One will or two? Dealing with foreign property

Q&A: Lack of proper planning can frustrate your intentions and leave your assets in limbo

We are lucky enough to own a second property in France with our main home in Dublin.We have had conflicting advice both here and in France on what to do re making our will to include our second property .

We are aware that there are very different rules re inheritance under French law so we want to be clear how to proceed with making our will to include both.

We have two adult sons who will inherit equal shares of our estate when the time comes.

Ms B.O’S., email

Planning is the key to peace of mind when it comes to wills and managing your affairs after your own death. It’s obviously not something most of us want to think about but failure to do so can have devastating effects on those we love the most.

Things get even more complicated when you have assets in more than one country. There can be local rules on both inheritance and taxation. And then there are local laws designed specifically to frustrate the intention of other legislation, as we will see.

The standard advice for many years was that a person should make a will in each jurisdiction where they have assets. Relatively recent changes in the law were intended to ensure that this should no longer be strictly necessary any more – at least not in the case of France – but there are still reasons why it might be a good idea.

Forced heirship

French law restricts in part what you can do with your assets, with the protected beneficiaries largely being any children – legitimate or otherwise. If you are resident in France, or have assets there, under French law any children are legally entitled to a proportion of them.

Where there is one child, they are automatically entitled to have the assets; in the case of two-children, the figure is two-thirds and it is three-quarters where there are three or more children.

If the children predecease the parents, these rights transfer to their own children. If there are no children, then it is your surviving spouse whose rights are protected as a matter of law, but only where there are no children.

In your case, this appears to be somewhat academic as you say the intention is to divide your estate equally between them on your death. And even if that involved one of the two inheriting the French property in full with the other receiving their inheritance from other assets, the outcome should be free from challenge under French law.

But, in any case, a EU Regulation on Succession Law (Regulation 650/2012), known as Brussels IV, which came into force in late 2015, sets down that a person habitually resident in one EU state can elect to have the succession (inheritance) law of that state prevail over the local law in other EU states where they may have assets.

Ironically, Ireland – along with the UK and Denmark – refused to sign up to this which means, for instance, that a French resident could not elect under the regulation to have French law govern a property they have in Ireland. However, Irish residents can still elect to avail of the EU regulation for assets in EU countries that have signed up to it – including France.

Election of law

So you can elect to have Irish succession law govern the inheritance of your French property, or you should be able to.

However, the French were not entirely happy with what they see as a watering down of the rights of “forced heirship”. So, last year, they amended their succession law to state that where either the deceased or any of their children is either an EU national or habitually resident in an EU state : “and when the foreign succession law does not know a mechanism with a reserved portion protecting the children, each child (or his/her heirs, or those who benefit from his/her rights) can use the assets which are located in France to obtain a compensation at the time of death, in order to benefit from the forced heirship rights which they have under French law, within the limits of these rights”.

Now Ireland does have such a “legal right share” in relation to wills, but it applies only to spouses or civil partners, not to children. So, if an Irish resident with French property was looking to dispose of their assets in a will in a way that disinherited, or disadvantaged, any of their children, that child or children could claim compensatory provision from the French asset under current French law.

This latest measure came into force only last November and it is highly likely to be challenged in the European courts but, for now, that’s how it stands.

As I say, it doesn’t apply to you as you are leaving your assets evenly to the two children but it might be relevant to others with property in France.

Practical benefit

In practical terms, the main reason for having separate wills in each country where you have assets is to streamline the probate process. If there is only the one will, it will have to go to probate successively in each country where there are assets and this can be a time consuming process. Worse, distribution of the assets can be held up while the process is ongoing.

One international legal firm recounts the possibly apocryphal tale of a client who had one will covering assets in seven different countries. The process of getting probate took 23 years, during which time most of the intended beneficiaries passed away themselves. Not that it would have made much difference, they said, as by the time lawyers in the seven different countries were paid for sorting out the man’s affairs, there was precious little left for them to inherit anyway.

With separate – but not contradictory – wills, the legal process can run concurrently in whatever number of countries you hold assets.

A second issue is that legal constructs that are valid in one country might not be accepted in another. One example, in the French case, relates to their understanding and treatment of trusts.

So, even if not strictly necessary in your case, it probably does make sense to have a separate French will, if only to facilitate probate.

It is important if you are dealing with a multi-jurisdictional estate and, especially with multiple wills, that you do not opt for a DIY approach to will writing. There are templates and services available now that do allow you to write your own will, without going through what many people consider the unnecessary or unreasonable expense of employing a solicitor. Personally I’m not a fan.

After your mortgage, how you distribute your estate is probable the biggest financial decision you will make in your lifetime. And as you won’t be around to explain what you really meant with certain wordings, it is critically important to get it right.

Multiple wills

This is the bread and butter of many legal practices: wills are legal documents and they have a language all their own which is designed to ensure there is no confusion. Money spent on legal advice and guidance in writing a will is money well spent – all the more so for people with anything other than the simplest of personal finances, such as yourselves with this foreign property.

A key risk with multiple wills is that one inadvertently revokes the intention of the other. In general, a subsequent will overrides any previous will. So if you have an overarching will to cover, say, your worldwide assets and then subsequently draw up a French will that clashes with certain provisions of th Irish will, it is the later French will that determines what happens to the assets it covers.

If for no other reason, this alone explains the worth of letting solicitors / notaires handle these matters. And make sure they have sight of both wills to check that they do not work counter to one another, or revoke intended provision for inheritance.

It's not necessary to have a big (and expensive) legal firm do this work for you on the basis that they have the international expertise. Many smaller Irish legal firms have connections with local law firms in other countries where Irish people frequently have assets and where the legal rules might differ – such as in France or Spain. And legal costs, at least in France, are very modest for drawing up a will.

And, of course, for those not minded to make a will at all, bear in mind that French law – and the rights of children over a spouse – will apply to any French assets.

Finally, bear in mind that succession and tax are two separate issues. We have talked here about the rules around inheritance. Regardless of how you frame the wills, whoever benefits from the French property will have to pay inheritance tax.

Children have a tax free inheritance threshold of €100,000 from parents and inheritance tax runs at rates from 5 per cent up to 45 per cent. A double taxation treaty at least means they should not be taxed twice – in France and in Ireland.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by email to dominic.coyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice