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The new proposals on succession in the EU. This article briefly explains the proposed Regulation (14722/09) on succession and the creation of a European Certificate of succession, issued by the European Commission in October 2009.
The rules governing cross border estates, where someone has assets in more than one country at the time of their death, can be quite complicated and can sometimes leave a person uncertain as to whether their wishes will be followed upon their passing. This is due to the often conflicting laws of member states. The process can be just as confusing and time consuming for heirs who may have to wait years before receiving their inheritance. At the same time the cost of settling cross border estates, with lawyers based in each country that assets reside, can be excessive. There have been examples of estates of several hundred thousand Euro being eroded by costs that eat up over half the estate.
The aim of the proposed Regulation on succession is to create a legal framework of common rules that unifies and simplifies the law of succession for people living in the European Union, whilst reducing cost and the amount of time it takes for proceedings to end.
The Regulation will apply to all Member States. However there are currently exceptions applying to Ireland, Denmark and the UK, where they currently may not recognised wills that remove assets from their jurisdiction. However they may still recognise wills that opt to be read in their own jurisdiction transferring assets from other EU countries. This is particularly relevant for the Uk which offers a relatively benign regime for inheritance.
What is being proposed?
The proposed Regulation provides for succession to be governed by one, and the same law. The applicable law, by default, will be that of the deceased’s last habitual residence. Alternatively, a person can choose the law of their country of nationality to apply to the whole of their succession, provided this is elected and stated clearly in their Will. For example, Miguel Sanchez is a Spanish national who has relocated to France and become habitually resident there. On his death, the succession rules in France would apply unless his Will specifically elects Spanish law. There are some apparent advantages to this approach. Firstly, this provides citizens of the EU with a greater deal of certainty and removes the need for executors to open proceedings in more than one Member State. This approach also avoids the potential conflict of laws between each Member State, which should result in fewer costs being incurred, and the ability for the estate to be distributed more efficiently and speedily.
Whilst the detail has yet to be finalised there are questions on how habitual residence will be determined. Residence is generally determined on the facts of each case, however determining an individual’s residence can sometimes be complicated especially where that person has multiple homes, in different jurisdictions, and spends equal time in each of them. It is also important to consider that legislation and regulation determining habitual residence, in one Member State, could be significantly different to that of another Member State. How the assessment will work in practice is not yet clear.
Another consideration is understanding how succession laws operate in each Member State. For example, in the case of Miguel he would need to understand the succession law in France, where the principle of forced heirship is recognised and a fixed proportion of the estate (of at least one half) is inherited by the child or children of the deceased, irrespective of any wishes of the testator as expressed in a Will. In Spain forced heirship is also recognised however the rules determining who can benefit and in what shares vary to the French rules. Because of the differences in succession law, it is important for all parties to understand how the law works in each Member State before making an election or agreeing to the default position of habitual residence. Equally as important is the regular review of an individual’s personal and financial circumstances and be aware of any changes in legislation, of the Member State concerned, to ensure that testamentary wishes will continue to be met and fulfilled. Another proposal is the identification of a single authority, or Court, who will be the competent authority for settling the succession. The authority is the jurisdiction of the habitual residence of the deceased. If assets of the deceased are based in another jurisdiction or the choice of law has been elected then this authority does have the ability to refer any matter to the competent authority of the country of nationality of the deceased, in order to deal with the matter in accordance with its legislation.
A European Certificate of Succession is also being proposed. The certificate will be recognised throughout the EU and can be used by Executors and heirs to prove their title to property.
What is the effect on national laws? The European Commission have confirmed that the intention of the proposal is to enable people to clearly stipulate, and to a certain extent, choose the law applicable to cross border successions. The intention is not to replace or harmonise succession law, property law or family law in the Member States. They have also confirmed that the proposal will not affect the taxation of inheritances; this will remain the matter for the Member States national law. SummaryThe proposal aims to simplify the rules and systems that apply to succession in different Member States. Clarification of the rules on succession is of particular benefit to EU citizens who live and work in a Member State that is different to their country of nationality. The proposal is currently with the Council of the European Union however, it is unclear when the Regulation will be adopted by them and the European Parliament. However, until the Regulation comes into force and the detail, regarding how this proposal will operate in practice is clearer, there remains some uncertainty on the impact this Regulation will have in each Member State and those jurisdictions in Europe, where the Regulation does not apply, and the rest of world. The information provided in this article is not intended to offer advice.