Preparing for the EU Succession Regulation

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Preparing for the EU Succession Regulation
Regulation (EU) No. 650/2012 of 4 July 2012
Luxembourg, 20 January 2014
The new setup for cross-border estate planning
Agenda
1.
Scope, Term and Local Applicability of Succession Regulation
2.
Determination of Applicable Material Succession Law
3.
Jurisdiction (Forum)
4.
European Certificate of Succession
5.
Advising Clients on Choice of Law in a Luxembourg-German Context
Page 2
Scope of EU Succession Regulation
•
•
•
•
Determination of Applicable law
Determination of Jurisdiction (Forum)
Recognition and Enforcement of Foreign Decisions in Succession Matters
European Certificate of Succession
•
Not covered: Gift and Inheritance Tax / Double Taxation Treaty
 In this context solely recommendations by EU Commisssion of 2011 (without consequences)
•
Not covered: Matrimonial Property Regimes!
 From a German perspective, this is a real issue because the intestate shares of surviving spouse
and their issue including their respective forced shares are influenced by the matrimonial property
regimes. The beneficiaries‘ shares are to be named in the European Certificate of Succession even
though the participating EU member states use different connecting factors for determining the
applicable matrimonial property law.
Page 3
Transitional provisions (Term)
June 2012
Example:
August 2012
17 August 2015
Regulation „Entry into force “
passed by
Council of
Ministers of
Justice
Applicability
April 1980
August 2013
January 2016
Will and
Testament
Codicil
Death of
Testator
 EU Succession Regulation applies to the whole case including 1980 Will and Testament
Page 4
Local Applicability
• Uniform Law  Principally Applicable in Relation to Non-Participating Countries (e.g.
Switzerland, U.K., U.S.A, Monaco…)
• Recognition and Enforcement of Decisions in Succession Matters limited to Decisions
taken by Participating Member State, Artt. 59 ff. Succession Regulation
• Extraordinary Provisions on Forum in Participating Member States in cases relating to
Non-Participating Countries, Art. 10, Art. 11 Succession Regulation
• Beware: Existing Treaties continue to Apply, Art. 75 Succession Regulation
– e.g. Consular Treaty between German Reich and Turkey of 28 May 1929
– Luxembourg: No Treaties
Page 5
Agenda
1.
Scope, Term and Local Applicability of Succession Regulation
2.
Determination of Applicable Material Succession Law
3.
Jurisdiction (Forum)
4.
European Certificate of Succession
5.
Advising Clients on Choice of Law in a Luxembourg-German Context
Page 6
Determination of Applicable Succession Law
Present Provisions in
German Law and
Luxembourg Law
Primary Connecting Factor: • Nationality for Movables and Immovables, • Immovable Property: Situs law, Art. 3 para.
Art. 25 para. 1 EGBGB
2 Cciv
• Movable Property: Last Residence of
Decedent
Exceptions:
• Choice of Law in Favour of German
Succession law available for Foreign
Nationals but Limited to German Situate
Real Estate, Art. 25 para. 2 EGBGB
• No Choice of Law
• Renvoi (e.G. Luxembourg National residing • Renvoi
in Germany), Art. 4 para. 1 EGBGB
International Conflict of
Applicable Laws between
Luxembourg and Germany:
• Ordre Public.
• Ordre Public.
• Fraude à la law?
• Fraude à la law.
• Movable Property: Whenever a Decedent resides in a State he or she is no citizen of
(e.g. German national residing in Luxembourg or vice versa)
• Immovable Property: German National leaving Real Estate outside Germany
Page 7
Determination of Applicable Succession Law
EU Succession Regulation (1)
• Primary Connecting Factor: Habitual Residence, Art. 21 para. 1 Succession Regulation
– Habitual Residence (considerations 23 to 25):
• Consideration 23:
„In order to determine the habitual residence, the authority dealing with the succession should make
an overall assessment of the circumstances of the life of the deceased during the years preceding his
death and at the time of his death, taking account of all relevant factual elements, in particular the
duration and regularity of the deceased‘s presence in the State concerned and the conditions and
reasons for that presence.“
• In case of a mismatch between economic and personal centers of vital interests (e.g. an employee living in one member state and
working in another) the private center of vital interests shall prevail (consideration 24)
• No intention required to establish an habitual residence (objective criterion)
– Identical Connecting Factor for Movable and Immovable Property (no Scission)
– Unclear Meaning of Escape Clause in Art. 21 para. 2 Succession Regulation
Page 8
Determination of Applicable Succession Law
EU Succession Regulation (2)
• Choice of Law in Favour of Testator‘s Law of Nationality, Art. 22 Succession Regulation
– Assumption of Choice of Law for wills made before 17 August 2015
– Beware: No Assumption in Cases of Interstate Succession!
• Example: German National with habitual Residence in Luxembourg:
– No more Mismatch between Approach of Authorities in Germany and Luxembourg:
• Primary (default) Connecting Factor: Habitual Residence  Luxembourg Succession Law
• Choice of Law Option in Favour of German Succession Law as Law of Nationality (Lower forced Shares of Descendants,
Forced Heirship Claim of Monetary Nature only)
– What about the droit de prélèvement (right to compensation with Luxembourg Assets if Inheritance Share
under Foreign Succession Law of Luxembourg Resident Heirs is lower than under Luxembourg
Succession law?
• In General: Will Participating Member States regard it as against Public Policy (ordre public) if Application of
Foreign Succession Law leads to lower Forced Heirship Entitlements? (Discussed amongst others in
Sweden and in Italy).
Page 9
Determination of Applicable Succession Law
EU Succession Regulation (3)
• Exceptional Connecting Factors
– Admissibility and Substantive Validity of Testamentary Dispositions other than Agreements as to Succession,
Art. 24 Succession Regulation
– Admissibility and Substantive Validity of Agreements as to Succession, Art. 25 Succession Regulation
• German Joint Testaments are Agreements as to Succession within the meaning of the Succession Regulation, see Lechner,
NJW 2013, 26; Herzog, ErbR 2013, 2, 8; Lehmann, ZErb 2013, 26; other opinion Simon/Buschbaum, NJW 2012, 2393, 2396;
Nordmeier, ZEV 2012, 513.
• Beware: Even though the Succession Regulation explicitly approves of Mutual (Joint) Wills, there is a Risk that Joint Wills
may be regarded as against Public Policy (e.g. in Itay)
– Formal Validity of a Testamentary Disposition, Art. 27 Succession Regulation
– Formal Validity of a Declatation of Acceptance or Waiver, Art. 28 Succession Regulation
– Administration of an Estate, Art. 29 Succession Regulation
– Special Rules imposing Restrictions concerning or affecting the Succession in Respect of Certain Assets (but
see consideration 54: strict Interpretation)
– Commorientes, Art. 32 Succession Regulation
– Estates without a Claimant, Art. 33 Succession Regulation
Page 10
Determination of Applicable Succession Law
EU Succession Regulation (4)
• In Particular: Exceptional Provisions
(Foreign Real Estate and Forced Heirship Claims)
– At Present: Acquisition of Foreign Real Estate in the U.K. or the U.S. in Order for a German National or a
Luxembourg Resident Testator to reduce Forced Heirship Claims of Descendants (because neither English nor
U.S. State Laws provide for Forced Heirship Claims for Descendants or Foreign Domiciled Testators)
– EU Succession Regulation: In the Future Foreign Real Estate owned by Testator habitually Resident in Germany
or in Luxembourg Governed by German or Luxembourg Law (or Succession Law validly chosen). Art. 30
Succession Regulation does not provide differently (see consideration 54)
– But: No more Forced Heirship Entitlements regarding Domestic Real Estate owned by an Englishman or U.S.American if he or she includes a Valid Choice of Law in Favour of their Law of Nationality in his or her Will, see
Art. 34 Abs. 2 Succession Regulation
Page 11
Agenda
1.
Scope, Term and Local Applicability of Succession Regulation
2.
Determination of Applicable Material Succession Law
3.
Jurisdiction (Forum)
4.
European Certificate of Succession
5.
Advising Clients on Choice of Law in a Luxembourg-German Context
Page 12
Jurisdiction (Forum)
• General Rule: Exclusive Jurisdiction by Authorities in Participating Member State the Decedent was
last Habitually Resident in, Art. 4 Succession Regulation
• If the Decedent was Habitaully Resident in Non-Participating State then Art. 10 Succession Regulation
provides for subsidiary Jurisdiction where Estate Assets are located in a Participating Member State
• Exception in Cases of Choice of Law
– Formal Choice-of-Court Agreement, Art. 5 Succession Regulation
– Informal (but express) Acceptance of Jurisdiction, Art. 7 Lit. c) Succession Regulation
– Jurisdiction based on Appearance, Art. 9 in Case of Art. 7 Succession Regulation
– Jurisdiction declined by Court seised, Art. 7 a) Succession Regulation
• Forum Necessitatis, Art. 11 Succession Regulation
• Receipt of Acceptance or Waiver of the Succession, Art. 13 Succession Regulation
Page 13
Agenda
1.
Scope, Term and Local Applicability of Succession Regulation
2.
Determination of Applicable Material Succession Law
3.
Jurisdiction (Forum)
4.
European Certificate of Succession
5.
Advising Clients on Choice of Law in a Luxembourg-German Context
Page 14
European Certificate of Succession
• Formalized European Certificate of Succession, available in all Official Languages of the EU,
Art. 67 para. 1 s. 2 Succession Regulation with very broad Contents, Art. 65 para. 3
Succession Regulation
• Legal Effects of European Certificate of Succession
– Presumption of Accuracy, Art. 69 para. 2 s. 1 Succession Regulation, Including both Statements of
Fact and Legal Entitlements of Persons named
– Change or Correction of Official Registers shall be Possible Based on the Information given within
the European Certificate of Succession, Art. 69 para. 2 s. 2 Succession Regulation
– Protection of Good Faith, Art. 69 para. 3 and 4 Succession Regulation
• No Good Faith if a Person positively Knows the Certificate is Incorrect or if his or her Ignorance results from
Gross Negligence (Standard of Gross Negligence not defined within the Succession Regulation).
• Limitation of Validity to six Months by Default, Art. 70 para. 3 Succession Regulation
• No Withdrawal of European Certificate of Succession even if Authority realizes Incorrectnes
of Certificate, Art. 71 Succession Regulation
• National Certificates of Inheritance (e.g. German Erbschein) can be applied for if National
Authorities have Jurisdiction. Subsequently, such National Certificate can be Accepted in
other Participating Member State subject to Art. 59 Succession Regulation
Page 15
Agenda
1.
Scope, Term and Local Applicability of Succession Regulation
2.
Determination of Applicable Material Succession Law
3.
Jurisdiction (Forum)
4.
European Certificate of Succession
5.
Advising Clients on Choice of Law in a Luxembourg-German Context
Page 16
New Area of Legal Advice: Decision on Choice of Law
Choice of Law always Available if Testator holds a Nationality of a State he is not Habitually Resident in (i.e.
any Testator living in a Foreign State, any Testator with Dual or even Triple Nationality). No limitation to
Choice in Favour of „effective“ Nationality
German Succession Law:
• Forced Share of Descendants: ½ their intestate
shares
Luxembourg Law:
• Forced Share of Children = ½ or even ¾ or Estate
depending on their number
•
Forced Heirship Entitlement only Monetary Claim
•
•
Received Donations only Credited against Forced •
Share if so Agreed at the time of Donation
•
Inter-vivos Waiver of Forced Heirship Rights
permissible
•
No inter-vivos Waiver of Forced Heirship Rights
•
Executor is entitled to dispose of Estate Assets in
the Heirs‘ stead
•
Executor only supervises the Heirs
•
Permanent Executorship available, e.g. in order to •
take care of Heirs who are Minors
Forced Heirs are entitled to Seat in Community of
Heirs
?
No Permanent Executorship available
Other criterion: Speed and Foreseeability of Court Decision?
Page 17
Summary
• The EU Succession Regulation is a Grand and Bold Piece of Legislative Reform
• Practitioners must adopt their Practice to the Requirements and Effects of the Succession Regulation now .
• Many Difficulties currently associated with Cross-Border Estate Planning will be mediated, yet new Problems will
arise.
• Many Issues will only come up during the years to come, so Cases of Cross-Border Successions in the years after
16 august 2017 will be subject to increased uncertainty.
• Legal Advice with Regard to the Choice of Law will play a major Role when advising International Clients. Pros and
Cons of the respective Substantive Laws and the Different Forums must be Weighed . It will not Suffice any Longer
to try to Avoid an International Conflict of Laws.
• The Negotiations between the different Legislative Bodies of the European Union lead to Major Changes to the
Draft Regulation in Summer 2012. Any Publication published before Autumn 2012 is thus Outdated.
Page 18
Thank you!
Attorney-at-Law (Germany)
Dr. Daniel Lehmann, TEP
Partner
Baker Tilly Roelfs
Nymphenburger St. 3b
80335 Munich
Germany
phone:
fax:
cell:
+ 49 (0) 89 55066-295
+ 49 (0) 89 55066-130
+ 49 (0) 172 8294626
[email protected]
www.bakertilly.de
Page 19
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