Legal Alert Regulation (EU) No 650/2012 on Successions
The European Parliament and the Council of the European Union have passed a regulation which aims at simplifying inheritance settlement and avoiding disputes when the will of a deceased involves the legal systems of more than one Member State. Under the new rules, the succession to a deceased person will be dealt with as a whole, wherever the assets are.
The regulation will apply from 17 August, except for Articles and 77 and 78, which will apply from 16 November 2014, and Articles 79, 80 and 81, which will apply from 5 July 2012. Denmark, which has opted out of EU justice and home affairs matters, will not be involved. Neither will Britain and Ireland, who also decided to opt out of the scheme.
A CHOICE OF TWO NEW RULES
Currently heirs and legatees to the around 450,000 cross-border successions each year are faced with complex legal issues involving judicial systems in several states. According to Kurt Lechner (EPP, DE), who steered the proposal through Parliament, cross-border inheritances make up 10% of all successions in the EU, involving some 123 billion. The Lechner report was passed with 589 votes in favour, 21 against and 79 abstentions.
The new regulation introduces two new principles for dealing with international successions.
First, if someone dies in a Member State that is not their home country, their succession will generally be dealt with under the law of the Member State where they last had their place of “habitual residence”, by the courts and authorities of that Member State. This will avoid conflicts that could otherwise arise if several courts in different Member States declared themselves competent. “Residence” will be a matter of facts, and does not mean “domicile”.
In addition, a single competent authority will have jurisdiction, that of the deceased’s habitual residence. As an exception to this, competence may be given to the authorities of the country where the property is located if that is necessary for the transfer of the property and its recording in the land registers.
Currently, an estate can be subject to a number of laws depending on the location and type of the asset involved. For instance, many European state rules of Private International Law distinguish between immoveable and moveable assets. The law of the country where the real estate is situated applies to the real estate involved. However, bank accounts, investments, shares, etc., are subject to the law of the deceased’s domicile. Therefore, a conflict of laws arises when a person is deemed to be domiciled in two countries, making it difficult to plan ahead or settle cross-border estates.
Second, the person drawing up a will also has the option of having his or her will read under the law of his or her Member State of origin. This will give EU citizens in general a new right, which is believed to be a major improvement, as it will allow anyone living abroad within the EU to retain close links with their home country and ensure that specific national provisions, such as rules governing gifts made during a lifetime, are respected.
Indeed, the regulation will enable people to choose in their Will to have the law of their native state applied to the whole of their estate. The choice of law cannot be implied. An express provision of this must therefore be drafted in the Will. . An option of applicable law is not new to a Finnish citizen, who has been able to choose applicable law under the Finnish Code of Inheritance 40/1965. In fact, a Finnish citizens options are reduced considerably by this regulation.
EUROPEAN CERTIFICATE OF SUCCESSION
The Regulation also introduces a European Certificate of Succession, which will constitute proof of the capacity of the heir or legatee and of the powers of the executors of wills or third-party administrators. This certificate will be issued by the competent authority upon application of any heir, beneficiary, devisee, legatee, executor or third-party, using swifter and cheaper procedures, i.e. an application form that can be easily translated into any language within the European Union. Use of this certificate will not be mandatory.
In practice this means that within one estate there might be many different certificates proving different kinds of capacities. The practical effects of the European Certificate of Succession are to be determined in the future. It is believed that this will represent a major improvement on the present situation, where people sometimes have difficulty exercising their rights. The European Certificate of Succession will not apply to tax issues.
The use of the Certificate will not be a substitute for internal procedures. However, the effects of the Certificate will also be recognized in the Member State whose authorities have issued it. Most likely the competent authorities in Finland will be the district courts.
NO IMPACT ON NATIONAL LAW
The new regulation will not affect the situation of people who remain resident in their home country. It will not change national laws governing succession, property, or tax arrangement and it will not introduce any harmonization of national laws.