshold or "nil rate band" as it is known must be transferred to the second spouse when they die.

A solicitor will be able to advise on how this should be done.

There are other provisions people may wish to consider. For example, if you live for seven years after making a gift to someone there will usually be no inheritance tax liability - no matter how large the gift.

You can also give away a total of £3,000 each year, either to one person alone or divided between several people, without the recipients being liable for inheritance tax on the gift when you die. Gifts made to charities, either in your will or in your lifetime, are also exempt from inheritance tax.

Inheritance tax planning can be quite complicated so it is wise to seek legal advice as soon as possible to make the most of the provisions available.

Please contact us if you would like more information about the issues raised in this article.

If you wish to make an appointment, or ask us a question please contact us.