Foreign property in Scottish estates

23/04/2018

With Scotland’s weather remaining typically inconsistent as summer approaches, some Scots may be thinking longingly of warmer climates in continental Europe. Some may even have a holiday home to take refuge in. But while a place in the sun can provide relief from colder climates at home, estates containing foreign property can throw up many legal complications that individuals should be aware of.

One doesn’t need to look further than the recent death of the “French Elvis” Johnny Hallyday, whose estate administration threatens to become more emotionally wrought than even the most tumultuous French chanson. Despite his iconic status in France, Hallyday occasionally resided in Los Angeles and his will was made under the law of California. He left everything to his current wife and their two adopted children under that will, while his three children from previous relationships were not left anything. Hallyday allegedly felt he had provided for them adequately during his lifetime.

Hallyday’s children have now asked the French courts to consider whether he was able to avoid strict French “forced heirship” rules by making an American will, or whether his estate should instead be handled under French law. His widow has made it clear she will resist any challenge to Hallyday’s will.

Although it will be a rare person who leaves an estate quite as large as Hallyday’s, any cross-border issues will cause complications when administering an estate. Perhaps the most common example of a cross-border issue for people domiciled in Scotland would be a holiday home in France or Spain. For people in that position, tailored legal advice from a Scottish perspective is absolutely necessary to avoid unintended consequences.

In Scotland children cannot be disinherited entirely as they will always be able to claim on part of a parent’s estate, regardless of what the parent’s will says. This is known as their “legal rights”. However, this does not include any land or buildings in the estate. While Scottish children do have greater protection from disinheritance than they do in England and Wales, countries in continental Europe tend to give children greater rights of inheritance. This can include claims on land or buildings.

The important question is what law will apply to a foreign property?

It used to be the case that land or buildings in a foreign country, owned by a person who died domiciled in Scotland, would definitely be dealt with according to the laws of that country. This made it a necessity for people domiciled in Scotland to get a foreign will dealing solely with that property, in addition to a Scottish will that would cover the rest of the estate.

Now, new European Union legislation means British nationals, or people who are domiciled in Britain, can choose in their will which law they want to apply to all of their estate. This choice will have effect regardless of where the property is based. Although the UK did not opt-in to the legislation, British nationals can still make use of it and so Brexit will not make a difference.

The law is fiendishly complicated and the exact way of going about the “choice of law” is still being worked out. For example, a choice of law that sought to have French property devolve according to Scottish inheritance law, and thereby prevent French forced heirship rules from applying, may be objected to by the French courts.

It should be stressed that the ability to make a “choice of law” does not mean there is no benefits to getting a will in the country where the property is located. Making a local will could make the administrative process easier in that country and help to keep costs down.

Another important point to be aware of is that choosing Scots law to apply to your estate may not avoid inheritance tax laws applying in the other country.

If you own a home in another country and wish to seek advice on your legal position, our team of experienced and approachable lawyers would be happy to help.