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Preparing for the EU Succession Regulation Regulation (EU) No. 650/2012 of 4 July 2012 The new setup for cross-border estate planning Luxembourg, 20 January.

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Presentation on theme: "Preparing for the EU Succession Regulation Regulation (EU) No. 650/2012 of 4 July 2012 The new setup for cross-border estate planning Luxembourg, 20 January."— Presentation transcript:

1 Preparing for the EU Succession Regulation Regulation (EU) No. 650/2012 of 4 July 2012 The new setup for cross-border estate planning Luxembourg, 20 January 2014

2 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

3 Scope of EU Succession Regulation Page 3 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.

4 Page 4 Transitional provisions (Term) June 2012 Regulation passed by Council of Ministers of Justice Example: August 2012 „Entry into force “ 17 August 2015 Applicability April 1980 Will and Testament August 2013 Codicil January 2016 Death of Testator  EU Succession Regulation applies to the whole case including 1980 Will and Testament

5 Page 5 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

6 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

7 Page 7 Determination of Applicable Succession Law Present Provisions in German Law and Luxembourg Law Nationality for Movables and Immovables, Art. 25 para. 1 EGBGB 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 Renvoi (e.G. Luxembourg National residing in Germany), Art. 4 para. 1 EGBGB Ordre Public. Fraude à la law? Primary Connecting Factor: Exceptions: International Conflict of Applicable Laws between Luxembourg and Germany: Immovable Property: Situs law, Art. 3 para. 2 Cciv Movable Property: Last Residence of Decedent No Choice of Law Renvoi Ordre Public. 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

8 Page 8 Determination of Applicable Succession Law 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 EU Succession Regulation (1)

9 Page 9 Determination of Applicable Succession Law 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). EU Succession Regulation (2)

10 Page 10 Determination of Applicable Succession Law 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 EU Succession Regulation (3)

11 Page 11 Determination of Applicable Succession Law 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 EU Succession Regulation (4)

12 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

13 Page 13 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

14 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

15 Page 15 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

16 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

17 Page 17 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 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 Executor is entitled to dispose of Estate Assets in the Heirs‘ stead Permanent Executorship available, e.g. in order to take care of Heirs who are Minors Other criterion: Speed and Luxembourg Law: Forced Share of Children = ½ or even ¾ or Estate depending on their number Forced Heirs are entitled to Seat in Community of Heirs ? No inter-vivos Waiver of Forced Heirship Rights Executor only supervises the Heirs No Permanent Executorship available Foreseeability of Court Decision?

18 Summary Page 18 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 Any Publication published before Autumn 2012 is thus Outdated.

19 Thank you! Page 19 Attorney-at-Law (Germany) Dr. Daniel Lehmann, TEP Partner Baker Tilly Roelfs Nymphenburger St. 3b Munich Germany phone: + 49 (0) fax: + 49 (0) cell: + 49 (0)


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