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WILLs & Powers of Attorney
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Feb. 5, 2015

The EU Succession Regulation (Regulation (EU) No.650/2012).

Cross border conflicts between the principles of movement in the EU and complicated and expensive succession issues to which this can cause, stems from the historic entirely different succession laws that apply in the EU.

In a single swipe the Succession Regulation is used to fix the problem. This is only partially achieved as all participating states in the EU (except for Denmark, Ireland and the UK).

The Succession Regulation solution to this is Jurisdiction and applicable law and European Certificate of Succession.

Jurisdiction and applicable law

The main purpose of the Succession Regulation is to ensure that succession to a given estate is treated consistently. Ideally, the courts of a single jurisdiction will apply a single law to the entire estate. Generally speaking, the courts and governing law will track each other and will be those of:

  • the jurisdiction of habitual residence;
  • unless there is a jurisdiction to which the deceased was more closely connected;
  • unless the deceased elected for the law of their nationality to apply.

Provided that the law that governs the succession falls within one of these categories, it does not need to be an EU member state.

This means that assets (including property) could be passed in accordance with the law of another jurisdiction entirely if they are a participating EU member state. In many situations of the cross-EU, renvoi will be disapplied and so only domestic succession laws of the relevant jurisdiction apply. In theory this should reduce the amount of conflicts. things never turn out to be that straightforward.

European Certificate of Succession

The other major change is that parties interested in an estate will be able to apply to the courts in the relevant jurisdiction for a European Certificate of Succession(ECS), but are not obliged to do so.

In cross EU-cases, an ECS may replace the usual national post-death certificates. It is predicted that the ECS will set out details of the deceased, any applicable marital status, the relevant succession law, and the heirs and beneficiaries, so that it can then be used in any participating state in order to transfer and dispose of the assets of the estate. This should mean that there is no need for separate post-death dealings in each jurisdiction in which assets are held.

Some areas that need further consideration and these include;

What does habitual residence mean?

Unless a nationality election to the contrary is made, the law and jurisdiction that govern succession will usually correspond to the country of habitual residence. it is not defined in EU regulations itself. It is not always deemed by a simple sum of the amount of time spent in each jurisdiction. ‘Habitual Residence’ has an independent meaning developed through the EU case law, notably cross-border divorces.

Other factors will come into play, such as where has the person established his fixed basis, his centre of interests, and all relevant facts will be taken into account for the purposes of determining the habitual Residence. It will come down to question of fact if given by lack of definition.

The UK, Ireland and Denmark are not parties to the Succession Regulation, so the effect remains uncertain in these three states on Succession Regulation.

Residents and nationals from these states will be affected: for example a French resident and British national, can ensure that English law applies to his French bank account.

And, residents and nationals of other participating EU states that hold UK, Irish or Dutch assets will not be able to take advantage of the Succession Regulation. A German resident and national with property in the UK might want German law to apply, but the English courts are not obliged to comply. Things get more complicated when you consider the qualified disapplication of renvoi. Where habitual residence (and therefore the applicable law) is that of a ‘third state’, renvoi will still be allowed provided the reference will be to a ‘member state’ or to another ‘third state’ that would apply its own domestic law.

The Succession Regulation does not include the definition of the terms ‘third state’ or ‘member State’. The succession Regulation imposes obligations and requirements on ‘member states’ to which this regulation applies. So where do the UK, Ireland and Denmark fit in? Evan in the absence of a definition it is difficult how to see how UK, Ireland and Denmark could qualify as member states for the purposes of Succession Regulation and without their participation how can these apply to them?; consider an English resident and British national who wants English law to apply to a French property. However English PIL rules would apply French law (as the law of situs) to succession, unless they made a specific election referring to her nationality, France will presumably accept the renvoi and apply French law.

Application of the ECS

For many people with assets throughout the EU, the ECS should make the post-death process considerably more certain, efficient and cheaper. However people in the UK, Ireland and Denmark are not likely to benefit from this.

For example take England and the current move to amend the English and Welsh Non-Contentious Probate Rules, it is not predicted an ECS will ever replace the need for a separate grant of representation in England. For a start, the information required for a grant does not correspond with the details provided in an ECS. Even more importantly, the usual English procedure secures the payment of any inheritance taxes due before property can be transferred; this will not be the case with the ECS. This leaves an open question of whether a ECS will provide sufficient information to secure an English grant, without the need for further (potentially costly) evidence of the relevant foreign law.

Testamentary freedom across the EU

Over the years, different jurisdictions have developed many methods for protecting family members and dependants from being disinherited. Across much of the EU, this is preserved in the principle of testamentary freedom.

In the UK, the Inheritance (Provision for family and dependants) Act 1975 (the 1975 Act) allows certain categories of disinherited heirs to claim against the estate of an English or Welsh domiciliary.

Without any further changes to the 1975 Act, it is easily imaginable that a British, non-English or Welsh domiciliary with assets throughout the EU could simply disinherit all family and dependants. Neither forced heir-ship nor the 1975 Act will provide protection.

While the Succession Regulation will only apply to deaths after 17 August 2015, transitional provisions allow a choice-of-law clause to be included in Wills and other testamentary documents drawn up now. These choices should be carefully considered, together with any tax planning opportunities and the effect of a marriage. Now is the time to start reviewing Wills and estate-planning and consider the effects that Succession Regulation is going to have.