Cross-border successions
March 2024 /
In an increasingly interconnected world, handling cross-border successions has become more prevalent and complex. Where an individual’s estate includes assets in multiple countries, such as owning property abroad or holding shares in a foreign company, if the deceased held a different nationality from their last country of residence or if his heirs reside in different countries, their estates may become subject to the laws and regulations of multiple jurisdictions. This can trigger a multitude of unexpected legal hurdles[1].
Legal Challenges
A significant challenge arises from the diversity of inheritance procedures observed across jurisdictions. For instance, succession automatically passes to the heirs in France, whereas in the US, one shall either go through a probate process and appoint an administrator or should have settled a trust beforehand. Heirs of a Parisian who owned property in Florida will then need to undergo the probate process, which can extend over a year, regardless they are French residents themselves.
Another challenge concerns the inheritance distribution. In Belgium in absence of a will (in testat), the surviving spouse typically receives the usufruct of the estate, whereas in the UK, the legal concepts of usufruct and bare ownership do not exist. Where a legal concept is unknown in a given jurisdiction, it will generally attempt to grasp the legal features in question by assimilating them to an equivalent institution in its domestic law. This may not result in the expected patrimonial legal treatment.
Furthermore, complications arise from the concept of hereditary reserve, which does not exist in every jurisdiction. Also referred to as forced heirship or compulsory portion, it is a public order rule in some countries to secure for certain heirs a minimum share of the deceased’s estate, regardless of the contents of the will (ab testat) or foreign succession laws. In some jurisdictions, there is no such concept, allowing individuals more flexibility in distributing their assets according to their wishes as outlined in their will. It is imperative to determine the applicable national law to determine whether a hereditary reserve must be observed.
International Private Law
In general, with cross-border successions, the primary concern is about determining the relevant national law to understand the applicable rules. International Private Law (IPL) plays a pivotal role in this context.
IPL comprises the legal rules that dictate which court holds jurisdiction and which law it should apply. Criteria such as domicile, nationality, and the location of assets are considered for determining both the court’s jurisdiction and the applicable law. The initial step always includes determining the court’s jurisdiction since each court applies its own IPL. Once this is identified, the applicable law can be assessed.
Although the objectives of IPL is to minimize disputes, discrepancies between different countries’ IPLs can still result in legal issues. For instance, under Quebec’s IPL, the distribution of movable property in successions is determined by the law of the deceased’s last domicile, whereas the distribution of immovable property is governed by the law of its location. However, in many other countries, both movable and immovable property successions are governed by the law of the deceased’s last domicile, which could lead to conflict of law for non-resident individuals with property in Quebec.
Ideally, uniform IPL across all nations would eliminate such issues, but unfortunately, this is not the reality.
European Succession Regulation
Since August 17, 2015, the European Regulation on Succession Law is in force, with the introduction of common rules for handling inheritances with EU dimension. This Regulation directly applies to all European Union Member States, except for Ireland and Denmark, and aims to streamline the process of international successions.
As a general rule, the European Regulation on Succession Law designates the court of the deceased’s habitual residence as having jurisdiction and dictates that the national law of the deceased’s habitual residence applies to the estate. Nevertheless, certain exceptions may apply.
Furthermore, Member States are expected to respect and recognize decisions of other Member States without requiring additional internal procedures. For instance, an heir can issue a declaration of acceptance or waiving of an inheritance before a court in his EU country of residence, irrespective of the jurisdiction handling the inheritance situated in another EU country. The Regulation also introduced a new instrument: the European Certificate of Succession. This instrument serves as a material proof and has automatic legal effects in all Member states.
Thanks to this Regulation, navigating through cross-border EU successions has become less cumbersome, yet it does not address all issues. Moreover, considering people’s mobility, their residence can swiftly change with all related consequences.
Which steps to take?
If you find yourself dealing with cross-border estates or children, we strongly recommend analyzing your estate and seeking advice from a professional to understand the implications of both national and international laws on your succession.
To ensure legal certainty, writing a will that specifies the applicable law governing your succession is a basic recommendation. However, it is important to note that limitations may apply. Typically, under EU regulations, you have the choice to opt for the law of your nationality, either at the time of signing the will or at the time of death. This choice must be explicit, and only one applicable law can be selected by the testator.
Choosing a jurisdiction upon decease is also a possibility. However, according to EU regulations, only heirs can enter into a choice-of-court agreement, not the testator. Nevertheless, as the testator, you could include a testamentary penal clause or an alternative provision, outlining consequences for initiating proceedings outside the jurisdiction of a specific country’s court.
Another approach is to organize gifts to limit the number of cross-border assets in the future succession. This can help simplify the estate distribution process and minimize potential conflicts of laws.
Remember, proactive planning and seeking professional advice can significantly ease the complexities associated with cross-border succession matters. Should you have any inquiries, we are here to provide analysis and assistance on the matter.
[1] This article delves into the civil aspect of international successions, omitting discussion of the fiscal dimension.
