The new European Succession Regulation revolutionises cross-border inheritance by establishing that the law applicable to the distribution of assets is that of the deceased’s place of residence.
Citizens who reside in a country other than that of their nationality should know that, now more than ever, planning their succession well can be a key issue if they do not want their heirs to face unpleasant surprises.
The recent reform of the European Succession Regulation has changed the rules on this matter so that now in Spain – and across Europe, except for the United Kingdom, Ireland and Denmark – the main criterion for determining the law applicable to inheritances is no longer the nationality of the deceased, but their habitual residence. That is, if a Spanish citizen residing in France dies in France, the law applicable to their succession will be that of the latter State and not Spanish law, as was the case until now.
The consequences of this may substantially affect the distribution of assets, bearing in mind that the law applicable to the succession determines issues such as the limitations on the freedom to dispose of one’s own estate when a person has descendants, a spouse or other relatives.
This new legal landscape, which significantly changes the application of international law in the field of succession, means that any citizen with assets located in several countries must rethink their inheritance.
Family business
The new regulation may also have important consequences for family businesses since, depending on the law applied to the succession of a family member, the distribution of shareholdings may even vary and affect ownership of the company’s assets, as the portion of the estate that corresponds to children or the spouse is not the same in one country as in another.
Take the case of a Spanish citizen, with Catalan civil status (vecindad civil), resident in France and with children. Under the new regulation, which has applied since its entry into force last 17 August, the inheritance would now be subject to the strict forced-heirship rules of the French Civil Code, and not, as before, to those of Catalan law, which are more flexible and better suited to transferring the family business.
The scope of this new legal framework has an even greater impact if we consider that during the years of crisis many Spaniards decided to look for new business abroad, relocating their companies and changing their residence to another country.
Furthermore, as the notary Isidoro Calvo points out, this whole new situation must also be taken into account by large companies with expatriate workers, who are fully affected by the new regulation.
In these cases, like the holders of shares in family companies, expatriates will have to review whether they prefer their succession to be governed by Spanish law or by that of the country where they have settled, as they may choose the law applicable to their inheritance. And if they drew up a will before the European regulation came into force, they should also review it because the legal framework governing it may have changed.
The consequences of the new regulatory environment may be enormous considering that in Europe there are 450,000 cross-border successions every year worth 123 billion euros, as José Manuel García Collantes, president of the General Council of Notaries, recalled at a conference on the new regulation.
The case of a German businessman resident in SpainThe regulation covers a wide variety of cases that can vary enormously depending on the deceased’s personal circumstances. For example, a retired German businessman, Hans, a widower with two adult children, sold all his assets in Germany in 2011 and established his residence in Jávea, where he set up a single-member limited company. In 2012 he married a Spanish woman and, as a wedding gift, gave her 48% of the company’s shares. In 2014 they had a son and in November 2015 he died without leaving a will. His three children will be entitled, as heirs, to 52% of the company’s shares, specifically 17.3% each, and the Spanish widow to the usufruct of 17.3%. The widow’s usufruct would end on her death. If, however, Hans had stated before a notary that his succession would be governed by German law, his widow would be entitled to a quarter of the shares in full ownership (not usufruct as in Spain) and another quarter by way of participation in gains, in total 26% of the shares; the other 26% would go to the children in equal parts. In conclusion, it will suit the widow for her husband to choose German law, while the children benefit from the Spanish Civil Code, as the widow would only be usufructuary of 17.3% of the company, a usufruct that will end on her death. Moreover, if Hans had made a will under the German Civil Code, it recognises absolute freedom of testation, so that, for example, he could have left everything to his widow, since there are no forced shares. |
Taken from: http://www.expansion.com/juridico/actualidad-tendencias/2015/11/04/563a4d52268e3e87598b4685.html