With Brexit looming, now may be a more appropriate time than ever to review your succession planning, and make changes before the UK leaves the European Union.
There are three main areas of your succession planning strategy that could be affected by the UK's exit:
Current EU regulations allow for a UK citizen to make an election that Scots law is to apply to the succession of their property which is located in a jurisdiction elsewhere in the EU. It is not uncommon for the law in different countries to place restrictions on who property can be left to in a Will, for example, prevent you leaving the whole of that property to your spouse. Scots law does not have any such rules in relation to homes, and you can leave them to whomever you like. It is therefore advisable to make a carefully drafted election in your Will to ensure that your Scottish Will is effective in determining the succession of your EU based property.
Making an election that Scots law applies in your Will provides no guarantee that the foreign jurisdiction will accept this. This may also prove increasingly difficult following Brexit, where UK citizens may not retain the benefit of this EU regulation. Therefore putting in place a Will in the jurisdiction where that property is based may also be advisable.
Trusts can be an incredibly valuable tool to use in estate planning to mitigate future tax liabilities while retaining elements of control. So long as they are effectively constituted and held for a sufficient time, assets held in a trust will generally be classified as not being part of the individual's estate when it comes to paying inheritance tax. This can result in significant tax savings. Trusts are also useful for succession planning by enabling assets to be protected from those you would not wish to inherit them, or to put some conditions on when and how the inheritance is to be received by beneficiaries.
However, not all jurisdictions outside the UK recognise Trusts, and their effectiveness may be limited when placing in Trust assets which are located outside of the UK. Post-Brexit, recognition of UK Trusts may be given even less credence in remaining EU jurisdictions.
EU regulations have over the years sought to limit the privacy of Trusts for tax purposes. Recent rules, which were a result of EU regulations, imposed that Trusts must now be registered and certain details made public. Following the UK's departure from Europe, these rules are likely to remain in place, but any future EU regulations affecting Trusts will no longer have an impact on UK established Trusts.
There are various tax reliefs available in the UK, which currently can also be claimed against the value of assets located in the European Economic Area (EEA). These include agricultural property relief, capital gains tax relief and gifts to charities. Once the UK is no longer part of the EU, it is uncertain whether these benefits will remain. As there is a risk that these reliefs may soon not be available on foreign assets, it may be worth considering restructuring your investments in a more tax-efficient way, if possible.
Much confusion still exists as to what the full impact of Brexit will be (if it even goes ahead). Brexit may have significant implications for succession planning and where assets are owned in another EU country in particular, it is advisable to seek professional advice now to see what changes you may want to make to your estate planning.
If this blog has raised any questions and you would like to discuss estate planning, please get in touch with Murray Beith Murray today using our Contact Form or call us on 0131 341 3741 to speak with one of our specialist solicitors.
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