We previously recommended that families create a written list identifying, and noting key details of, their financial and personal assets. The importance of this in support of drafting a Will or for broad estate planning purposes was emphasized.
Ensuring that testamentary objectives are met can be especially challenging for families with multi-jurisdictional estates.
Jurisdictions apply different connecting factors such as domicile, residence, or nationality to determine which jurisdiction’s laws will apply for succession matters, sometimes leading to complex conflicts of law. Issues such as mental capacity and the validity of substantive aspects of Wills are treated differently across countries (particularly as between common law and civil law countries).
In 2015, most EU countries adopted a set of regulations, known as the EU Succession Regulations, that reduce complications for cross-border succession planning and administration.
Note that the intention was not to harmonize succession and inheritance laws across the EU. The Regulations are intended to reduce conflicts between the laws potentially applying to cross-border estates, including applicable law, jurisdiction of courts, enforcement of decisions and presentation of instruments in succession matters.
Where a client has a multi-jurisdictional estate, including ties to an EU country (e.g., being a citizen or resident or owning assets located there), then the Regulations will impact succession planning.
The Regulations apply to the estates of people dying after August 17, 2015.
Where an estate falls entirely within a person’s country of residence and nationality, then little changes. In addition, the Regulations do not apply to revenue, customs or administrative matters, including questions relating to matrimonial property regimes, legal capacity, maintenance obligations or property rights other than those arising by reason of death, trusts or company matters.
The Succession Regulations and Impact
The default position set out in the Regulations is that the law of the Member State where the deceased had her last habitual residence has jurisdiction with regard to her entire estate. The inheritance laws of that country would be applicable to the estate. This includes both succession and administration issues.
Habitual residence is not necessarily the same as the last domicile or even residence prior to death. It involves an assessment of the “life circumstances” of the deceased up to and including the time of death. Where her life was centered, including her most important social contacts, are be considered.
This default position can also be overridden in a number of circumstances – most importantly, if the testator elects the laws of her nationality to apply to the whole estate, by evidencing in writing, the election to exercise a “choice of law”.
Note: some advisors question whether an estate containing multiple wills can make this election with respect to less than the entire estate.
This choice of law would be helpful where a testator has a strong preference for a particular set of national laws or where there is any uncertainty with respect to habitual residence.
The Regulations determine the set of laws that apply to succession issues, but does not determine which courts can be involved. The courts of the Member State where the deceased was habitually resident at the time of death or in which property is located would retain the jurisdiction to rule on succession matters, but they would apply the national laws set out under the choice of law election.
Where a Member State is elected as the choice of law, then the parties can agree that the courts of that country will have exclusive jurisdiction to rule on all succession matters.
While not a requirement, the parties can apply for a Certificate of Succession that will be recognized in each Member State (and probably Switzerland and perhaps other countries).
Impact on Clients that are Not Resident in the EU
It is only EU Member States that are bound by the Regulations, but there are two ways in which nationals or residents of non-Member States could be impacted.
If the connecting factors of a country’s Private International laws would link a person’s assets back to laws of the EU country, then these Regulations will apply.
If you have property in an EU country, or have dual citizenship including of an EU country, then the Regulations are relevant, especially if you have concerns about particular local laws – e.g., those dealing with forced heirship.
Historically, a Canadian national habitually resident in France, and owning real property in both France and Canada, would have had French law apply to the personal property and real property located in France, and Canadian law to the real property located in Canada.
Now, that person could elect to have Canadian law apply to the entire estate, which would require French courts to apply Canadian succession laws to the French real property.
Under the Regulations, if that person died without having made an election, then French law, including forced heirship rules, would apply to the entire estate, including the Canadian real property. [However, it is questionable whether Canadian courts would give up jurisdiction with respect to the Canadian real property.]
It is not yet clear that all EU countries will accept an election to a national law that does not provide for forced heirship rights. However, court references to date suggest that they would only apply local laws in exceptional circumstances, after looking at the practical consequences of the proposed succession.
Disclaimer: The above is intended as commentary only, and should not be interpreted as advice for any particular circumstances. The Regulations are complicated, and the way that they interact with domestic laws impacting, inter alia, estate, succession, marital property and tax issues remain uncertain and certainly not without risk and complexity. The commentary above is brief and has not dealt with many relevant issues or nuances addressed in our internal memorandum.