Lords urge caution to EU legislators on succession of estates

• Report: The EU’s Regulation on Succession
• House of Lords EU Sub-Committee on Law and Institutions

Succession laws in Member States differ greatly, and cross-border variations in legislation make dealing with issues such as who is entitled to what of the deceased’s property and how that estate is to be administered very complex.

In October 2009 the EU Commission proposed legislation which aims to simplify some of the cross-border issues that arise when the deceased has 'exercised their right to free movement', i.e. moved to another Member State to live or acquired property in a Member State other than their own. The expansion of the EU and increasing mobility within it means that these cross-border issues are increasingly common.

The Committee strongly agree with the Commission that it is not appropriate to harmonise the substantive law of succession across the Member States, for example by laying down common EU rules determining who is entitled to what property of the deceased. On the other hand, simplification of the law on cross-border succession could bring real practical benefits, but particular care is needed to ensure that any legislation intended to simplify the law does not have the unintended consequence in practice of replacing one type of complexity with another.

The Report highlights the areas of difficulty arising from applying the law of another state to UK property. One is that it would introduce "clawback" into the UK, whereby relatives of the deceased would, in certain circumstances, be able to satisfy their inheritance from property previously given away by the deceased. Another difficulty with the proposal is that the Commission’s proposed test for determining which state’s law is to apply is too vague and therefore creates uncertainty.

Under the Lisbon Treaty, the proposal would not apply unless the UK opted in. In the course of the inquiry the Committee agreed with the government that the UK should not, at this stage, opt in.

Commenting on the report, Chairman of the Sub Committee on Law and Institutions Lord Bowness said:

"It is very apparent having conducted our inquiry that the EU needs to be very cautious in seeking to legislate in this highly complex area. The Committee support the principle of simplification, but given the complexity of the law involved and the lack of empirical evidence of the size of the problem, we feel that a more cautious, step by step, approach than the Commission’s proposal would be more appropriate.

"The proposal must ensure adequate protection of the interests of all those involved- beneficiaries, the tax authorities and creditors".