Anyone who has been involved in cross-border inheritance or estate planning will be aware that it is a complex process especially when someone owns property in more than one country. This is because the various assets in the same estate can be subject to the laws of different countries.
The free movement of people within the European Union has created many cross-border situations such as owning estates in different countries. This European and/or international ownership of real estate and movable assets entails the application of multiple inheritance laws and creates conflict of law rules for succession that are currently deeply heterogeneous between the European member states. Some member states apply the law of the nationality to govern a succession, in others the law where the person is a resident; some retain a principle of scission between movables and immovables, while others address the issue as a unity.
However new regulations are due to come into force on 17th August 2015 which are intended to harmonise these differing, and sometimes conflicting, laws of the EU countries in relation to the succession of assets.
A major step in facilitating cross-border succession was the adoption of the Regulation (EU) Nr. 650/2012 (hereinafter referred to as the “Succession Regulation”) on jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of Succession.
Except for Denmark, the United Kingdom and Ireland, the Succession Regulation provides a direct application in all participating member states of the Succession Regulation (hereinafter referred to as the “Member States”) and enjoys universal character, in that, the selected law can be the law of a Member State, a third state, or a non-Member State. Although the UK is therefore not a signatory to these regulations, the regulations are still of considerable relevance to UK residents and nationals with assets in participating EU countries.
The intended effect of the new European Succession Regulations is to make things less complicated so that instead of different laws of different countries applying to different assets, just one country’s laws will govern the succession of all the assets in the deceased’s estate. On a practical level, the Succession Regulation is an important arm in ensuring predictability for estate planners.
Overview of the Succession Regulation
The Succession Regulation introduces novel concepts for cross-border succession planning of individuals with multi-jurisdictional estates and ties to a Member State.
The default position is that the law of the country in which the deceased has their habitual residence at the time of death will apply and will govern the succession of the whole worldwide estate.
People will however be able to opt for the laws of the country of their nationality (or one of their nationalities if multiple) to apply to their estate instead by properly setting this out in their will.
The Regulations also state that the law chosen does not need to be the law of another EU Member State. This would therefore enable, for example, an Australian national who is habitually resident in Spain to choose Australian law to apply to his estate or an American citizen who owns a property in Europe could use these new regulations for estate planning.
After 17 August 2015, an English national (for example) will be able to create a Will that stipulates that English law is to apply to his/her entire worldwide estate, including property in other participating EU member states. As such, any EU member state which is a signatory to the regulation would be required not to apply its own succession rules to those assets, and apply English succession law instead
The following is a brief overview:
- Habitual Residence: The most significant criterion of the Succession Regulation is the adoption of the concept of "habitual residence" instead of nationality or domicile. This means that the law of the country where the deceased habitually lived just before death will govern inheritance issues. In the Member States, one law will govern the entire succession, regardless of the nature or location of the estate’s assets.
- Choice of Law: The second major innovation of the Succession Regulation is Article 22, which allows the general rule of habitual residence to be overridden by the use of the concept of "party autonomy", in order to permit a testator or testatrix to designate his or her national law as the law governing his or her succession as a whole, by expressing his or her choice expressly and in testamentary form. Should a person have a double nationality, he or she may designate one of the two national laws.
- Jurisdiction in one Country: While Article 22 allows for a testator or testatrix to select his or her national law to govern his or her succession, the Succession Regulation does not allow a testator to choose the jurisdiction to rule on the succession as a whole. Instead, the courts of the jurisdiction in which the deceased had his habitual residence at the time of death shall have jurisdiction to rule on the succession as a whole.
However, where the deceased made a choice of law in accordance with the Succession Regulation and the law chosen by the deceased is of a Member State, the parties concerned may agree that the courts of that Member State are to have exclusive jurisdiction to rule on any succession matter. The courts of the Member State in which the deceased had his habitual residence at the time of death can also decline the jurisdiction to govern the succession if it considers that the courts of the Member State of the chosen law are better placed to rule on the succession, taking into account the practical circumstances of the succession, such as the habitual residence of the parties and the location of the assets.
- Loi Uniforme: Article 20 of the Succession Regulation provides that any law specified by the Succession Regulation shall be applied whether or not it is the law of a Member State.
- European Certificate of Succession: The Succession Regulation creates a European Certificate of Succession. This is a document similar to a Grant of Probate and provides proof of who is entitled to the assets of the estate. The ECS will be issued by the authorities of the participating Member State in which the deceased was habitually resident and will be recognized by all of the participating Member States. This standard form certificate will allow heirs, legatees, executors or administration to prove their legal status and/or rights in any of the Member States and benefits from direct circulation, as no formality is needed for its recognition in the destination state. For example, the beneficiaries of a Spanish National, who dies habitually resident in France, with assets in France, Italy and Spain will be able to deal with all the assets on the basis of the one Certificate which will be recognised not only in the country issuing it (France) but also (in this example) Italy and Spain. However because the UK has not opted in to the Regulations it is not bound by them or subject to their application. Therefore where a UK national who is habitually resident in France has chosen UK law to apply to his estate it may still be necessary to obtain a UK grant of probate to administer any UK assets.
The Succession Regulation appears to leave many questions unanswered. While there are outstanding questions as to which law will apply to the succession of a deceased person’s EU-situs property, there are also unanswered questions as to which law applies to other incidental matters such as testamentary capacity, revocation, children’s rights and legitimacy, adoption, status of spouses, recognition of foreign divorces, family allowances, matrimonial property regimes, and the ranking of creditors of the estate. The Succession Regulation suffers from exceptions, which underline a renewal of conflict of laws and legal issues that practitioners must keep in mind when implementing the multijurisdictional estate plan.
Matrimonial property law, trust law and tax law are expressly excluded from the regulation. Accordingly, we strongly advise clients to seek specialist advice from international estate planning lawyers and to pay attention to these surrounding legal issues in order to provide global and adequate estate planning strategies.
If you require any advice in relation to these new Regulations and how they may affect you or if you need assistance with making a Will contact our lawyers in the European Probate and Estate Planning Team:
Graziano Cecchetti (London): graziano.cecchetti@giambronelaw.com
Gonzalo Butori (Barcelona): gonzalo.butori@giambronelaw.com
Helen Teffere (Rome): helen.teffere@giambronelaw.com