British Expats Beware of Foreign Succession Laws and Foreign IHT

Children of British Expats in Europe often are entitled to the Estate without even knowing it. EU Succession Laws are full of surprises.

British expats who are resident in Europe, let’s say in Germany, Austria, France or Spain, rarely are aware that ever since the introduction of the EU Succession Regulation (August 2015), if they pass away while being resident in that country, the Inheritance and Succession Laws of that country of residence will most likely apply to their estate. This is due to the fact that the entire European Union (except for the UK, Denmark and the Republic of Ireland) have adopted the EU Succession Regulation which states that the laws of the country in which the deceased had his or her last habitual residence must apply. Habitual residence is easier to achieve than domicile.

Thus, a British national who may consider him- or herself to be domiciled in England, can easily be considered by the German, Austrian, French or Spanish probate court to have established habitual residence outside the UK. Then, from a EU law perspective, these national succession rules (i.e. German, Austrian, French inheritance laws etc.) do apply to the entire estate, including the assets situate within the UK. English law takes a different view on this issue which may lead to horrendous legal disputes and contentious international probate cases which drag on for years and block the administration of the estate both in the UK and in Europe.

Who inherits if a British expat dies abroad?

German Intestacy Rules Overview Chart

The application of foreign succession laws can lead to surprising results. Pleasant or unpleasant, depending on the degree of kinship with the deceased. Under German succession laws, for example, the surviving spouse has a much weaker position compared to the intestacy rules in England and Wales as well as Scotland. Details are explained here and here.

The stunning results are not only caused by different national rules of intestacy. These could easily be avoided by simply creating a will. But even if the British expat has set up a valid will, the inheritance and succession laws of continental EU countries (including Germany, Austria and France) often apply statutory elective share rules, also known as forced heirship or compulsory inheritance share rules. For practical implications of such forced heirship rules see here and here.

By the way: National inheritance tax laws of the respective country of residence do also apply. This cas always been the case and has nothing to do with the EU Succession Regulation and will also not be affected by Brexit. National tax laws are what they are. Still, British expats should inform themselves about the respective IHT laws of their country of residence. Unless they live in Austria because Austria does not levy any inheritance tax (as of now).

In order to avoid unpleasant surprises or probate problems, expats should definitely have their last will checked by an international succession law expert within the country of residence. English solicitors are rarely capable or even willing to consider foreign law implications (for some examples how English wills can lead to catastrophic results outside the UK see here).

If you wish to instruct Graf & Partners LLP to draft a Will or to team up with a foreign lawyer to advise in specific areas of German or Austrian law, please feel free to complete the questionnaire and contact our German succession and probate law experts. Lawyers can create a tailor-made Last Will only if they are fully informed about the testator’s personal situation and his/her objectives. In order to draw up a Last Will that fully meets the clients individual requirements, Graf Partner LLP uses a comprehensive questionnaire and Will preparation checklist (available for download here).  This checklist also helps to facilitate an effective and individual preparation for the personal meeting at the firm.

German solicitor Bernhard Schmeilzl also conducts inhouse seminars for British and American lawyers and accountants who advise clients with foreign assets or who have family abroad. More on these seminars here: Advising Clients with Assets Abroad

For more information on German-British probate matters and international will preparation see the below posts by the international succession law experts of Graf & Partners LLP:

Or simply click on the “German Probate” section in the right column of this blog.

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The law firm Graf & Partners and its German-English litigation department GP Chambers was established in 2003 and has many years of experience with British-German and US-German probate matters, including the representation of clients in contentious probate matters. If you wish us to advise or represent you in a German or cross border inheritance case please contact German solicitor Bernhard Schmeilzl, LL.M. (Leicester) at +49 941 463 7070.

Living Wills and Advance Directives for Medical Decisions in Germany

Our law firm specialises in international wills and succession planning for German-British and German-American clients. In this context, our international clients often also ask us to assist with the related matters of creating a Living Will, a Healthcare Proxy, a Lasting Power of Attorney or Advance Directives for Care or End of Life Medical Treatment. All these things are permitted under German law and are becoming increasingly popular.

The terminology most commonly used for these end-of-life legal instruments in Germany is:

  • “Generalvollmacht” (General POA, Lasting POA)
  • “Vorsorgevollmacht” and “Betreuungsverfügung” (Healthcare Proxy)
  • “Patientenverfügung” (End of Life Care Instructions / Advance Directives for Medical Decisions)

Many Germans use the templates and forms developed by a group of medical and legal experts under government supervision. These forms are contained in the brochure “Vorsorge” which is available for download here.

If a client requests that we come up with a more individual set of end-of-life documents which are specifically tailored to the needs of an international family, we are happy to prepare such documents, either in German or in English language.

For more information on German-British probate matters and international will preparation see the below posts by the international succession law experts of Graf & Partners LLP:

Or simply click on the “German Probate” section in the right column of this blog.

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The law firm Graf & Partners and its German-English litigation department GP Chambers was established in 2003 and has many years of experience with British-German and US-German probate matters, including the representation of clients in contentious probate matters. If you wish us to advise or represent you in a German or cross border inheritance case please contact German solicitor Bernhard Schmeilzl, LL.M. (Leicester) at +49 941 463 7070.

Preparing International Wills: A Checklist for Clients and their Lawyers

Complete Questionnaire for International Families and Expats who are resident or own Assets in Germany or Austria

If you or your client owns assets in more than one country, or if a beneficiary is resident in another country than the testator, chances are that the executor and/or the beneficiary need to obtain probate in more than one country. Since the EU Succession Regulation neither applies to the United Kingdom nor to Ireland, the option to take out a European Grant does not exist in those cases. Furthermore, the estate may be subject to various inheritance tax regimes.

Therefore, international families and expats should draft their Wills in a way which ensures a smooth transfer of the assets. British or U.S. Wills often create uncertainty in Civil Law Jurisdictions like Germany, Austria, Spain or France. Vice versa, German or French style Wills are often difficult to interpret in regards to the issue of who has become “heir” (Erbe). Thus, in order to avoid legal uncertainties or even disputes between the beneficiaries and executors, the Will should address the probate requirement of all jurisdictions involved. Inter alia, this means to use the specific succession law and probate terminology in the international Will in order to avoid misinterpretation by the probate registrar. There are many “false friends” in international succession law: an executor under English law, for example, is not at all the same as an Austrian “Exekutor”.

There are always more taxes than you think

Also, every testator who finds himself in an international situation should keep in mind the very different inheritance tax regimes of various countries. English solicitors or U.S. lawyers sometimes forget that there may be additional inheritance tax due in the country where the foreign assets are situated or – and this aspect is sometimes overlooked – where an individual beneficiary is resident at the time of the bereavement. While Austria, for example, does not levy inheritance tax at all, countries like Germany and France do tax the individual beneficiary. This is dangerous territory for international succession lawyers. Professional tax and estate planning can often mitigate the overall inheritance tax quite considerably.

Lawyers can create a tailor-made Last Will only if they are fully informed about the testator’s personal situation and his/her objectives. In order to draw up a Last Will that fully meets the clients individual requirements, Graf Partner LLP uses a comprehensive questionnaire and Will preparation checklist (available for download here).  This checklist also helps to facilitate an effective and individual preparation for the personal meeting at the firm.

If you wish to instruct Graf & Partners LLP to draft a Will or to team up with a foreign lawyer to advise in specific areas of German or Austrian law, please feel free to complete the questionnaire and contact our German succession and probate law experts.

German solicitor Bernhard Schmeilzl also conducts inhouse seminars for British and American lawyers and accountants who advise clients with foreign assets or who have family abroad. More on these seminars here: Advising Clients with Assets Abroad

For more information on German-British probate matters and international will preparation see the below posts by the international succession law experts of Graf & Partners LLP:

Or simply click on the “German Probate” section in the right column of this blog.

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The law firm Graf & Partners and its German-English litigation department GP Chambers was established in 2003 and has many years of experience with British-German and US-German probate matters, including the representation of clients in contentious probate matters. If you wish us to advise or represent you in a German or cross border inheritance case please contact German solicitor Bernhard Schmeilzl, LL.M. (Leicester) at +49 941 463 7070.

 

Workshop “Clients with Foreign Assets” for British Inheritance & Probate Lawyers

Why would an English or Scottish solicitor even give a toss about German or Spanish inheritance tax laws or about French or Italian forced heirship rules? Well, for starters, in order to avoid the client’s survivors yelling at him/her some years later because they ran into probate or/and foreign tax problems abroad.

Or, and this is of course the far better reason, to really impress your client with advice on international aspects of estate planning the client would otherwise never have thought of. Are you a solicitor or accountant who advises British clients with assets abroad or relatives living outside the UK? Then you might want to check whether you were already aware of some of the tripwires described in this post on international estate planning and will preparation.

Estate Planning for International Families requires seeing the big Picture

A solicitor who knows the basic principles of other jurisdiction’s succession rules and inheritance tax concepts is much more valuable to his client because such a solicitor can avoid structuring English Wills which may have counterproductive consequences in other countries.

The standard advice given by many English solicitors is still: “If you own assets abroad make a separate Will in each of those countries”. Well, this is simply not enough because such wills need to be synchronised both from a practical probate perspective and in regards to the overall inheritance tax consequences. Also, sometimes the better choice is to deal with the foreign assets directly in the English will.

Since 2003, the succession and tax lawyers of Graf & Partner specialise in international estate planning and will preparation with a strong focus on British-German, American-German, British-Austrian and American-Austrian inheritance cases and probate applications. German lawyer Bernhard Schmeilzl regularly gives presentations and conducts inhouse seminars for British and American lawyers and accountants who advise clients who possess foreign assets or who have relatives abroad who shall inherit or receive gifts or legacies. More on these seminars here: Advising Clients with Assets Abroad

The goal of our seminars on international inheritance and tax law is not to make the English solicitor a Jack of all trades or to expose the solicitor to liability risks. Instead, the goal is to give the solicitor a basic idea about where the English estate planning approach might cause problems elsewhere and then team up with the respective experts from those countries to find the best overall solution for the client and his family.

To give you an impression of the case studies we discuss in our workshops here are a few slides taken from our 90 page power point presentation: Presentation Wills and Estate Planning for International Clients

For more information on German-British or Austrian-British probate matters and international will preparation see the below posts by the international succession law experts of Graf & Partners LLP:

Or simply click on the “German Probate” section in the right column of this blog.

International Wills: What your English Solicitor does not tell you (but should)

Drafting Wills for British or American Clients with Assets outside the UK / USA

You are a British or American citizen but have assets abroad, let’s say in Germany, Austria, France, Italy or Spain. Your English solicitor or your American lawyer suggests you make a Will which deals only with your national estate, i.e. the Will is restricted in such a way that it shall only apply to your assets located within the UK or the USA. The lawyer tells you that you should set up separate Wills for your foreign assets.

Is this really the best approach?

Well, this approach is extremely risky, because if your British or American estate lawyer does not consider the effects of your English or American Will in these other countries, your survivors are almost certain to suffer harsh consequences in regards to foreign inheritance taxes, may have to go through expensive and tedious foreign probate proceedings and they may even be confronted with foreign succession rules they have never heard of before but which are now applicable to the estate, e.g. forced heirship, obligatory heirship, elective share rules for surviving spouses, children and even parents of the deceased. In other words: The British or American beneficiary (e.g. the surviving spouse) will have to share the German, Austrian or French estate with the children or even the parents of the deceased because the testator was unaware of the foreign intestate succession rules or the compulsory elective share statutes which exist in many countries, especially those influenced by the French Civil Code (“Code Napoleon”), inter alia Germany, Austria, Italy and Spain. But also Islamic countries. An overview of this “Forced Heirship” concept is available on Wikipedia.

Thus, the standard “make one separate will per jurisdiction and hope for the best” approach is only suitable for those who also prefer to jump into a swimming pool without checking first whether there is even enough water in it. Those who would rather prefer to protect their survivors from unnecessary foreign taxes, legal costs and endless probate proceedings might want to consult an expert on international will preparation and international inheritance tax mitigation.

Just one simple example: How to avoid 5,000 Euros in German probate and translation fees and nine months waiting for the German grant? The testator who owns property in Germany can, while still alive, issue a so called transmortal or postmortal power of attorney which allows the transfer of the German property upon death – without the need for German probate. This is only one of many options to make life easier for your executors and beneficiaries. More on how to avoid probate in this post: How to Access German Assets without having to go through German Probate

Surprise Visit from the Foreign Tax Man?

Foreign inheritance tax is an issue which is very often overlooked or simply ignored by British solicitors or American lawyers. Especially one constellation leads to trouble on a regular basis because common law succession lawyers do not have this issue on their checklist when preparing a Will: If the testator is British, lives in the UK and only has assets located within the UK, then there may still be foreign inheritance tax due if the beneficiary lives abroad, let’s say in Germany, France or Spain. This is due to the fact that many European countries levy tax not on the estate as such but instead tax each individual benefiary, similar to the concept of income tax. In other words: In spite of the British estate having already been taxed in the UK, the son, daughter or grandchild who receives all or part of the estate from his or her parent or grandparent will have to pay German, French or Spanish inheritance tax on top of British IHT. Whether this tax burden can at least be mitigated depends on whether there are double taxation treaties in place or whether the respective country at least offers unilateral relief (for Germany see here).

All these (any many other) problems often remain unaddressed when a British client who has either assets or relatives abroad discusses his or her Last Will and Testament with a British solicitor or accountant. Many solicitors merely recommend to the client to consult a foreign lawyer. This is not always helpful because, even if the client does, such a foreign lawyer then also only sees his / her side of the story, i.e. German, French or Spanish inheritance law. Such foreign lawyer is, however, usually unaware of British issues like nil-rate band, unlimited spouse exemption, deed of variation etc and may thus make suggestions which sabotage the British side of estate planning. In order to come up with a truly working international will, the lawyer drafting the will either needs to be an expert in both countries’ succession and tax laws or the lawyers from the various countries need to team up. This may not be cheap but it is still better than to be unaware of foreign inheritance taxes or forced heirship laws. For the surviving beneficiaries, ignorance of the testator is certainly not bliss in this regard.

What makes matters worse is that a Deed of Variation is not being accepted by most European tax authorities. Instead, using such a Deed of Variation will in most cases be considered a second taxable event, i.e. a gift from the beneficiary mentioned in the Will to the person benefitting from the Deed of Variation. This may trigger additional gift tax. Thus, professional IHT planning is even more important in international constellations, because the content of an English (or US American) will can’t be changed anymore even if the tax consequences later turn out to be unpleasant. More on this here: Deed of Variation and International Succession

Seminars for Lawyers and Accountants with International Clients

Since 2003, the succession and tax lawyers of Graf & Partner specialise in international estate planning and will preparation with a strong focus on British-German, American-German, British-Austrian and American-Austrian inheritance cases and probate applications. We also know our way around the succession and inheritance tax laws of France and Spain.

German succession and inheritance tax law expert Bernhard Schmeilzl regularly gives presentations and conducts inhouse seminars for British and American lawyers and accountants who advise clients who possess foreign assets or who have relatives abroad who shall inherit or receive gifts or legacies. More on these seminars here: Advising Clients with Assets Abroad

For more information on German-British probate matters and international will preparation see the below posts by the international succession law experts of Graf & Partners LLP:

Or simply click on the “German Probate” section in the right column of this blog.

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The law firm Graf & Partners and its German-English litigation department GP Chambers was established in 2003 and has many years of experience with British-German and US-German probate matters, including the representation of clients in contentious probate matters. If you wish us to advise or represent you in a German or cross border inheritance case please contact German solicitor Bernhard Schmeilzl, LL.M. (Leicester) at +49 941 463 7070.

Does a German Last Will & Testament become void if the Testator later marries or has Children?

Not automatically, but the surviving spouse and/or the child may challenge the Will for being “outdated”. The German legal term is “Anfechtung” according to section 2079 German Civil Code (Section Wills & Probate), which states:

Section 2079 German Civil Code

Avoidance for omission of a person entitled to a compulsory portion

A testamentary disposition may be avoided if the testator has omitted a person entitled to a compulsory portion who is in existence at the time of the devolution of the inheritance, the existence of whom was unknown to the testator when he made the testamentary disposition or who was born or became entitled to a compulsory portion only after the making of the testamentary disposition. Avoidance is excluded to the extent that it is to be assumed that the testator would have made the disposition even if he had known the circumstances.

This statute of German probate law is a so called “Auslegungsregel” (i.e. statutory rule of interpretation of a Will). It is meant to clarify this situation: The testator has made his or her Will at a time when he/she was not married, then later marries but does not modify or revoke the Will, then dies. In these circumstances, if German succession law applies, the Will shall be interpreted as being valid but voidable (anfechtbar). The surviving spouse may challenge this Will by making a formal declaration of avoidance (Anfechtungserklärung) to the competent German probate court. This must be done within a statutory deadline of one year from when the person entitled to challenge the Will has obtained knowledge of the grounds of avoidance.

The same rule applies if the testator has children after setting up a Will under German law. Then the child has the right to void the German will which the testator has created at a time when he or she did not know about this child.

However, this rule of interpretation does not apply if there is no room for such interpretation. If, for example, the testator has explicitly stated in the German Will that this Will shall remain valid even if he or she later marries or has (further) children, then section 2079 German Civil Code cannot be invoked. If the Will itself is silent on the matter but the testator has mentioned that the Will shall remain valid in such situations, then it becomes difficult. Such contentious probate cases can drag on for years in German courts and usually the party invoking section 2079 German Civil Code prevails.

Spouses in Germany often create mirror wills (Berliner Testament, Ehegattentestament) and explicitly preclude (ausschließen) this section 2079 BGB, because they want to protect themselves against the Will being voided if the surviving spouse later marries again or has additional children.

For more information on cross border probate matters, international will preparation and German inheritance tax matters see the below posts by the international succession law and tax law experts of German law firm Graf & Partners LLP:

Or simply click on the “German Probate” section in the right column of this blog.

The Anglo-German law firm Graf & Partners and its German-English litigation department GP Chambers was established in 2003 and has many years of experience with British-German and US-German probate and tax matters, including the representation of clients in contentious probate matters. We are experts ininternational succession matters, probate and inheritance law. If you wish us to advise or represent you in a German or cross border inheritance case please contact German solicitor Bernhard Schmeilzl, LL.M. (Leicester) at +49 941 463 7070.

Higher Probate Fees in the UK as of May 2017

Update 25 April 2017: The below post is outdated because due to Theresa May’s snap election called for 8th June 2017, the British government has dropped the plans to raise probate fees (at least for now). More on the matter here.

Please note that the UK Probate fees will change from May 2017. For estates with a value of up to £50,000 (pre IHT) the fees will be nil. This is an improvement, because the current threshold for fee exempt estates was £5,000. For all other estates, the probate fees will now be significantly higher. The current flat fee up to now was £215. The future probate fees for estates in the United Kingdom are:

Value of estate (before inheritance tax) Probate Fee
Up to £50,000 or exempt from requiring a grant of probate £0
Exceeds £50,000 but does not exceed £300,000 £300
Exceeds £300,000 but does not exceed £500,000 £1,000
Exceeds £500,000 but does not exceed £1m £4,000
Exceeds £1m but does not exceed £1.6m £8,000
Exceeds £1.6m but does not exceed £2m £12,000
Above £2m £20,000

More details on the increased UK Probate Fees are available here.

For more information on cross border probate matters, international will preparation and German inheritance tax matters see the below posts by the international succession law and tax law experts of German law firm Graf & Partners LLP:

Or simply click on the “German Probate” section in the right column of this blog.

The Anglo-German law firm Graf & Partners and its German-English litigation department GP Chambers was established in 2003 and has many years of experience with British-German and US-German probate and tax matters, including the representation of clients in contentious probate matters. We are experts ininternational succession matters, probate and inheritance law. If you wish us to advise or represent you in a German or cross border inheritance case please contact German solicitor Bernhard Schmeilzl, LL.M. (Leicester) at +49 941 463 7070.