One the 23rd of June 2016 Britain voted to leave the European Union. Since this was announced, our news has been filled with the drop of the pound, new trade deals outside the EU and, one of the most shocking repercussions of all, the redesign of the Toblerone. But for those with property outside the EU and with concerns regarding what will happen to Inheritance Tax, there has been very little guidance. Further, the guidance given often revolves around the idea that we just have to ‘see what happens’, which is never very useful when trying to plan finances. This article hopes to provide the reader with a little reassurance regarding the current stance of the UK and a glimpse into what is to be expected in the future.
A little reassurance
The thing that is important to begin with, is that UK law in this area is largely built upon UK common law and long-standing legislation, rather than implemented European legislation. Therefore the effects of de-tangling EU laws will be minimal on Wills and Probate, so for now, it is not foreseen that the legislation will be changing any time soon. This means that any fears about current wills, made according to current legislation, becoming legally invalid can be diminished.
Another worry following Brexit was the issue of an emergency budget being implemented. It was declared following Brexit that this could have led to a potential rise in IHT (inheritance tax) from 40 to 45%. However, the new Chancellor, Phillip Hammond, has announced that no such budget will be implemented, so for the time being, the stance of IHT remains the same as it was prior to Brexit.
The fall in the value of property
Its been mentioned over and over but the fall in the value of the pound has great implications on the value of property and the number of people buying and selling. Further, due to the uncertainty that remains following our decision to leave the EU, this fall is likely to remain as it means that it is a risky time to purchase or sell. The fall in houses being put on the market leads to a rise in house prices, as there is a lack of properties for sale. In terms of your personal estate, this is very relevant, as this current economic condition is likely to have affects on an individual’s assets no matter how big or small. Therefore, it has become more necessary than ever to plan for the future to protect your assets, meaning it is more important than before to seek professional help when drafting a will.
Owning property in Europe
It would be wrong to say that there will not be inheritance implications on people who own properties in Europe. In terms of Wills and Probate, English law has always been a little different to other EU countries such as France, Portugal and Spain. In those countries, when someone dies, there can be an automatic right that everything is left to the spouse and children. Whereas in England, the laws of succession mean that a person is entitled to leave their assets to whomever they choose, regardless of how ‘silly’ others may consider it. English law states that property is governed by the laws in which it is located; so if you have a house in Spain, Spanish law governs it. However, due to an EU Directive in 2012, it became possible to put a clause in your will stating that you would like your property in Europe to be governed by English law. This means that regardless of which EU country your property is located; an individual can still make a decision as to who those assets go to. Leaving the EU however, means that it is uncertain whether other member states will still agree to us being able to benefit from the Directive and having this choice. Therefore choosing how to draft your will again becomes a little more complex.
It is frustrating to still be a part of the view of ‘we will see what happens’ but with so much speculation and little direction it is difficult to give a definitive answer to any questions regarding Brexit. However, what is clear is that our Wills and Probate legislation will remain the same for the time being. Further, the worry of an increase of IHT has loosened greatly, although of course new budget decisions can always alter this stance. In terms of drafting a will, personal assets have become a lot more vulnerable due to the drop in the pound. Its value is on the rise but now more than ever it seems that professional help when drafting a will would be advisable in order to protect what ever you have as much as is possible.
As for owning property in Europe, the future of the Directive is uncertain; it is hard to see a reason why member states would allow our benefits in this to continue. This again means that professional help when drafting a will, or when altering one to suit the potential changes would be the way forward.
The good news is that the process of Brexit is a slow one. Even once we have officially ‘left’ there is still a great deal of legislation to work through, so changes are not going to be sudden and are not going to be effective without warning. There is no need to panic and so immediate action is not necessary but care and consideration is advisable more than ever.
Article created by Tabitha McKie.