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George F. Bearup, J.D. Senior Legal Trust Advisor

1-Jun-22

Forced Heirship Laws-Not With Brussels IV

Take-Away: Brussels IV addresses choice of laws and administrative rules that relate to property situated in European Union (EU) jurisdictions. Individuals who own assets located in the EU should seriously consider affirmatively electing to have U.S. state estate planning laws apply to those EU located assets.

Background: Brussels IV is the common name applied to an EU Regulation. [EU No. 650/2012.] It was enacted in 2012 to address the substantial differences in various EU countries laws that deal with the laws of succession. Some countries have forced heirship provisions while others do not. As such, an individual who resides in one jurisdiction, but who owns property in another jurisdiction, may find forced heirship applying to some of his/her assets, even though that concept is not applied in his/her own country of residence.

Default Rule: Brussels IV thus provides a default mechanism that is used to determine which laws will apply to the succession of a decedent’s assets in the EU; it allows one EU’s nation’s laws to apply to the succession of all of a decedent’s EU property, wherever the property is located. The default provision is that the law applicable to the succession of a decedent’s property as a whole will be the country in which the deceased has his/her habitual residence at the time of death.

U.S. Citizens: A U.S. individual who owns property located in an EU country may find that such property is subject to forced heirship or other succession laws that frustrate the owner’s testamentary intent,  and which could also frustrate US estate tax laws, e.g. one country’s forced heirship regime would cause some assets to go to the decedent’s children and not his/her surviving spouse, and thus not qualify for the unlimited federal estate tax marital deduction, or that some assets would be distributed outright to the decedent’s children and not into a credit-shelter (bypass) trust.

  • Affirmative Election: Brussels IV allows a citizen of any country, even one outside the EU, to formally elect to apply the succession laws of his/her own nationality to property that is situated in the EU. Accordingly, a U.S. citizen, e.g. a Michigan resident,  can elect to apply the law of a U.S. state to the succession of his/her property located in the EU, even if the EU country in which the property is located has forced heirship laws that would force the disposition of some or all of the property to surviving spouses and/or other family members in fixed shares.
  • Manner of Election: The election is usually made via a provision to that effect in a testamentary instrument, usually the owner’s Last Will, although the election can also be implied. There are also provisions in Brussels IV that deal with which state’s laws within the U.S. can be elected, which is generally resolved by U.S. conflict-of-law provisions.
  • Estate Administration: In addition to avoiding forced heirship laws, the election to have a U.S. state law apply will also facilitate estate administration when dealing with other succession issues, such as: (i) the cause, time and place to open the succession of the estate; (ii) the capacity of an individual to inherit; (iii) the determination of beneficiaries and their respective shares; (iv) the determination and effect of elective rights of a surviving spouse, or a waiver of those elective rights; (v) pretermitted children; (vi) disclaimers by an heir; (vii) the priority and payment of creditors; and (viii) the application of rules with regard to advancements.

Caveats: Unfortunately there are some exceptions or limits to the use of an affirmative Brussels IV election.

  • Ireland, Demark and UK: A few important EU members states are (or were) not part of Brussels IV, to wit: Ireland, Denmark and the United Kingdom.
  • France: France has enacted domestic legislation that under some circumstances may override Brussels IV to allow its domestic succession laws to nonetheless apply.
  • Inheritance and Estate Taxes: Brussels IV does not affect the taxing jurisdiction of the EU member states.
  • Uncertainty: There remains some uncertainty about how Brussels IV impacts certain marital laws, e.g. marriage and divorce.

Conclusion: Individuals who hold EU assets should seriously consider formally electing to apply U.S. state law to their EU assets in order to avoid the EU forced heirship laws and also to avoid uncertainties about which country’s succession laws apply to which assets.