Where there’s a Will, there’s a way
The ability for people to freely choose to set up home and establish a new life in a different country is increasing. In 2012 alone, 312,000 people emigrated from the UK. With this increased freedom, advisers are faced with the complexity of applying rules which govern cross-border estates upon death, where an individual owns assets in more than one country.
Civil law approach
Most civil law jurisdictions such as France and Spain ensure that marriage and parenthood create certain responsibilities in favour of a spouse and children when an individual dies. The rules of succession may vary, however, the similarity is that the individual may not freely dispose of their estate but instead specific heirs will be entitled to a fixed share. This is known as forced heirship.
Common law approach
Common law jurisdictions, such as England and Wales and Hong Kong, allow an individual to leave their wealth and assets to whomever they wish upon their death and can decide the proportion each beneficiary is entitled to.
Unlike civil law jurisdictions, there are generally no rules which provide a family member with an automatic right to any part of an individual’s estate upon death.
Potential conflicts which can arise
In England and Wales for example, English law will govern movable property (such as a life assurance policy) if the individual was domiciled in England at the time an individual executed his Will. However in France, French law will govern movable property if the individual was habitually resident in France at the time of death.
Recognition of foreign Wills
The rules determining what constitutes a valid Will vary from one country to another. A conflict can arise where a Will does not meet the formal requirements of a Will in another country. This could result in one of the Wills not being recognised. In some cases, it may be necessary to have more than one Will drafted and executed in accordance with the law of the country, where the assets are situated, to ensure that all assets are inherited in accordance with the individual’s wishes upon their death.
Most legal systems, regardless of whether the country is a civil law or common law country, protect relatives of a deceased person who tries to disinherit them. In civil law countries, protection takes the form of a reserved portion of the estate. This mechanism is not recognised everywhere and it is possible for the wishes of an individual via a Will to be ignored. Whilst an individual is able to create a Will, the individual cannot disinherit forced heirs otherwise the law will override the Will if
it is inconsistent with the forced heirship rules.
Let’s look at a scenario where an individual is resident and domiciled in England and owns a house in France. He creates a Will in accordance with the law of England and Wales leaving his worldwide assets to his parents because he does not want his children to inherit any of his estate. Under French law the Will would be ignored as the rights of the children, the forced heirs, will take precedence.
Recognition of trusts
The concept of a trust is a common law principle and may not be recognised in a civil law country, for example, where a UK domiciled individual creates a trust within their English law Will. The trust may be ignored, or the local laws may instead categorise the trust as a different structure.
The administration and distribution of an estate
The right of an individual to administer an estate can vary from one country to another. In England and Wales an executor is appointed where there is a Will once probate has been granted. Whereas in some countries the courts may issue a certificate of inheritance or the administration may be the responsibility of a Notary. Whichever system is followed, it is important to recognise that an authority gained in one country may not be recognised in another. The whole estate may not be able to be administered or distributed until the correct authority has been obtained.
Dealing with estate planning can be complicated when there isn’t a global component. However, when the estate does involve an international element it is important to be aware of the potential conflicts and the complex issues that may have to be resolved before considering the best approach to take.