A new EU regulation on succession came into force on August 17. Expatriates living in Malta need to understand how it affects them. You may need to take action to ensure your assets are distributed to your heirs according to your wishes.

The increased mobility of individuals has created confusion when it comes to the settlement of cross-border inheritances.

If you have estates in more than one country, this can trigger the application of multiple succession laws.

There are an estimated 450,000 cross-border successions each year in the EU, with a value of over €120 billion, and it gets very complicated and expensive for everyone concerned.

European Succession Regulation EU650/2012, known as ‘Brussels IV’, was devised to provide certainty as to which law will apply in governing a succession. It standardises the law across the EU, to simplify and lower the costs on cross- border succession issues.

The administrators of an estate will be able to apply for a ‘European certificate of succession’, intended to replace the standard post-death legal instruments across the EU. Effectively it will become a standard European grant of probate. It will set out the key details of the deceased, the estate and the beneficiaries and should be able to be used to transfer and dispose of assets across the EU.

Importantly for expatriates, it allows individuals to opt for the succession law of their country of nationality to apply instead of that of their country of residence.

Key elements of Brussels IV

The default position and most important criterion is that the law of the State in which the deceased was “habitually resident” at the time of their death applies to succession of assets located across the Brussels IV zone.

However, an individual can elect to apply the law of their nationality to all their assets across the zone.

This selection must be made before death, through a statement in their will or a similar document.

The default position may also be overturned if there is a jurisdiction to which the deceased was ‘manifestly’ more closely connected.

It applies to all EU member states except the UK, Ireland and Denmark, which have opted out. However an English national, for example, living in Malta can still opt for English succession law to apply on their death.

Brussels IV only relates to succession law and the distribution of assets.

It does not affect where any inheritance/ succession taxes are to be paid. You may therefore still need specialist tax planning to protect your heirs from taxes.

Malta succession law

Under Maltese succession law, there is a reserved portion for the spouse and children, which varies depending on the number of children. If you have up to four children, you must leave them a third of your estate; if more than four, you leave them a half.

Your spouse is entitled to a quarter of your estate if there are children, or a third if no children. The spouse also has the right of habitation in the main home.

The rest of the estate outside the reserved portion may be freely disposed of.

This applies to real estate situated in Malta, regardless of the nationality or residence of the owner, and the worldwide moveable assets of individuals who are domiciled in Malta.

Note that under the new EU succession regulation, the default position is that Maltese succession law will apply to your estate in Malta, unless you have expressly stated otherwise.

Succession planning

For a family, ensuring that assets pass to the right beneficiaries at the right time, with the minimum of administration or taxation, can be a complicated process.

It is important to undertake a succession planning health check.

The first step is to establish your goals. Who would you like to benefit from your estate? Do you want them to have control over the money or not? How quickly would they need to be able to access the money?

What impact will tax have? Would you like to try and avoid probate on some of your assets?

Then take specialist advice on the most effective estate planning for you and your heirs to ensure your estate is distributed according to your wishes, and as easily as possible for your heirs.

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Kevin Cassar specialises in wealth management services to expatriates across Europe and has been in this field for the past 15 years.