Letter from the President
During the 19th Century, a great writer was once asked to give his definition of life and his reply was: "In my opinion, life is a sexually transmitted disease that is only healed by death." During our lifetime we are all concerned with the situation in which our families, children and their descendants are going to be left, what to do with our estate and shares, companies, etc. Succession law is, undoubtedly, the one part of Law that all of us must be familiar with, to arrange the future of our estate, and to live the rest of our lives with peace of mind. Therefore, in order to give you all, our friends and clients an approach to the different ways of thinking and procedures on this issue, as well as the legal and tax implications in all the countries where BGI is present, we have devoted this second edition of our publication to the Inheritance Law. In view of the painful or sinister connotations that this topic may have for many people, we have tried to combine the articles with engravings and vignettes from different times which illustrate with humour the different situations or aspects that may take place in this kind of cases. As you know, laughing at oneself is usually the best solution forâ€Ś almost anything in lifeâ€Ś and even more in the difficult times that we live in. Juan Luis Balmaseda de Ahumada Presidente de BGI
Contents BGI .........................................................
Austria..................................................... 16 Bulgaria................................................... 28 Cyprus..................................................... 40 Czech Republic....................................... 50 France ..................................................... 58 Germany ................................................. 72 Gibraltar .................................................. 82 Greece ..................................................... 90 Hungary .................................................. 100 Morocco .................................................. 114 Portugal................................................... 122 Rusia ....................................................... 130 Spain ....................................................... 138 United Kingdom ..................................... 156
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BGI is an association of independent Law Firms: joined by an international vocation with the same philosophy, approach, beliefs, commitment and spirit. BGI is dedicated to deliver world - class services to all our clients that are carried out with total discretion, in a highly personalized, individual and innovative style.
In 1996, two established and prestigious law firms - Balms Abogados and Black & Graff solicitors in London joined together in order to establish Balms Group International (BGI), an international Organization of Independent Law Firms. Balms Abogados have offices in Marbella, Madrid, Vigo, Bucharest, Budapest, Sofia, Burgas, Tangier, and Marrakech. All BGI members are medium size law firms (5-30 lawyers) that are equally prestigious and well-known in their respective countries. Currently, the founder members also have partners in Argentina, Austria, Bulgaria, Cyprus, Czech, Great Britain, Gibraltar, Republic, France, Germany, Greece, Hungary, Mexico, Morocco, Portugal, Romania, Russia. At this moment, we are considering the applications from other candidates to join BGI from Italy, Croatia, Panama, Guatemala, Dubai and China. BGI members demonstrate a common corporate image, which is not only a logo but more importantly market by the same group spirit and philosophy where, regardless of our independence, there is a society spirit for the group that makes us stand out from the crowd and is the difference that makes the differences. BGI enjoys of a World Secretariat, located in Spain, and from this secretariat is managed the whole network. Through our network, we have our own web site (www.bgi-law.com), corporative presentation, brochure, and periodical publications as our news letter, "BGI News, issued half-yearly, and "Balms Group International Law Magazine" a monography issued annually, whose second edition we have the opportunity of introducing using these lines. In order to review our criteria, develop new understandings of Law and improve the service to our clients in our network, we organize two annual conferences, Annual BGI International Congress, which usually is held in May and the Biannual BGI Conference which is celebrated in autumn. For the admission of new Law Firms to the group, it is necessary to first, complete and return a questionnaire. Secondly to send a brochure and a letterhead of their law firm, with the formal application of the organization and, consequently, accepting the bylaws of the network, and formally promise to, in the case their admission is accepted, to pay the entry and annual fees. Once a law Firm meets all the requirements, the President of the organization, and, if convenient, the introducing member of the candidate will visit and interview the new Law Firm interested and the President will present a report of them to submit for approval by the Executive Committee. Our next aim is to offer the very best of legal services and tax advice to our clients, in that places where we are located and our target is to have offices in that countries where our clients may ask for our services and support. Juan Luis Balmaseda de Ahumada Presidente de BGI
GENERAL PRINCIPLES OF SUCCESSION LAW IN
Inheritance Law in
Argentina I. The Comparative Law Systems In comparative law there are three systems that determine the application of law to succession that has been caused by death. These three systems stem from two different perceptions that have been formed of succession: the traditional Roman perception and the Germanic perception. The Roman one is that hereditary succession causa mortis is a continuation of the deceased in the form of the beneficiary, whereas the Germanic one is that the object of this transfer is the distribution of the estate that a person leaves behind when they die. Due to the existence of these different perspectives, each legal structure must apply the system that matches their perception of succession best. In the sphere of private international law, fundamentally, this has led to the development of three systems: a unit system, a plural or dépeçage system and a third, mixed system. In the first approach, a sole law is applied to conveyance, which is determined, in accordance with the different sets of laws, by the place of residence or by the nationality of the deceased. The application of a sole law to the hereditary descent does not necessarily mean that only one judge shall have competency. As many judges can have competency as there are places of jurisdiction in which the deceased leaves behind property. Savigny based the application of this system on the idea that estate, considered as a unit, is a concept that has no specific content. Estate can consist of properties, of rights or of private belongings, credits and debts that exist but are not visible. Estate has no fixed location and locus rei sitae cannot be applied to it. Under the plural or dépeçage system, the resultant transfer of estate upon death is to be conducted in line with the laws in every place where there are assets that make up the estate of the deceased. This means that as many laws are applied as there may be areas with different legislation in which there is estate to be transferred because their owner has died. The plural system of law of succession, which is based on the Germanic concept of
succession, rules out the notion of succession in people. Under this system, right of succession is predominantly a patrimonial matter and must therefore be addressed in the same place as the estate that is the object of the succession is located. Since a single judge can have competence and apply the law of a number of countries, there may be circumstances in which several judges with competence in the judicial process are not necessarily required. And there is the mixed system, which applies the single body of law approach to moveable estate and the plural or dépeçage one to real estate.
II. Our Law System (Argentina) According to Article 3283 of the Civil Code, the right of succession to the estate of the deceased is governed by the local law of the place where the deceased held residence at the time of their death, irrespective of whether the beneficiaries are
These three systems stem from two different perceptions that have been formed of succession: the traditional Roman perception and the Germanic perception. The Roman one is that hereditary succession causa mortis is a continuation of the deceased in the form of the beneficiary, whereas the Germanic one is that the object of this transfer is the distribution of the estate that a person leaves behind when they die.
from Argentina or from other countries. Vélez Sársfield, the author of the Argentine Civil Code, was therefore an advocate of the sole law or unit system. However, this general principle established by the author of the Code has exceptions that, even though there are not so many of them, could be so broadly applied that the principle itself becomes exceptional. The capacity to succeed to estate comes under the rule of the law where the beneficiary is resident at the time the decedent dies (Article 3286 of the Civil Code). The testamentary capacity of a person is determined by the law of the place where the testator is resident at the time they make their will (Article 3611 of the Civil Code). This place of residence may be different to the one that they may hold at the time of their death. Should there be no-one who holds a right to inherit the estate of the deceased by virtue of our legal system, the entitlement to receive those assets that are in the Argentine Republic shall fall to the tax authorities (Article 3588 of the Civil Code). Real estate, as such, in the Argentine Republic is subject exclusively to the laws of the country on it as such, on the capacity to acquire it, on the manner of conveying of it and on the validating legal require-
ments that are to be met for these actions (Article l0 of the Civil Code). Moveable property with a permanent location and which is preserved without the intention of it being transported to another place shall be subject to the law of its location (Article 11 of the Civil Code). The article footnote, analysed bearing in mind the circumstances at the time it was written, allows the assertion that the intention of the author of the Code is to address moveable property with the highest value (those which have a permanent place) and real estate the same way and for assets of lesser value to be governed by the system that is set out in the Code as a general principle i.e. by the law in the final place where the deceased held residence. The same provision, applied to legal circumstances that did not exist in the era that the Code was written but which are commonplace today, suggests that shares in companies, and securities and assets that require registration, etc. are subject to the laws of the place where they were registered. Should there be a distribution of the estate to be succeeded between foreign persons and Argentines or foreign persons with residence in the State, the latter shall receive a part of the estate that is held within the Argentine Republic is equal to the
value of those assets in the foreign country from which they were excluded for any reason, by virtue of local laws or traditions (Article 3470 of the Civil Code). This article establishes a right of compensation that favours Argentine beneficiaries and foreign beneficiaries with residence in Argentina. It is to be highlighted that that the right of inheritance which is being defended does not necessarily correspond to the rightful share of estate that must be conveyed by law, since the law does not distinguish between types of heirs and beneficiaries. Argentina, Bolivia, Paraguay, Peru and Uruguay signed and subsequently ratified the Treaties of Montevideo in l889 and 1940, under which the plural or dépeçage system was founded. Title XII of the treaty clearly expresses how the plural system is to be applied. Article 44 of the Title declares that the law of the place where the estate is located at the time of the holder's death shall be the place that determines the nature of the testament. Article 45 stipulates that this same law shall apply to the succession capacity of the beneficiary or legatee, to the validity and execution of the testament, the share of estate that is to be transferred by law, and the amount of estate that is allowed to be passed on, to inheritance entitlements and rights and, in a nutshell, to anything regarding rightful suc-
cession to estate by law and testamentary succession.
III. Conclusion To summarize, our legal framework has established the unit system as a general principle for the application of law to succession mortis causa. It does this with the ruling that the right of succession shall be determined by the law in the final place of residence that was held by the deceased. There are exceptions in this system that could be widely applied. The exceptions in question are those that were mentioned earlier and determine the following: conveyance of real estate within the Argentine Republic; of moveable property with permanent place in the republic; the right to inherit; testamentary capacity; the right to compensation of the Argentine beneficiary or of the foreign beneficiary with residence in the republic; and, lastly, there is the law governing the circumstance when there is no heir or beneficiary (in accordance with our system of law and order) to whom the estate of the deceased can be passed and it is therefore inherited by the tax authorities. Convention on the law applicable to successions to the estates of deceased persons,
The Hague (The Kingdom Netherlands), 20 October 1988
Message 472, signed by the President of the Republic, by the Ministry of Foreign Affairs and the Ministry of Justice, on a draft bill, was a message that requested of the Congress of the Nation its approval of the Convention. The Message emphasizes the achievement by the Convention of a balance between basing succession on the deceased's nationality and basing it on the deceased's place of residence, to lead to the system under which succession is governed by one law. The Message also stresses the importance of the profesio juris provision in Article 5 of the Convention by which an individual may choose the law that will determine the succession to their estate. However, it makes it clear that this choice is restricted by the laws of the decedent's habitual residence and their nationality. The Message concludes by stating that the Convention is compatible with the internal legislation of the Argentine Republic and is a step towards resolving the conflict of laws that emerges in matters of succession to estate.
our legal framework has established the unit system as a general principle for the application of law to succession mortis causa. It does this with the ruling that the right of succession shall be determined by the law in the final place of residence that was held by the deceased.
Although Article 3 (1) stipulates that succession shall be subject to the law of the State in which the deceased was habitually resident at the time of their death, it also declares that this will only be the case if the deceased was a national of the aforementioned State. Article 3 (2) determines that the same law regarding the final residence of the deceased shall also be applicable should the deceased have been resident in this State for a period of no fewer than five years immediately preceding their death. However, in exceptional circumstances, should the deceased at the time of their death have had manifestly closer ties to the State the nationality of which they then held, the law of that State shall govern succession. Other considerations aside, the law cannot be more precise in this latter circumstance because the decision as to what constitutes these manifestly closer ties will always be an arbitrary one. Article 3 (3) dictates that in all other cases succession shall be governed by the law of the State of which the deceased was a national at the time of their death, unless the deceased had closer ties with a third State at that time. Article 5 (1) establishes that a person may select the law of a particular State to be applied to all of their estate if, at the time of their death, the deceased was a national of this State or was habitually resident in it. Under Article 6 the person may choose the law of one or various States to govern the succession to a particular part of their estate. In line with the Convention, however, this choice shall not infringe the application of the mandatory rules of the law applicable under Article 3 or Article 5 (1). Part of the doctrine maintains that our Civil Code does not have clear provisions which indicate a firm stance on succession and the footnotes to the Code's articles tend to make them even more obscure. Nonetheless, there are no grounds for criticism, in my opinion, and this is illustrated by the above summary of our system, which is based on conclusions drawn from Argentine doctrine and case law. For the approval of the Convention to lead to the employment of a unified system of law of succession does not seem a possible consequence if this is how a unified law of succession is understood. This statement is based on the text of the Convention itself, since Article 6 of the Convention allows the choice of the law of one or of several States to govern the succession to a part of one's estate. One could
also argue that the text is extremely unclear if they try to unite it with that of Article 5 (1). It allows the choice of law, but the very condition for the competence granted in Article 6 is for application of Article 5 (1) to the succession to the whole estate and compliance with it. Under the regulation of Article 5 (1), a person who is a national of a State may choose the law of that State for the succession to their estate, but they do not have to be resident in this State at the time of their death. Therefore, there shall be no infringement of the decision should a person with Argentine nationality -at the time of their death- and with final residence in the Argentine Republic, choose for the laws of another State to govern the succession to their estate; someone who is unaware of the rules of our law and order system, that is, of
positive law, completely mandatory law that is to be obeyed and which does not encroach upon those principles and safeguards that a society has deemed necessary to exist. Let us not forget that, amongst other things, the concept of a rightful share of estate by law is not just in the interests of individuals but also in that of law and order. So if the laws of that foreign country did not coincide with those of our system of law and order on which the concept of a rightful share of estate by law is based, the person's choice would be a violation of fundamental principles for our society. In addition to this, the idea of the person who wrote our Code would also be compromised in so far as that the footnote for Article 3588 of the Civil Code is enviously concerned with protecting the sovereignty of this State.
Indij, Lichtmann, Martínez Raymonda Abogados BALMS GROUP INTERNATIONAL
Globalization, as a worldwide phenomenon, has nor left judicial matters aside. The high competitiveness conditions, the deep and sudden changes and the complexity of the issues inherent to the present rendering of legal services have led professionals to seek training in a number of disciplines, to be continuously up-dated ad to be flexible, creative and highly qualified in order to offer their clients the service they deserve. Indij, Lichtmann, Martinez Raymonda Abogados intends to be in the lead and to render services of excellence, permanently adapting itself to the sudden changes that take place day after day and to the clients´ needs. Theretofore, the Law Firm is strongly based on solid principles surch as seriousness, confidentiality personalized attention, interdisciplinary work as daily routine and specialization, though never disregarding the problem as a whole. State-of-the-art technology applied to the filing system and to data communication, as well as a functional building infrastructure, are essential for an adequate rendering of services. From its comfortable offices located in the Courts neighbourhood, a few meters away from the Count Palace, a solid team of professionals with oer 30 years of experience, plus the experience acquired from a wide range of activities offers their clients a comprehensive vision of the judicial and extra-judicial alternatives by means of creative solutions thar aim to solve each issue in the most advantageous way for the client. All the professionals that make up the Law Firm share the above mentioned principles as well as the work methodology; they all have an integral and interdisciplinary approach in the issues to be dealt with. Furthermore, they have fluent international contacts that enable the handling of issues abroad: a task that is eased in the written and oral exchanges, by the proficiency of the members in the main following languages: English, German, French, Portuguese and Hebrew.
PARTNERS AND ASSOCIATES PARTNERS Alberto Teodoro Indij Tomás J. Lichtmann Rafael Martinez Raymonda Raúl Oscar Bernarz Javier Ezequiel Indij
ASSOCIATES Gastón Ariel Mirkin Jacqueline Lichtmann Damián Bartfeld
AREA OF SPECIALITY Civil Law Commercial, Corporations and Corporate Law Labor Law Contentious Matters, dispute resolutions Real Estate Transactions International Law and foreign investments Criminal Law Administrative Law Indij, Lichtmann, Martínez, Raymonda Abogados Talcahuano 718, 10th floor C1013AAP - Ciudad Autónoma de Buenos Aires, Argentina Phone:(54-11)4372-3287/43723288/4373-8722 Fax: (54-11) 4372-3287/4372-3288 E-mail: email@example.com Wed page: www.ilmarabogados.com
GENERAL PRINCIPLES OF SUCCESSION LAW IN
Inheritance Law in
Austria 1. General overview The legal bases for inheritance law are the regulations of the ABGB, the general Civil Code, written in 1811. The main part of the ABGB has remained the same but, of course, it was continously amended. Austrian Inheritance Law is guided by the principle of private autonomy. Testators may draw up a will (testament) or arrange for an Inheritance Contract (see further details below). A compulsory regulation for the legal portion exists, as well as many formal restrictions which should be considered individually, according to the individual case. Therefore legal counsel by a lawyer is essential.
2. The Power to authorize a will The freedom to draw up a last will is known as the capacity to make a will. This is obligatory by law and cannot be avoided by the decedent. The right to draw up a will is not transferable. The testament has to be drawn up personally, which means that the testator may not appoint a representative. The bequeather cannot pass on the appointment of an heir to a third party.
3. Types and forms of last wills and testaments a) Handwritten testaments This is the easiest way to draw up a will. The formal requirements for this testament are that the testator shall write his testamentary disposition in his own hand-writing and also signs it himself. b) Oral testament If the testamentary disposition is not written by the bequeather, the presence and signature of three witnesses is important. The testator also has to state explicitly that the text at hand is his last will. Therefore, the presence of at least two of the three witnesses is required, but they do not have to know the content of the last will. Only persons over 18 years of age can be lawful witnesses. They have to understand the language of the decedent and they should not be heirs or legatees. Additionaly, a witness should not be the executor of the will and he should not be related or related by marriage with the person who is an heir or beneficiary in the last will. Any amendment to a testament which was not written in the decendant's own
handwriting shall only bevalid if it is signed by the bequeather or in the presence of three witnesses. Testators who cannot write may put their mark on a testament which was written by somebody else. Here, too, the presence of three witnesses is compulsory. The last will must be read before three witnesses to testators who cannot read. The decedent must confirm that the document is his last will. c) Testaments made in life-threatening situations These can only be drawn up if there is an immediate danger of death of the testator or the loss of his capacity to make a will. In that case, the bequeather may express his last will orally or in written form before two witnesses. Three months after the lifethreatening situation occurred, this testament loses its validity. Previous last wills do not become valid again. d) Testament drawn up before a court A testament before a court may be written or oral. A written testament must be signed by the testator andaccepted by two judges or by a judge and two witnesses. It is then signed and than entered in the court journal. A last will also may be expressed in the front of the court orally. The requirements for such testaments are similar to written testaments before a court. e) Testament drawn up by a notary The last will can also be expressed before a notary. Here also two possibilities exist: a
written or an oral testament. In this case, the last will may be drawn up after counselling and cooperating with a lawyer and the presence of another witness, before a notary. The counsel of a lawyer or notary ensures that the testament of the client is recorded in a centrally organised journal of testaments.This guarantees the execution of the testament of the deceased.
4. Specific testamentary formalities concerning last wills As explained in section 4, the validity of a last will is bound to strict formal rules. Thererfore, it is important to get legal counsel before the last will is expressed. This ensures the validity of the last will and can avoid arguments among the heirs concerning the legacy.
5. Written languages for a valid will (including the official language) A last will may be expressed in any language. If the witnesses have to understand the content of the testament, the witnesses are also required to understand the language.
6. Deposit of the dispositions in last wills A proper oral or written testament may be entered in a testament journal, thereby ensuringthat the inheritance court is aware of the existence of a last will. The content of the last will is not recorded. It is only registered that a valid last will exists and the place where it can be found. There is also the possibility for lawyers to register the last will electronically in the Austrian archive for legal documents (the Archivuum). This ensures that the last will is safeguarded.
7. The legal capacity to draw up a will To draw up one's testementary disposition, the decendent has to have the legal capacity to do so. When the testament is drawn up, evidence of such capacityneeds to be provided before the content of a testament is amended or if a testament is revoked. There are no legal effects on the testament if the legal capacity to draw up a will subsequently vanishes. A testament shall not be valid if the bequeather did not have the legal capacity to make a will. This ability is given if the decended is aged over 18. A person aged 14-17 may only express his last will before
Only persons over 18 years of age can be lawful witnesses. They have to understand the language of the decedent and they should not be heirs or legatees. Additionaly, a witness should not be the executor of the will and he should not be related or related by marriage with the person who is an heir or beneficiary in the last will
12. Legal relations between coheirs: inheritance taxes The heirs build an inheritance alliance, if there is more than one heir. They are coowners of the assets that belonged to the testator, which is subsequently divided according to each heir's share of the inheritance. This same is true of any debts.
a court or notary. Additionally, the minor needs to provide evidence that he is aware of the situation. He must be aware that he is making a last will and he must understand the content of the testamentary disposition. The testament is based on the free will of the testator.
8. Inheritance without a testament The rules of the legal order of succession shall apply if the deceased did not draw up a testamentary disposition. Basically, only near relatives or spouses may inherit. If there are none, a legatee is assigned as devisee. The heirship goes to the State as "abandoned property" if no legatee can be found. The "parental system" is applied by Austrian Inheritance Law, by which relatives are "classified". Through this system, close relatives displace more distant relatives in inheritance law. The children of the decedent are the first to inherit. If there is more than one child, the bequest is divided by per-capita quota. A surviving spouseinherits one third and any children inherit the remaining two thirds. The second "parentel line" is the parents of the decedent. They only inherit if there are no direct relatives (children or grandchildren). In this case, the parents receive two thirds of the legacy and the surviving spouse receives one third. The descendants of relatives who died first take over their legal position as heirs.
9. Matrimonial property regime: inheritance law The Austrian Marital Law implies a seperate property regime. The spouse retains ownership of any property he or she brought to the marriage. This can also be bequeathed. Furthermore, the possibility of a marital agreement exists. Any amendment to the martial agreement requires the agreement of both spouses. In the event of a marital agreement, one fourthof the property may not be touched by the provisions of the agreement.
10. The right to the legitimate portion (the freedom to draw up wills and legal protection for certain members of the family The right to a compulsory portion constricts the "ability to make a will". Only the spouse and the children of the testator have the right to a compulsory portion. The parents also have this right if the decedent has no children. The amount of this obligatory portion for a child or a spouse is half of the share they would receive according to legal succession. The compulsory portion for the parents -if they are still alive- is one third of the legal portion. This compulsory portion can only be settled in cash. Consequently, the heir is bound to pay a sum of money to the recipient of the compulsory portion. If this is not done voluntarily, a claim will need to be placed for the compulsory part. Money that was given beforehand can be deducted to keep the compulsory part low. If special circumstances occur, gifts of the bequeather to other heirs to the compulsory portion may increase the amount of the obligatory portion. In principle, a testator may disposses an heir to the compulsory portion, but only on rare occasions. One reason would be if the person who has the right to the legal portion does not help the decedent in an emergency situation or acts unlawfully. The last will must declare the disinheritance explicitly. The bequeather may limit the legal portion to half, if there is no real relationship between the testator and the person who should get the compulsory part (eg illegitimate children).
11. The legitimate portion: legal nature and practice In legal practice, the legitimate portion conforms to section 10 of the above-mentioned legal regulations. However, counsel by a lawyer is necessary to assignate or avoid the legitimate portion.
16. Inheritance taxes The amount to be payed as inheritance tax depends on the degree of kindship and the amount of the heritage. The calculation of the inheritance tax can be seen on the following chart.
Pay level (euro)
Rate of tax Category I:
Spouse,Children Adoptee, Stepchildren
Rate of tax Category II: Grand-children
13. Distribution of the inheritance An inheritance alliance is revoked by the ditribution of an estate. This can happen as part of an agreement among the heirs, or due to a claim for the distribution of real estate. Costs for the administration and legal actions are divided by a per-capita quota. This can also be part of an agreement, in last instance.
14. Collation of real estate The heirs build an inheritance alliance, as mentioned before. The distribution of the heritage can only take place according to an inheritance agreement among the heirs or by a claim for the division of real estate. Therefore, it is wise and advisable to assess the distribution of assets in the last will. This legally binds the heirs. The legal portion poses a limitation to an assessment of the portions.
Up to 7300 Up to 14.600 Up to 29.200 Up to 43.800 Up to 58.400 Up to 73.000 Up to 109.500 Up to 146.000 Up to 219.000 Up to 365.000 Up to 730.000 Up to 1,095.000 Up to 1,460.000 Up to 2,920.000 Up to 4,380.000 Up to 4,380.000
2,0% 2,5% 3,0% 3,5% 4,0% 5,0% 6,0% 7,0% 8,0% 9,0% 10,0% 11,0% 12,0% 13,0% 14,0% 15,0%
4.0% 5.0% 6.0% 7.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0% 21.0% 22.0% 23.0% 24.0% 25.0%
Rate of tax Category III: Parents, Step-parents, Grandparents, Siblings
6.0% 7.5% 9.0% 10.5% 12.0% 15.0% 18.0% 21.0% 24.0% 27.0% 30.0% 32.0% 34.0% 36.0% 38.0% 40.0%
Rate of tax Category IV:
Rate of tax Category V:
Step-parents, Step-children, First Nephews and nices
Common law spouse and all others
8.0% 10.0% 12.0% 14.0% 16.0% 20.0% 24.0% 28.0% 32.0% 36.0% 40.0% 42.0% 44.0% 46.0% 48.0% 50.0%
14.0% 16.0% 18.0% 20.0% 22.0% 26.0% 30.0% 34.0% 38.0% 42.0% 46.0% 48.0% 51.0% 54.0% 57.0% 60.0%
15. Guarantee of the payment of the legitimate portion Legal actions (e.g. a claim for the compulsory portion) need to be taken if the heirs do not voluntarily give the others their legitimate portion. Heirs and legatees have to pay for the legitimate portion on a prorata basis. This portion must be payed within three years immediately following the announcement of the testament, at the latest.
The last will can also be expressed before a notary. Here also two possibilities exist: a written or an oral testament. 21
The basis of calculation is all of the property of the legacy at the current market value. There is one important exception: Real estate is valued to the third of the standard tax value. The standard tax value is normally way below the current market value. Thus the inheritance of real estate is less expensive than inherating cash, works of art, precious metals or gemstones, for instance. Other important exceptions are bank deposits or securities, stocks and bonds deposited in Austria. If these proceeds underly the capital returns tax (voluntary for foreigners) no inheritance taxes are charged. Thus they are tax free. For this reason, counsel by a lawyer when drafting a last will is recommended. If the assets exceed one million euros, setting up a private trust may be an interesting option to keep taxes to a minimum.
17. Substitutions In the event that the heir namedby the bequeather cannot or does not accept the inheritance, he may be replaced by a "substitute heir". This must be explicitly recorded in the testament. If there is no such regulation, the other heirs get the portion or legal succession takes place.
mal rules if the inheritance is passed on with no renumeration.
25. Life insurance Money from a life insurance becomes part of the bequest, if there is no assignee. It is advisable to appoint a beneficiary to to take advantage of tax allowances.
26. Pension funds The evaluation of the pension fund by a court depends on the strategy of assessment chosen by the testator. The choice of the fund can have considerable impact on the assessment of the inheritance tax. Therefore, a thorough analysis and legal counsel should be obtained from a lawyer.
27. Proof of the status of the heir and legatee Another regulation may be agreed upon: If heir A accepts the inheritance and dies, heir B may replace him. This has to be specifically expressed in the last will by the testator and heir B has to be already born when the will is drawn up.
18. Ownership and use of inherited real estate It may be stated in the last will that a specific person is not an heir but accepts a bequest. That means that he does not receive the entire legacy but only specific parts of it; he is a legatee. The law provides that an heir will always receive his portion. By this legacy agreement, parts of the heritagemay be assigned to a specific person. The basic principle of the legal capacity to draw up a will must be obeyed. The primary limitation tosuch an agreement is the legitimate portion.
19. Ownership and use of inherited real estate As explained above, an alliance of heirs is formed. Then the division of the real estate takes place. The heirs agree who may use the estate or, if they cannot arrive at an agreement, the legal provisions shall apply. The administration of the inheritance usually is managed jointly by the devisees. Here, the simple majority decides. A curator for the inheritance is appointed in special cases.
20. Restrictions regarding the heirs' liability If a devisee accepts the inheritance, he also accepts all rights and liabilities of the testator. It is advisable to execute a limited
inheritance declaration if the exact amount of debts is not known. In that case, the court makes an inventory of the bequest and the heir can only be made liable to the amount of the heritage.
21. Revocability of last wills The last will may be revoked at any time by the testator, but he also has to follow the formal regulations (see section 4. above).
22. Execution of last wills The testator may appoint an executor to his will, who shall ensure that the wishes of the decedent are carried out. The executor may also accomplish special administrative tasks of the inheritance. Ideally, remuneration forthe executor should also be regulated in the last will.
23. Individual real estate inheritance/ Legal dispositions
A court may issue an official certificate stating that an heirs' power of representation. An acceptance of the heritage is issued by the court.
28. Inheritance Tax and measures to reduce it There are tax allowances for real estate, bank deposits and securities, stocks and bonds, that are deposited at Austrian banks and underly the capital returns tax. The foundation of a private trust also may be of interest to minimise taxes. Details should be discussed with a lawyer who can provide counsel or take actions individually for each case.
29. International treaties and agreements to avoid the double taxation in inheritance law
Austrian court. This happens in any case when Austrian real estate is inherited.
31. Proffesio iuris in Inheritance Law This instiution does not exist in Austrian Inheritance Law, or in Austrian International Private Law.
It is essential to get counsel by a lawyer if the amount of the heritage is high. The lawyer willassist you in in drawing up and executing your last will. The formal aspects should be complied with and taxation issues should be discussed to guarantee the implementation and enforceability of the last will.
These treaties were agreed upon to avoid paying inheritance tax twice, in the country of the decendent and in the heir's own country. Austria has signed agreements with the US, Hungary, the Czech Republic, Switzerland, the Netherlands, Liechtenstein, France and Germany. It should be noted that the agreement with Germany ends with the end of the year 2007.
24. Inheritance transfer according to the contract
30. Inheritance - Aspects of Private International Law
33. International treaties and conventions in International Inheritance Law
Rights may be sold. This also applies to the law of succession, but inheritance rights may only be sold after the death of the testator and before the heir officialy accepts the bequest. The devisee may sell his right or transfer it without compensation. Attention should be paied to the strict for-
The Tangible Inheritance Law acts in accordance to the personal statute of the decendent according to § 28 of the Austrian International Private Law. This depends on the citizenship of the testator. That means that Austrian inheritance Law becomes effective if the case is handled by an
Austria ratified the treaty on the formal requirements of testaments on the 5.10.1961. Testaments that are formally correct in the signatory States are also accepted in Austria. It is advisable for clients who own assets in Austria or intend to deposit money in
32. First and second grade remission in International Inheritance Law The current legal position allows considerably tax benefits for tax category 1 (spouse and children), and for category 2 (grandchildren).
Austria for tax reasons to contact us, so we can jointly decide upon the best possible and most inexpensive solution.
34. Model of an open before a notary I Testament I, …., born …, express my last will, after carefull consideration, free of misaprehensions and external force. "Fill in last will" 1.Hereby I anull all testamentory dispositions that were made before this date. 2.…. is the sole heir of all of my assets. 3. a)There are no relatives with the right to inherit a legitimate portion, or b) my spouse / children / parents receive only the legitimate portion 4. If .. dies before I die or dies simultaniously with me the substition heir is .. I authenticate this testamentary disposition with my signature. I have read it before three witnesses and declare this document to my last will.
A person aged 14-17 may only express his last will before a court or notary. Additionally, the minor needs to provide evidence that he is aware of the situation. He must be aware that he is making a last will and he must understand the content of the testamentary disposition.
Neumayer & Walter BALMS GROUP INTERNATIONAL
Viena Neumayer and Walter's correspondence languages are English and German. The Law firm has also permanently employed an interpreter for English and French language and has permanent facilities to translate into Italian, Hungarian, Czech and Russian. As a matter of course all network facilities and links to Austrian and international law-electronic data bases, electronic commercial and land register are established.
PARTNERS Mag. Dr. Johannes Neumayer Mag. Ulrich Walter Mag. Wolfgang Haslinger External Legal Adviser: Robert Walter
AREA OF SPECIALITY - Business Law / International Trade Law - Taxation / international double taxation - Company Law - Competition Law, copyrights, trademarks, etc. - Intellectual property - Media Law - Cross-border company direction and finance - Financial and banking matters - Company foundation - Construction Law - Agents Law - Joint ventures and take-overs in Eastern countries - Seminars in media law, intellectual protection law, label laws and reputation - Protection for companies and managers - Real Estate transactions - Administrative Law - Public permissions - Labour law and foreign employee matters - Construction Law - Corporate law - branch offices in foreign enterprises - Trade law - Civil law - Administrative law - framework of economical regulations - Zoning law - Criminal law in economic offences - Town and rural planning NEUMAYER & WALTER Baumannstrasse 9/11 A-1030 Viena, Austria Tel: +43 171 28 479 Fax: +43 171 45 247 E.mail: firstname.lastname@example.org
GENERAL PRINCIPLES OF SUCCESSION LAW IN
Inheritance Law in
Bulgaria General overview The social relations in the field of inheritance according to the Bulgarian legislation are subject to regulation by the Inheritance Act of 1949 (last amended in July, 2007). According to the Bulgarian law there are two types of inheritance: 1.By law - where the inheritance passes into the hands of persons specified as legal heirs in the law itself, and namely: the survivor of the spouses or the persons having certain next-of-kin ties with the deceased; and 2.By testament - according to the will of the testator, expressed in a specific document, called testament by virtue of which the inheritance passes to persons named by the testator himself as inheritance beneficiaries. The transition of the estate of the inheritor to the heirs as an aggregate of assets and liabilities is called universal assignment. Where there is only one heir he gets the entire inheritance. Where there is more than one heir each one is considered as an assignee of a share of the inheritance. There is also the so called private assignment arising out on the ground of a deed drafted to the benefit of a certain person while the testator still living. In contrast to the heir being universal assignee, the private one (legatee) gets only specifically determined estate. That estate comes not directly from the deceased but through the universal assignee. Towards the universal heir the legatee is kind of a creditor.
Types of heirs. Order of succession. The law outlines the persons capable to inherit and expressly excludes those who have not been conceived at the time of opening the inheritance and those who were not born able to live. The legal persons may inherit only by a will if they have been established upon the time of opening the inheritance and not dissolved prior to that moment. Each of the children of the deceased inherit equal share. Adopted children are own children of the testator. If the adoption is partial adopted children and their descendents do not inherit the relatives of the adopter. When the deceased has left no children or other descendents, his parents inherit equal shares or the heir is the one who is alive. If the deceased has left only second or upper degree of ascendants, the heirs with equal shares are the closest ascendants in degree. When the deceased has left only brothers and sisters they inherit equal shares. If there are brothers and sisters and second or
upper degree of ascendants, the first group takes two thirds, and the ascendants receive one third of the inheritance. Consanguine and uterine brothers and sisters take half of what real brothers and sisters take. Where the survivor spouse inherits together with other types of heirs, all items acquired throughout the marriage and belonging to the so called "common marital property" shall be divided into two equal shares, one going to the survivor spouse and the other inherited by all heirs in proportions. The survivor spouse inherits share equal to the share of each of the children. Where the deceased has not left second and upper degree ascendants, brothers and sisters or their descendents, it comes to the lateral branch relatives up to the sixth degree to inherit. The closer degree relatives and descendents of the closer degree relatives preclude from inheritance distant degree relatives.
"Legitimate portion" issues Bulgarian legislation states as a general principle the freedom of every major person to dispose of his property by any means and with no restrictions. Nonetheless, The Inheritance Act sets some restrictions pursuant to the protection of interests of the family and especially of the closest relatives by law - descendents, parents and the surviving spouse. If there are such heirs the testator could dispose of freely only a definite part of his estates. That part of his estates, which is protected by the law and is exempted from dispositions through a testament or donation, is called a legitimate portion. This part serves for protection of the interests of the descendents, the surviving spouse and the parents of the testator. The part of the inheritance that stays out of the legitimate portion is called available portion. The testator is entitled to dispose of it freely. The particular sizes of the legitimate and available portions depend on the number and class of the inheritors. The date of the opening the inheritance decisively matters in defining the legitimate and available portions. Inheritance remission made by any of the inheritors does not change the legitimate portions but comes to increase the portions of the other inheritors.
Dispositions made by a will. Restrictions. Anyone can freely dispose of the whole or part of his own estate. That disposal may refer to either the whole, or part of, or fraction of the entire estate, or even to a separate item. One of the means to dispose of a real estate is to leave a will. The testator is considered owner of the estate until he passes away and while he is alive the heirs or legatees do not have any rights over the estate, subject to future inheritance. The heirs are not allowed to accept a part of the inheritance or give up a part thereof. The heirs are liable for the testator's debts with their entire assets. They may relieve themselves of liability only if they give up entirely the inheritance. The legislation provides for an opportunity to set a limit on their liability by inheritance acceptance through inventory. Inheritance acceptance through inventory must be declared before the district judge within three months following the date which the heir has come to know about the opening of the inheritance.
Ability to draw up a valid will According to the Bulagrian Inheritance Act, any person at the age of 18 years and who is not under judicial disability and is capable of acting reasonably, is free to dispose of his own property through afterlife
There is also the so called private assignment arising out on the ground of a deed drafted to the benefit of a certain person while the testator still living. In contrast to the heir being universal assignee, the private one (legatee) gets only specifically determined estate. That estate comes not directly from the deceased but through the universal assignee
arrangements. The testator may dispose of his entire property through a single will. However, through one and the same act two or more individuals cannot make testamentary dispositions neither to their mutual benefit, nor to the benefit of a third party. Testamentary dispositions, which refer to the whole or a fractional interest in the entire belongings of a testator are called "general" and the person, to whose benefit they have made, is considered a "heir". Testamentary dispositions, which refer to specific possessions, are called "partial" and the beneficiaryy is considered a"heir by devise" (legatee). A disposition of a specific item of property is deemed invalid if the testator is not owner of that item at the moment of opening the inheritance. A heir by law or by will, has the right to take over the legacy even where he has declared a remission.
Types and forms of last wills and testaments. 4. Specific formalities. According to the Bulgarian legislation there are two types of testaments: holographic and notarised testaments. According to the law the holographic testament has to be drawn by the testator himself, entirely in his handwriting, and also dated and signed duly by him. The notary testament is drawn by a notary. Any notary no matter of his judicial region is competent to draw up a will. The procedure is attended by the testator himself and two witnesses who are capable, and literate. The notary draws up the will after the testator freely speaks out his wishes. Then the will has to be read and the testator shall sign it followed by the witnesses and the notary who also must put the date and place.
Official language of the will According to the Bulgarian legislation the will is drafted in Bulgarian. However, provided that the testator is not fluent in Bulgaria, he may express his last will in another language. If that is the case, an interpreter must be appointed by the notary to attend and interpret the procedure of drafting the will. Another option might be that the notary and witnesses are fluent in that foreign language.
Keeping the will in a safe custody The notary will is kept in custody by the notary. The holographic will may be given for custody to a third party - either notary or any other party chosen by the testator. The
third option is that the testator himself keeps in custody the will.
Legacy Depending on the content of the testamentary dispositions we may distinguish between universal wills and private wills (legacy). The universal will is a testamentary disposition of the entire estates and assets of the testator or a share thereof with no single item dispositions. On the other side, subject of the legacy usually is a right (property, use, etc.) over a single item. According to the Bulgarian law the legacy of a single item is not considered valid if the testator is not owner of that item. As a valid disposition is considered the legacy of generally defined items even though at the opening of the inheritance there have not been these items. If that is the case the legacy sets as a duty to the heir to find and deliver these items to the legatee even if the testator himself has not left such items upon the opening of the inheritance.
Substitutions The will comes to its execution if the person, to whose benefit is made the will, survives the testator. The latter could specify one or more persons who will receive the inheritance or the legacy if the inheritor or the legatee passes away before the testator himself. That is the so called "common substitution" and the legacy is conditional. That kind of substitution is a bit different than substitutions by law reviewed already hereinabove. Upon that new kind of substitution, where the person, to whose benefit is made the will, passes away before the testator, or declares remission, his descendents do not receive the legacy. In that case the substitution is possible only with another person named by the testator in the will.
Revocability of the will The testament expresses the last will of the testator and that is why he may revoke it anytime until the day of decease. The testament might be revoked or amended, entirely or partially, by a new testament or through a particular notary deed stating that the testator expressly revokes or amends, entirely or partially, his previous dispositions. The new will might be notary or holographic, irrespectively of the form of the older one. Upon identical wills prevails the one with the latest date. The revocation of the will might be expressly or implicitly. The last type of revocation takes place when the next will contains dispositions
that are not compatible with the dispositions made before. The testament might be revoked through a notary deed stating that the testator expressly revokes his previous dispositions. The holographic will might be revoked through its deletion or erasure of a part of the text thereof. The legacy might be revoked through a disposal of the good, subject to the legacy. The legislation provides for a specific case where the will loses its force without being expressly or implicitly revoked. Dispositions made by one of the spouses to the benefit of the other are considered void if the marriage has been dissolved through a divorce.
execution before the heirs and legatees. All the disputes arisen out regarding the execution are resolved by the district judge.
Execution of the wills
Execution of the testamentary dispositions
The executors of the wills are appointed to facilitate the partition of the testator's estate through enforcement of the dispositions of the will. Usually, the execution is made by the heirs themselves. However, the testator may appoint the execution to some of the heirs or to any third person. The appointed executors may accept the appointment or turn it down. If all the appointed executors give up the appointment the heirs themselves are executors. The legislation does not provide for a final term to execute the will but it must be shared out as soon as it is possible. The executor of the will must account for the
The will comes to its execution if the person, to whose benefit is made the will, survives the testator. The latter could specify one or more persons who will receive the inheritance or the legacy if the inheritor or the legatee passes away before the testator himself.
Share of the inheritance The testament constitutes a gratuitous disposition of estates and other assets, similarly to donation. Where the disposition refers to a particular real estate, after the decease of the testator, that estate goes in property of the person named by the testator.. Upon the acceptance of the inheritance the legatee is entitled to dispose of the estate. The legacy is revocable document. It might be revoked or reduced only by the court provided that the legitimate portion of the heirs has been overstepped.
Generally, the execution of the testamentary dispositions is made by the heirs themselves and where disputes arise they are referred to the court. However, the execution may be assigned to any third person. The appointed executors exercise their duties only if they accept the appointment.
Legal relations among the co-heirs Upon the moment of acceptance of the inheritance, property rights and obligations pass to the heirs. In case of a single heir, he receives the whole inheritance but if there is more than one heir a "common property" arises out and each of the co-heirs has a share of the whole inheritance. In this case, each of the heirs enters into the common property with his respective share. The common belongings are used and managed in compliance with the decisions of the heirs who own more than half of the belongings. The benefits and expenses of the "common property" are divided among the heirs in proportion with their shares. The expenses needed to preserve and use "the common property" shall be paid by each heir in proportion with his share. Fees due upon the execution of the will and take over of the inheritance Drawing up the notary will is subject to certain fees according to the Tariff on the notary fees issued on the ground of the Notaries and Notaries' Work Act of 1999. According to Art. 9, sub-Art. 1 of the tariff, the execution of a will is charged with 50 per cent of the fee due upon drawing up a notary deed and not exceeding the amount of approximately EUR 750.
Inheritance estates and other assets The inheritance is an aggregate of material rights of the testator: property rights over the real estates and movables. The aggregate covers also the obligation rights, however, does not contain intangible assets of the testator that cease upon his death. The inheritance aggregate includes also the testator's duties and obligations and the heirs are liable in proportion with their shares. There is a particular set of rights and duties of the testator, which do not pass to the heirs. These are: · Right to use; · Rights and duties arising out of contracts
intuitu personae; · Rights and duties arising out of employment relations; · Rights and duties arising out of alimony; · Right to pension;
Proof of the status of the heir and the legatee Heirs by law prove their status through a certificate for heirs-at-law. Any of the heirs may apply before the municipal administration where his/her testator/ resided for the last. There is a formal application, which must be accompanied by ID document of the applicant. A fee should be paid as well and it differs for the different municipalities but as a general rule is very
modest. An application for such a certificate, even if applied for only by one of the heirs, takes effect as to the others.
Partition of the inheritance In case of a single heir, one person will receive the whole inheritance. Where there is more than one heir a "common property" arises out. Each of the co-heirs owns a share over any single item in the inheritance. The only means to cut off that common property is partition of the inheritance. Co-heirs may at any time cut off the common property through an inheritance partition even if the testator has resolved to the contrary. The right to claim for partition is not prescribed by term. The partition is deemed valid only where all of the co-heirs have joined the procedure. The legatees are not entitled to claim for partition since they are not within the circle of the co-heirs by law and do not possess a share of the inheritance. The partition is full - where the whole aggregate of the inheritance is subject to partition or fractional - where only particular belongings of the inheritance are divided. The Inheritance Law theory also distinguishes between legal and voluntarily partition. The agreement for voluntary partition depends entirely on the free will of the coheirs. The agreement must be signed in writing and validated through a notary stamp and signature. In case of co-heirs' disputes, the partition shall be made before the Court. Each of the heirs may claim for legal partition. The Inheritance Act provides for the testator, during his lifetime, to divide his possessions among his heirs, including the legitimate portion. This partition must be enforced through a deed of donation or a will. A partition, in which the testator has not included some of the co-heirs with a right to legitimate portion, is considered void.
Sale of the inheritance The Contracts and Obligations Act of 1951 provides for an option for sale of the entire inheritance aggregate through a contract to that effect. By the contract the heir transfers his inheritance rights to a third party. Transfer of the inheritance rights, however, does not deprive the heir of the capacity of heir and doest not bring to the inheritance buyer the capacity of heir. Only the property rights of the heir will be effectuated by that third party. The sale of the inheritance contract shall
be validated before a notary, however not in the form of a notary deed. The contract for sale of the inheritance containing real estates cannot be opposed to a third party unless it has been registered with the Registrations and Entry Office. The legislation prohibits sale of a future inheritance.
Inheritance Tax and measures to reduce it The Inheritance Tax in Bulgaria is charged on the taxable aggregate of the estate. Certain deductions are made prior to taxation - duties of the testator, rights and titles transferred by the heirs to the government, funeral expenses and other deductions provided for by the law. Until 2005 all the heirs and legatees were subject to inheritance taxation. As the law was changed, currently the surviving spouse and heirs who are direct descents are exempted from taxation. Besides, only estates exceeding the amount of BGN 250 thousand (EUR 130 thousand) are subject to taxation. The taxation rate is 0.7 per cent for brothers and sisters and their descents, and 5 per cent for other heirs.
International Treaties and Agreements to avoid the double taxation in Inheritance Law Bulgaria has agreed on and enforced almost forty bilateral agreements to avoid the double taxation. The list of countries that are parties to these agreements include most of the EU member countries as well as the USA, Russia, Canada, Japan, etc. however, as a rule, those agreements do not deal with inheritance matters! The Bilateral Agreement between Bulgaria and Spain on avoidance of the double taxation and prevention from evasion of income and estate taxation was enforced in 1991. The agreement deals with income and corporate taxes, estate tax and local taxes on incomes and estates in Spain, as well as with income tax, corporate tax and building tax in Bulgaria. Inheritance tax in Bulgaria belongs to the so called local taxes and is not subject to regulation by that agreement. It shall be paid to the Bulgarian tax administration by Spanish nationals who inherit estates in Bulgaria apart from any other tax duties that may arise towards the Spanish public authorities. Incomes coming from sale of real estate of the deceased person are subject to taxation in the country where the estate is located. The avoidance of double taxation nor-
Upon the moment of acceptance of the inheritance, property rights and obligations pass to the heirs. In case of a single heir, he receives the whole inheritance but if there is more than one heir a "common property" arises out and each of the coheirs has a share of the whole inheritance. mally takes effect through deductions made on the tax due in one of the contracting countries for the amount paid as a tax in the opposite contracting country.
Inheritance - Private International Law aspects Along with the bilateral agreements Bulgaria enforced in 2005 the International Private Law Code that regulated all international inheritance matters involving Bulgarian nationals and estates on the territory of the country and abroad. The provisions of the Code apply to all maters save where there is an international treaty or agreement, which regulates the inheritance maters differently and which Bulgaria is party to. Special chapter is devoted to inheritance law relations. The succession of movable assets is subject to regulation according to the law of the country whose habitual resident was the person deceased. The succession of real estates is subject to regulation according to the law of the country where the estate is allocated. If a legal action is brought involving real estates allocated in Bulgaria the Bulgarian court will have exclusive competence to resolve the case.
"Proffesio iuris" in Inheritance Law
cable law in case of afterlife arrangements. The International Private Law Code allows the testator to dispose of his entire estate according to the law of the country whose resident he is at the moment of exercising "proffesio iuris". That could happen even if the estate contains one or more real estates. The only restriction concerns the reserved portion of the inheritance, which is governed by the rules of the law applicable to movables and real estates falling within that portion. The same provision regarding the right to choose the applicable law applies in case of drawing up a will. The validity of the will shall be considered according to the law either of the country where it has drawn, or the country where the testator had resided prior to his death, or where the testator habitually had resided. The reference back is admissible according to the Bulgarian law.
First and second grade remission in International Inheritance Law Literally, there is no such definition and legal provision in the Bulgarian Inheritance Law. Any of the heirs or any of the next-ofkin heirs may declare remission. If that is the case, the portion of the one that remits the inheritance makes other portions larger. If all the heirs declare remission to the title the government takes over the estate except the movables, residential units, ateliers, garages and land slots designated for residential building construction, which all go to the municipality where the estate is allocated.
International treaties and conventions in Inheritance Law Bulgaria is a signatory to the Hague Conference of International Private Law. It was enforced on April 22, 1999. The government also accessed to the Convention Abolishing the Requirement of Legalisation for Foreign Public Documents (The Apostille Convention). Among these documents are also the notary deeds. The Apostille Convention requires that an official document emanating from an authority of a contracting state shall have a certificate placed on the document itself or on an "allonge". The certificate shall bear the title "Apostille". Having this certificate exempts the documents from being legalised by multiple authorities in the state where it will be submitted. Instead, it only requires a translation and once being translated, it is considered valid.
Open notary will pattern Everyone who is over the age of eighteen and is not incompetent and incapable may ask the notary to draw up a will. Before making the will the testator shall prove before the notary the ownership over the assets subject to dispositions. Usually, such papers might be notary deeds, registration of car certificates, insurance policies, receipts, deposit certificates, etc. Official tax appraisal certificates and other papers shall be submitted to ascertain the value of the assets. It is highly recommendable to submit to the notary some papers proving sound mental health and the ability of the testator to dispose of his assets. A medical certificate to that effect would be perfectly fit.
A person may choose in Bulgaria the appli-
The procedure shall be witnessed by two legally competent and capable persons. The notary draws up the will after the testator freely speaks out his wishes. Then the will has to be read and the testator followed by the witnesses and the notary shall sign the will. One original of the will shall be attached to the will records kept with the notary and the other goes in the records kept by the Registrar Agency. The notary shall provide the testator with a copy of the will.
Blams Abogados Bulgaria BALMS GROUP INTERNATIONAL
Set up in January 2006, Balms Abogados Bulgaria LLC is a Bulgarian Firm law and a member of Balms Group International. Balms Abogados Bulgaria is currently also a member of Bulgarian- Spanish Business Council, BulgarianBritish Chamber of Commerce and American Chamber of Commerce. Balms Abogados Bulgaria offers is clients a wide range of top quality legal services, tailored to satisfy the needs and expectations of each one of them. We are best known for our profound knowledge and expertise and the connection we make between the local environment and the international business community. The professionals who work for the firm are renowned for their familiarity with Bulgarian legislation, local culture and traditions. The expertise of the team members allows us to find the best legal solution in accordance with the proposals and objectives expressed by the client. The main offices for Balms Abogados Bulgaria are located within the key are in downtown of Bulgaria´s state capital- Sofia, close to the courts, government and other public authorities. There is also a second office in the city of Burgas, one of the largest and most important ports in the country. It offers a comprehensive legal service based on personal attention to the client´s needs and putting the emphasis on the quality of services provided. We get involved in client´s legal, tax and administrative issues arising out of their business activity in Bulgaria, revision and editing of commercial contracts, contracts of purchase and sale of real estates, advisory on construction, urban development, advising on the appropriate form of legal entity for tax planning, advising on double taxation treaty implications, aiding VAT registration. Balms Abogados Bulgaria also acts as a fiscal representative of our clients and their companies, offering tax, fiscal and legal advice, elaboration of document, agreements and fiscal representation. Besides, we count on a department of litigation law that investigates and offers the realization of all type of judicial procedures. PARTNERS Juan Luis Balmaseda de Ahumada Manager and Senior Partner Julio Aguado Arrabé Senior Partner Katja Blackmer- Partner/ Dr. Iuris Oscar Gómez Partner Jorge Martín Losa Partner Sofia Office Associates Gavrail Hrusanov Marina Belcheva Teodor Totev Ralitsa Yoseva Germana Zlatkova Yovka Dimitrova Ivanova
Office Manager Mariya Foteva Secretary and translator Elena Nedyalkova Bourgas office SF Consulting Manager Delian Grivichki Office Manager Galina Pandekova Secretary and translator Rositsa Hristova Mavrudieva
AREA OF SPECIALITY - Foreign investments, - Real estate, constructions development, and urban planning law; - Corporate Law (Company formation and administration); - Merge in and Acquistion law; - Public procedurement; - Concessions; - Taxations; - Contracts law; - Banking and insurance law; - Competition law; - Registration and protection of trademarks, patents, designs and copyright; - Receivership and insolvency procedures; - Employment law; - Civil and commercial, litigation and arbitration, dispute resolution. BALMS ABOGADOS BULGARIA SOFÍA 1000 Sofía, Bulgaria Avda. General Totleben, nº2, piso 4 Tel: + 359 2 950 4600 Fax: + 359 2 950 4601 Email: email@example.com BURGAS 8000 Burgas, Bulgaria C/ Eksarth Yosif, nº 24 Tel: + 359 56 84 1150 Fax: + 359 56 84 11 71 Email: firstname.lastname@example.org
GENERAL PRINCIPLES OF SUCCESSION LAW IN
Inheritance Law in
LEGISLATION In Cyprus, the Law of Succession (or Inheritance) is incorporated in a number of enactments, the most significant of which are the Wills and Succession Law, Cap 195, and the Administration of Estates Law, Cap 189, hereinafter referred to as Cap 195 and Cap 189, respectively. ·
Cap 195 deals with both wills and intestacy. The part of the Law which deals with wills is based on the English wills Act of 1837, whereas the part dealing with intestacy is based on the Italian Civil Code and reflects Continental Law.
ners to be incapable, due to infirmity of mind caused by disease or old age, of managing his own affairs.
Formalities of a Will Section 23 of Cap 195 provides that no will shall be valid unless it is in writing and executed as follows, i.e.: ·
WILLS In section 2 of Cap 195, 'will' is defined as the legal declaration in writing of the intentions of a testator with respect to the disposal of his movable property or immovable property after his death and includes a codicil. 'Codicil' also is defined in section 2 of Cap 195 as meaning an instrument in writing made in relation to a will, explaining, adding to, altering, or revoking in whole or in part its dispositions and considered as forming an amending or additional part of the will. Apart from disposing of the estate of the deceased, a will also may contain other instructions or declarations affecting the right of inheritance of certain persons or generally the affairs of the testator, such as the recognition of an illegitimate child, the pardon of a person otherwise incapable of succession, and the appointment of a guardian of a child for as long as such child is under disability or an incapable person. At the same time, many legal systems, including that of Cyprus, impose certain restrictions on the freedom of testamentary disposition for the benefit of the members of the family of the testator. The relevant provisions of Cypriot law, referring to legal effectiveness, i.e., the validity and enforceability of a will, are examined in the following sections under the headings 'Testamentary capacity', 'Formalities of a will', and 'Restrictions on freedom of testamentary disposition'.
Testamentary Capacity Section 21 of Cap 195 provides that any person may dispose of the whole or any
part of the disposable portion of his estate by will, provided that such will conforms to the provisions of section 23 of Cap 195. According to section 22 of Cap 195 and section 42 of the Administration of Estates Rules of 1955, a person who is not of sound mind, memory, and understanding or who has not completed the age of 18 years cannot make a valid will. Section 2 of Cap 195 contains the following definitions: ·
'Person under disability' means any individual who is an infant or a mental patient or is prohibited by a court from the management of his affairs or is absent from the colony (now the Republic of Cyprus); 'Mental patient' means any person considered to be a mental patient under the provisions of the Mental Patients Law; and 'Incapable person' means any person not under disability but who is certified by two duly qualified medical practitio-
A person who is not of sound mind, memory, and understanding or who has not completed the age of 18 years cannot make a valid will
It shall be signed by the testator, or by some other person on his behalf, in his presence and at his direction; Such signature shall be made or acknowledged by the testator in the presence of two or more witnesses present at the same time; Such witnesses shall attest and subscribe the will in the presence of the testator and in the presence of each other, but no form of attestation will be necessary; and If the will consists of more than one sheet of paper, each sheet shall be signed or initialled by or on behalf of the testator and the witnesses.
From the wording of section 23, it follows that a person cannot execute a will through an agent or representative. In the case of a blind or illiterate testator, the will shall be read out to him before execution and shall be signed by some other person on his behalf, in his presence and by his direction; otherwise, the testator shall place his sign on it. All other formal prerequisites of a will apply equally in the case of blind or illiterate testators. When two out of three attesting witnesses attested the will later than the time of the execution thereof and none of the witnesses signed in the presence of another, the will was held void. In a will consisting of more than one sheet, signed by the testator and initialled by the attesting witnesses, initials were held sufficient subscription. The provisions of section 23 of Cap 195 are of a mandatory nature and require strict compliance thereof. Any will that is not in conformity with the requirements of section 23 is void. Any persons of sound mind who have completed the age of 18 years and are able
to sign their names may be witnesses of a will. The principles that apply to the soundness of mind of the testator also apply to the legal capacity of witnesses. If, by will, a beneficial legacy is made to a witness or to the spouse or child of a witness, such legacy will be void, but the witness will be admitted to prove the execution of the will or the validity or invalidity thereof, not withstanding the legacy mentioned in such will. Any creditor or spouse or child of a creditor attesting a will by which his debt is charged will be admitted as a witness to prove the execution of such will or the validity or invalidity thereof, notwithstanding such charge. Section 27 of Cap 195 provides that no person shall, on account of his being an executor of a will, be incompetent to be admitted as a witness to prove the execution of such will or to prove the validity or invalidity thereof. According to section 28 of Cap 195, no alteration made in a will after the execution
thereof shall be valid or have any effect (except so far as the words or effect of the will before such alteration were not apparent), unless such alteration be executed in like manner as required by section 23, but the will, with such alteration as part thereof, shall be deemed duly executed if the signature of the testator and the subscription of the witnesses are in the margin or some other part of the will opposite or near to such alteration or at the foot or end of or opposite to a memorandum referring to such alteration and written at the end or some other part of the will.
Restrictions on Freedom of Testamentary Disposition The right of a person to dispose of his property by will is not absolute. Most legal systems restrict such right to part only of the property of the de cujus. This part is called 'the disposable portion of the estate'
The relevant legislation enacted when Cyprus was under British rule, purported to extend the enforcement of grants made by British courts in all parts of the British Empire. whereas the part which the person cannot dispose of by will is called 'the statutory portion of the estate.' Section 41 of Cap 195, as amended by Law 100 of 1989, determines the disposable portion as when: An individual dies leaving a spouse and a child, or a spouse and a descendant of a child, or no spouse but a child or a descendant of a child, the disposable portion may not exceed one-fourth of the net value of his estate; The individual leaves a spouse or a father or a mother but no child or a descendant of a child, the disposable portion may not exceed one-half of the net value of his estate; and The individual leaves none of the above; he can dispose of the whole of his estate. Consequently, the statutory portion may be determined as follows: ·
In the cases provided for in the first paragraph above, three-fourths of the net value of the estate; and In the cases provided for in the second paragraph above, one half of the net value of the estate.
every will shall be construed, with reference to the estate comprised in it, to speak and take effect as if it had been executed immediately before the death of the testator, unless a contrary intention appears from the will. Section 36 has been interpreted as establishing the principle that the will 'speaks from the death', i.e., as if it had been executed immediately before the testator's death. This means that a will is capable of disposing of all the property of the testator, even if such property was acquired after the execution of the will. Consequently, the disposable portion is ascertained at the time of the death and not by reference to the time of the making of the will, since the law applicable is the law in force at the time of the death of the deceased. The Law defines the term 'legacy' as a gift by will of movable property or immovable property and a 'legatee' as a person to whom a legacy has been left. The general rules governing legacies are set out in sections 30-33 of Cap 195. According to section 31, no legacy is valid if: ·
A legacy may be conditional; however if it is dependent on an impossible, illegal, or immoral condition, such condition will be void but the legacy will be valid. A legacy to a religious corporation is valid only if the following two conditions are fulfilled: ·
If the testator purports to dispose by will of a part of his estate in excess of the disposable portion, the will shall not be invalid, but such disposition will be reduced and abated proportionally so as to be limited to the disposable portion. The reduction and abatement referred to above shall not apply when the testator leaves a spouse but no child or descendant of a child or father or mother and he disposes by will of more than the disposable portion, up to the whole of his estate, to the surviving spouse. Section 36 of Cap 195 provides that
Made to a person who is not in existence at the death of the testator, unless it is made to a posthumous child of the testator; (if such child predeceases the testator leaving issue living at the death of the testator, the legacy takes effect as if the death of such child had happened immediately after the death of the testator, unless a contrary intention appears by the will) and It does not express a definite intention.
The will is executed at least three months before the death of the testator; and The testator has no relatives within the third degree of kindred.
Section 33(2) provides that where the testator is a Muslim, a legacy under sub-section (1) shall be deemed to be a 'valid dedication' and shall be governed by the law in force relating to such dedications. A testator may provide in his will for the substitution of a legatee by another legatee mentioned in the will. Otherwise, the provisions of section 31(a) shall apply.
Notice of the application containing a note of the day fixed for the hearing shall be advertised in the Official Gazette and one daily newspaper and a copy of the relevant issues should be attached to the application. According to section 4 of Cap 192, the court, before sealing a probate or letters of administrations under the Law, shall be satisfied that:
In Cyprus, as in England, a legacy may be either specific or general. The main characteristics of a specific legacy are the following: ·
It is a part of the testator's property, whereas a general legacy may or may not be a part of the testator's property; and It is a severed or distinguished part or, in other words, it is emphatically distinguished from the whole of the testator's property.
· In Robertson V Broadbent, Lord Selborne defined a specific legacy as something 'which a testator, identifying it by a sufficient description and manifesting an intention that it should be enjoyed or taken in the state and condition indicated by that description, separates in favour of a particular legatee, from the general mass of his personal estate'. A specific bequest, if vested in possession, and if the subject matter is incomebearing, entitles the legatee to the income from the testator's death and all accelerations which arise after the death. Section 44(1) of the Administration of Estates Law, Cap 189, provides that specific legacies rank and are liquidated after the payment of the just debts and, unless the will shows a contrary intention, are liquidated before the general legacies. In the event that the dispositions made by the will exceed the disposable portion, the general legacies are abated first or are reduced pro rata.
Contribution (Hotchot) Contribution (hotchpot) is dealt with in section 51 of Cap 195, which reads as follows: Any Child or other descendant of the deceased who becomes entitled to succeed to the statutory portion and to the un-disposed portion, if any, shall in reckoning his share bring into account all movable property and immovable property that he has at any time received from the deceased (a) by way of advancement; or (b) under a marriage contract; or (c) as dower; or (d) by way of gift made in contemplation of death. Provided that no such property shall be brought into account if the deceased made a specific provision in his will that such
property should not be brought into account. Re-Sealing of Probates or Letters of Administration
Legislation The sealing by Cypriot courts of probates or letters of administration granted by certain courts outside Cyprus is governed by the Probates (Re-Sealing) Law and the Rules made thereunder. Where a Court of Probate in the United Kingdom or in any British Dominion or in any country member of the Commonwealth granted probate or letters of administration in respect of the estate of a deceased person, the probate or letters of administration so granted may, on being produced to, and a copy thereof deposited with, a District Court, be sealed with the seal of that Court, and thereupon will be of the like force and effect, and have the same operation in the Republic of Cyprus as if granted by that Court. The relevant legislation enacted when Cyprus was under British rule, purported to extend the enforcement of grants made by British courts in all parts of the British Empire.
Procedure Application to seal a grant of probate or letters of administration may be made to the President or a District Judge of any District Court within the jurisdiction of which the deceased had property at the time of his death and may be made by the executor or their lawful attorney, duly authorized to reseal the grant under the Probates (ReSealing) Law. The application shall be by summons and shall be accompanied by: (a) the probate or letters of administration, sealed with the seal of the court granting the same, or a copy thereof certified as correct by or under the authority of the court granting the same; (b) an oath of the executor or the administrator or the attorney in the prescribed form; (c) the power of attorney, in case the application is made by an attorney as above; (d) a bond to cover the property of the deceased within the Republic, given by the administrator or his attorney on application to seal letters or administration.
Estate duty has been paid in respect of so much, if any of the estate is liable for estate duty in Cyprus; In the case of letters of administration, security has been given to cover the property in the Republic to which the letters of administration relate.
In every case, and especially when the domicile of the deceased as sworn in the affidavit differs from the one described in the grant, the court may require further evidence as to domicile and, if the deceased, at the time of death, was not domiciled within the jurisdiction of the court issuing the grant, the seal is not to be affixed unless the grant is such as would have been made by a court in Cyprus. The court also may, on the application of any creditor, require before sealing that adequate security be given for the payment of debts due form the estate to creditors residing in the Republic. Notice of the sealing in Cyprus of a grant shall be sent to the court from which the grant issued, and notice of the revocation of or any amendment to such a grant should be sent to the court by whose authority such grant was re-sealed.
Inheritance Tax As from 2004 there is no inheritance Tax in Cyprus.
The relevant legislation enacted when Cyprus was under British rule, purported to extend the enforcement of grants made by British courts in all parts of the British Empire.
Costas Tsirides & Co BALMS GROUP INTERNATIONAL
The law office of Costas Tsirides & Co was established in 1970 by its founder, Costas Tirides. The Said law office was established as a firm of General Practice and has remained so, during the years, though each member of the firm is specializing in different fields of the law. The head office of the firm is situated in Limassol with associates in all other towns of Cyprus. It is situated in a very preferential location in the Limassol Business Center, facing the Limassol Law Courts and has all the amenities required for a modern law practice. In over thirty years of successful practice, we managed to build a large munber of clientele from all over Cyprus and Internationallity. All our clients, private or commercial, individuals or corporate, receive the same personal service. We have a wide range of experience and skills within the firm, which enable us to provide a level of expertise. Our lawyers undertake litigation in all aspects of Cyprus Law. Lawyers of our firm are acting as arbitrators, legal adisors and serving as members of the Board od Directors of a substantial number of companies registered and/ or carrying business in Cyprus and abroad, both private and public. We have been involved with International Business (Offshore) for more than twenty years. Cyprus is a leading center for International Business and a combination of favourable factors has made Cyprus one of the most attractive places in the world for registration of International entities. Among these are, the geographical location of Cyprus, the low-tax regime, double taxation treaties with a large number of countries, the excellent telecommunications network and infrastructure, the high level of legal, banking and accounting services, the fact that the companiesÂ´law is based on the English model, the extensive use of the English language and the respectable status enjoyed by Cyprus Companies. Our business is primarily based upon personal relationships, trust and discretion. These values are fundamental to our approach and will remain so.
AREA OF SPECIALITY Litigation and arbitration Commercial and corporate Property Trust and probate Intellectual property PARTNERS Costas Tsirides Pavlina Tsirides Andreas Charalambous Alexandros Tsirides Photini Tsirides Nicos Elia Charis Lafazanis Stavros Toumbas OFFICES Limassol Nicosia Paphos LIMASSOL COSTAS TSIRIDES &CO Grivas Dighenis Ave., Panaides buildg, 2nd floor P.O. Box 56250, 3305 Limassol, Cyprus Tel: +357-5-365094 Fax: +357-5-359772 E-mail: email@example.com www.tsirides.com
GENERAL PRINCIPLES OF SUCCESSION LAW IN
Inheritance Law in
Czech Republic General overview Inheritance law in the Czech Republic is part of a legal system falling under the category of continental systems which originally developed from Austrian law prior to WWII. However, inheritance law is influenced, to an extent, by the suspension of law during the Communist period and this has had the effect of making the clauses somewhat inflexible. In the Czech Republic, inheritance law is regulated by Section 7 of the Civil Code, in particular. Although recently several amendments have been made, the regulation is still criticized because of too many restrictions to the powers of the testator. A new Civil Code is being prepared at the moment and substantial liberalization of the inheritance law is being planned.
Power to authorize a valid will Heritor gains entitlement to heritage at the death of a testator. According to Czech law, heritage can be acquired either by: 1.testament 2.statute If there is no heritor, the final property automatically goes to the State. First to inherit is the heritor from a testament; if the testament only concerns part of the property, the remaining part will be subject to the provisions of a statute.
Formalities concerning last wills There are following forms of testament: 1) Written and signed by the testator's own hand. It has to include the date, month and year on which the testament was signed 2) Not written by the testator's own hand. It has to be signed by two witnesses at the same time and the testator has to explicitly state that the signed document is the last will 3) Certified by a public notary. One of the advantages (besides of the high credibility of the document) is that the testament is registered and kept in the Central Register, i.e. it cannot be lost. Special procedures are foreseen for cases where the testator is unable to read or write. The testament will have to be made before three witnesses who are present at the same time, and the document has to be read out
loud and signed by them. The document will need to include the fact that the testator cannot read or write. Witnesses: Witnesses should not be written down in the testament as heritors; otherwise the testament could not be taken as a valid document. Witnesses also have to be the legal capacity to act. They cannot be individuals who are blind, deaf, or mute, and they must understand the language in which is the last will is made.
Right to refuse heritage Heritor shall have the right to refuse heritage. He does not have right to refuse heritage only in part. Heritor shall have 30 days in which to serve notice to the court, either in person or in writing, that he will not accept his share of the inheritance. After the 30 days have elapsed, his heritage will go to the State. The same will happen when there is no one in a position to inherit. An heir who is not known or who does not have a registered address and who was served notice of his right to an inheritance, but who has not attempted to let the court know of the fact within a set time limit shall not have the right to be incorporated into the inheritance proceedings at a later date. Heritor should always make an informed judgment about whether to accept or refuse his heritage, because there may are other circumstances when it might be more beneficial for him to do so. This could be due to the fact that he might only be liable for obligations or debts, if the amount of debt
Special procedures are foreseen for cases where the testator is unable to read or write. The testament will have to be made before three witnesses who are present at the same time, and the document has to be read out loud and signed by them. The document will need to include the fact that the testator cannot read or write
exceeds the value of the inheritance or when the dept has a similar value as the financial gain of the unencumbered share of inheritance. If a heritor is thinking about accepting an inheritance under any of the above stated circumstances, there are important things to bear in mind: -
Pursuant to Section 471 of the Civil Code, creditors may choose how they prefer to be repaid. If a creditor refuses to be paid back in part or in full by money from the heritage, the State can also use other objects contained in the heritage and which hold the value of the amount of debt. In the event that the creditor refuses such objects, the State may suggest liquidation. There is a possibility of endangering own property, when a creditor chooses to be repaid not with the inherited money or property but by heritor's other properties. If a heritor accepts a partly encumbered inheritance, it may leave him the obligation of paying additional costs such as abandonment or court costs.
Incapacity to inherit Individuals who have intentionally committed a crime to acquire the inheritance
shall automatically have no right to it (they are automatically excluded), unless the testator clearly indicates he has forgiven them.
Disinheritance Notwithstanding the foregoing, the testator has the right to exclude persons by his or her own decision by drawing up a will. The power to exclude a descendant is substantially limited. The descendant has always to receive one half (if he is over 18) or the entire property, which he would receive by law if there were no testament. The only way to exclude an heir is through disinheritance, which is admitted only in the cases foreseen by the Civil Code. An heir can be disinherited if he: -
has been imprisoned for over a year is constantly living a wild life neither cares for or shows any selfless interest in the testator as he should, being his descendant contrary to good manners, he did not provide testator with necessary help in his illness, old age or under other serious circumstances
In practice, it could be difficult to prove such behavior and treatment, and in majority of cases the disinherited person impeaches such accusations.
Testator has to explicitly state that the consequences of the disinheritance will also apply to the descendant of the disinherited; otherwise the right to heritage would automatically be passed on to children of the disinherited person.
The division of inheritance by statute Inheritance is firstly divided in full or in part, according to the last will of the deceased. In the absence of a testament, the dependants with the legal capacity to inherit are divided by statute into categories stated below. There are four groups to determine the right to decedent's property in consecutive order. (1) The first group includes the spouse, children and registered partners (currently inserted clause regarding homosexual relationships). If children do not inherit, the right to inherit is automatically passed on to their children. They all share proportionally. (2) If the children do not become heirs, the right to heritage is passed on the wife/husband or partner. If none of the members of the first group inherit, the heritage goes to their parents or companions. For the purpose of inheritance law, the concept of companion is defined as someone who has shared a household with the testator for more than one year and shared the costs for its up keeping. All members of the second group share proportionally, only partner or spouse has always the right to a half. (3) If no one from the second group inherits, next in line are siblings. They always divide the heritage proportionally. (4) If no one from the third group inherits, the fourth group to inherit is grandparents, and eventually their children. As mentioned above, Czech law does not allow a testator to avoid passing heritage to descendants, except in the case of a disin-
State can also refuse the inheritance, similarly to any other inheritor, but does not have pay the tax
herited person. Furthermore, there is always the issue of a compulsory heir. Minors are entitled to succeed to a part of the estate of the deceased by law. If the descendant is over 18, he has the right to receive at least half of the estate by law.
Last will A testament is always replaced by a new one insofar as they cannot coexist, particularly if they cover the same property. Testaments may include the testator's entire estate or only a part (even just one concrete thing). A testator may always revoke his testament by destroying the document on which his last will was written. An important factor that should be kept in mind is that there is no provision for a testator to add special conditions or qualifications to the last will. Therefore as a testator, you cannot add instructions about how you would prefer the heritage to be managed and you cannot forbid an heir to sell the heritage. Any such condition would be null and void and would not be binding on the heirs. A possible solution may be a testament establishing a foundation or a trust.
Court proceeding If there is more than one heritor, the issue of inheritance is to be decided in court. The court certifies the title to inheritance on the
basis of equality, also taking into account what the relative has received during the decedent's lifetime. It is also upon the court to determine what form of heritage will each heritor receive. If there is discovered that what a heritor had received does not legally belongs to him, he is obliged to return it to the rightful heritor. The latter, however, is bound to cover the costs that the false heritor paid in connection to his unauthorized gain. Czech law provides that a heritor who has gained something in good faith from a false heritor and whose heritage was confirmed, is allowed to recover it from the rightful heritor. If the value of an inheritance is barely sufficient to cover the court's costs, the court automatically stops the proceeding.
Administrator of the property of the deceased An executor can be appointed mainly to maintain control over and safeguard an estate during of a court proceeding, but only until the heritors are designated. Executor assumes all the rights and obligations of the deceased, but any decisions beyond the scope of basic management requires the consent of the inheritors and consent of a court. Inheritors will not be competent to manage or handle the proprietorship in any way whilst the executor has control over the estate.
Inheritance tax and measures to reduce it
Inheritance Tax falls under the provisions of Inheritance, Donation and Real Estate Transfer Tax Act No. 357/1992 Coll. Inheritance tax is levied on the gain from an estate after a death of an individual. It is a tax where an inheritor acquires estate from the deceased without providing a service in return. The acquisition of personal property, stocks and bonds, financial means in Czech as well as foreign currency, liabilities, estate rights, as well as real state, including flats and non-residential premises are liable for tax. Details of properties liable for taxes are to be found in Sect. 3 of the Inheritance, Donation and Real Estate Transfer Tax Act No. 357/1992 Coll. A heritor acquires the proceeds from an estate immediately after death of the testator (unless a court proceeding due to the reasons stated above takes place). Anyone who gains ownership by operation of law is automatically liable for taxes. Therefore, a taxpayer can therefore be an individual, a corporate body, or the State. State can also refuse the inheritance, similarly to any other inheritor, but does not have pay the tax. Further exceptions to the inheritance will be explained below.
I. Relatives in the direct ancestry line and spouses II. Spouses with children, children of spouse, parents of spouse and persons who lived with the heritor for longer than a year before death of a testator in the same household and who therefore managed the said household or relied on the heritor for subsistence III. Third parties and corporate bodies
Division into groups for calculation of the inheritance tax For the purpose of calculation of the inheritance tax, heritors are classified into three groups according to their relationship to the testator.
Tax/exemptions conditions The State is not the only body exempted from paying inheritance taxes. There are other tax-exemptions pursuant to Sect. 19 and 20. 1) Persons, who are classified as belonging to Groups I. and II. 2) Heritors of real estate, if these were not part of a business entity one year before. 3) For bank account deposits in foreign banks operating in the Czech Republic; income in Czech and/or foreign currency; local stocks and bonds; share of the inheritors paid from the estate or share derived from death of a spouse in a common property marital agreement, if the total amount by Group III. does not exceed CZK 20,000 per individual payer.
The amount of tax to be paid by Group III. varies from 3% to 20%. Tax-exception further applies to certain groups, such as: 1. Diplomats working in the Czech Republic as a representatives of a foreign country 2. State universities 3. Public research institutions 4. Public non-profit health institutions and others In a case where the inheritance is acquired by more than one person, the amount of tax is determined by the value of their share. Therefore, an individual who is not a direct heritor, but has the right to be paid a share of the heritage from other inheritor, will be liable for inheritance tax. Minors and individuals who are not legally competent will need representatives for any necessary negotiations.
Taxation system The basis of inheritance tax is the value of the property acquired by an individual heritor. If there is more than one heritor, they will each file a separate tax return. The tax return is to be completed and sent to the Tax Office no more than 30 days from the legitimate ending of the court proceeding. The heritor shall then receive a tax statement,to be paid no later than 30 days from the date of delivery.
Nocarova Jasek & Partners BALMS GROUP INTERNATIONAL
The firm was founded in 2000. The office is situated in the center of Prague, close to courts, notaries and administrative authorities. Our team consists of experienced attorneys who have the ability to provide a wide variety of services to meet the need of our clients. The office provides professional legal services for foreign and domestic clients, legal entities and/or individuals. The partners and members through their knowledge of Czech, English, German, Russian, French, Spanish are squipped to handle client's matters domestically as well as around the world. Our experience and education in working abroad as well as practices in international law firms guarantee a high level of services. We closely cooperate with the tax and accounting consultants and the auditors in the interest of insurance of a complex counselling and namely from the reason to eliminate negative tax or accounting aspects of elaborate legal documents.
PARTNERS: JUDr. Zdenka Nocarová, Ph.D. Mgr.Vladimír Jasek, LL.M.
JUDr. Tomás Temín, Ph.D. JUDr.. Zdenka Vselichová, MAES JUDr. Josef Redicha. JUDr. Pavel Just Mgr. Pavel Hlavicka Mgr. Regina Spelinová Mgr.Miluse Svobodová Mgr. Lucie Nováková Mgr. Daniela Kalinová
AREA OF SPECIALITY Property Law and Real Estate Transactions Business Law Company Law Mergers and Acquisition Joint Ventures Securities Capital financing Due diligences, Title insurance analyses Negotiating and Drafting of Trademarks and Copyrights Licensing of Intellectual Property Rights Labour and Employment Law Administrative Law Litigation and Arbitration Debt Collecting Company Liquidation and Insolvency Banking and Finance Tax Law Civil Law Criminal Law Landlord and tenant Consumer Law Restitutional Regulations Privacy Law, Press and Advertisement Residence Permits NOCAROVÁ JSEAK & PARTNERS, v.o.s. Národní Tfiída 19. 1-110 00 Prague, Czech Republic, Tel/Fax: +420 224 233 706, + 420 224 32 578 www.njp.cz - Email: firstname.lastname@example.org
GENERAL PRINCIPLES OF SUCCESSION LAW IN
Inheritance Law in
France The succession law of France was reformed in depth by the adoption of the Law of the 23rd of June 2006 Law, which entered into force on January 1st 2007. Three developments directed this reform: - The acceleration and simplification of the resolution process of successions; - The increase of the freedom to dispose of one's property; - The adaptation of law to the new reality of the composition of families. On the form, the Law intends to modernise the legal wording that has remained unchanged since the creation of the Code civil in 1804. Notably, the Latin phrase "de cujus" (literally: "the person from whom one holds his rights") has been replaced by "dĂŠfunt" ("deceased") .
Section 1: Legal transfer Subsection 1: The Capacity to Inherit I. Existence Existence at the time of the opening of the succession is a sine qua non condition to inheriting; this means that the person must be endowed with de jure personality on the day the succession is opened so as to be eligible for heirship. Thus, an unborn child must have been conceived before the opening of the succession and must be born viable to be deemed to exist. II. Absence of Unworthiness Unworthiness consists in the loss of the right to succeed as a consequence of certain penal condemnations (essentially due to an aggression against the deceased), independently of the deceased's wishes. The law enumerates the causes of unworthiness in a restrictive sense: - Article 726 of the Code civil provides two causes of unworthiness as a matter of law, which automatically lead to the loss of the right to inherit with no need for a declarative judgement; - Article 727 of the Code civil provides five optional causes of unworthiness; the declaration of unworthiness is then pronounced by the "Tribunal de Grande Instance" (regional court) of the applicable jurisdiction, once the succession is opened, at the request of a co-heir or, in the absence of other heirs, by the state, before six months have elapsed since the death.
The effect of unworthiness is the exclusion of the unworthy from the legal succession. Nevertheless, the exclusion is not irreversible. The deceased, subsequently to the facts generating the unworthiness of one of his heirs and to his knowledge of these facts, has the possibility to remove the unworthiness himself, whether by an express declaration of his wish to maintain the heir in his inheritance rights, or implicitly by instituting him as a universal heir or heir by general title. Subsection 2: Determining the Heirs I. Succession Rights of the Family A - Guiding Principles 1) Classification by Order: (art. 734 C.civ.) There are four orders: - 1st Order: The descendants; - 2nd Order: The privileged ascendants and privileged collaterals. These are, on the first part, the father and mother and on the second part, the brothers and sisters and their own descendants; - 3rd Order: The ordinary ascendants, i.e. all ascendants excepting the mother and father; - 4th Order: The ordinary collaterals, i.e. other than the brothers and sisters, up to and including the sixth degree. Each of these 4 categories constitutes an order of heirs that excludes the next.
2) Classification by Degree: (art. 744 C.civ.) Between heirs of the same order, the succession is distributed according to the degree of kinship with the deceased. As a result, two rules apply: - The rule of hierarchy: the nearest heir in degree excludes the other; - The rule of equality: the heirs of the same degree share the succession equally. 3) No discrimination according to state of filiation (art. 735 C.civ.) This principle was ratified by the Law of December 3rd 2001. Thus, be they of legitimate (within wedlock), natural (out of wedlock), or adoptive filiation, the descendants possesses the same successional rights.
The deceased, subsequently to the facts generating the unworthiness of one of his heirs and to his knowledge of these facts, has the possibility to remove the unworthiness himself, whether by an express declaration of his wish to maintain the heir in his inheritance rights, or implicitly by instituting him as a universal heir or heir by general title.
Two exceptions qualify this principle: - Children born of incest: As their filiation cannot be established both paternally and maternally, they shall inherit from only one of their parents; - Adoptive parenthood (simple adoption): children adopted under the simple form of adoption do not have the consideration of a reserve heir in the succession of the adopter's ascendants, and reciprocally (art. 368 C.civ.). B - Corrective Principles 1) Division by Branch: (Art. 746ss. C.civ.) Division by branch only applies when the succession is distributed among ordinary ascendants or ordinary collaterals. The applicable mechanism is then as follows: - Firstly, the assets are divided in two equal parts, one falling to the paternal line and the other to the maternal line; - Secondly, the classification by degree is applied independently in each line. 2) Representation: (Art. 751ss. C.civ.) This possibility, when admissible, allows the person nearest in degree to the heir to represent him in the succession. Representation only comes into play for the descendants and the collaterals of the
deceased. Thus, as an example, the grandson of the deceased can represent the deceased's son (himself designated as the representee). To be effective, this representation is subject to the following conditions: - The representee must not have renounced to the succession; he may however be unworthy. - The representative must have the capacity to inherit from the deceased. Through this mechanism, the representative exercises the representee's rights within the succession so that the representative receives from the succession the property that would otherwise have fallen to the representee. II. Rights of the Surviving Spouse A - The Surviving Spouse's Rights in the Succession 1) In the Presence of Descendants: (Art. 757ss. C.civ.) When the deceased and his surviving spouse have common descendants, the surviving spouse has the option, at the opening of the succession, to choose between:
- Inheriting a quarter of the succession in property; - Inheriting the whole of the succession in usufruct. If the descendants are not common children, such as if the deceased has children from a former marriage, the surviving spouse can only inherit a quarter share of the succession in property. 2) In the Presence of Ascendants: (art. 7571 C.civ.) In the presence of both the mother and father, the surviving spouse inherits half of the succession in property. In the presence of either the mother or the father only, the surviving spouse inherits three quarters of the succession in property. In the absence of both the mother and father, the surviving spouse inherits the whole succession in property. Finally, when the surviving spouse receives the whole or three quarters of the succession, the deceased's ascendants other than his mother and father can claim support from the succession, should they be found in need. 3) In the presence of ordinary or privileged collaterals: (Art. 757-2 C.civ.) If the deceased only leaves his spouse and collaterals to his succession, the spouse
then inherits the whole of the succession in property. 4) Right for Life to the Dwelling: (Art. 764ss. C.civ.) Unless the surviving spouse receives the whole of the succession in property, he benefits from the right to occupy the common residence until his own death. However, as it is not of public order , the deceased can deprive his spouse of this right through an authentic will (i.e. a will drawn up before notary). B - the Surviving Spouse's Rights against the Succession These consist in the rights that the spouse receives as a creditor, rather than as an heir. These rights are of public order, so that the deceased cannot deprive the spouse of them. 1) Right to Support: (Art. 767 C.civ.) When the spouse does not receive the whole of the succession in property and when he is in a state of need, he can claim alimony, limited to the living minimum. 2) Annual Right to Housing: (art. 763 C.civ.) This right allows the eligible spouse to obtain that the succession take charge of his housing for one year, beginning from the opening of the succession.
III. Rights of the State on Successions 1) Rights on Escheat Successions: If there are no heirs, the succession falls to the State (Art. 724 al.3 C.civ.). Following the Law of June 23rd 2006, articles 811 to 811-3 C.civ govern escheat successions. To inherit, the State must request from the Tribunal the authority to take possession of the estate. 2) Taxes and Duties. Inheritance tax is a tax levied on the gratuitous transfer of capital; it is also referred to as "gratuitous capital transfer taxes and duties" It is a proportional, progressive tax that takes into account relationship by blood or by marriage and that is assessed upon each heir's individual net share. To allow the Government to assess the taxes, the successors must remit, before six months have elapsed since the death, a statement of the succession's assets and liabilities. As of August 22nd 2007, legislation has been enacted to reduce the burden of succession taxes and duties considerably. The information set out below has taken into account these recent amendments. Reductions on Inheritance Taxes and Fees Personal reductions on succession rights and duties vary according to the heir's rela-
tionship to the deceased. The reductions are applied according to the reductions claimed over the previous six years for previous inter vivos gifts made to the heir by the deceased during his lifetime. The amount of these reductions is reset every 6 years. Since August 22nd, the reductions are set at the following values: - Between parents and children: €150,000 - Between brothers and sisters: €15,000 In successions, each brother and sister that is unmarried, a widower, divorced or legally separated can be exempt from taxes and duties if: 1) He or she is 50 years or older at the opening of the succession or suffers from a disability that prevents him or her from earning a living through work; 2) He or she resided permanently with the deceased during the five years preceding death; - Between aunts, uncles and nieces and nephew: €7,500 - If no other reduction applies: €1,500 on each successional portion - Spouses and civil partnerships also benefit from a similar reduction, in the sum of €76,000 for inter vivos gifts; although this reduction is void should the civil partnership end within one year after the gift for any reason other than the partners' marriage or death. A specific, cumulative reduction of €150,000 is provided for the disabled if they are incapable of earning a living by working or, if below the age of 18, of obtaining an education or professional training of a normal level. In addition, when the deceased had three or more children (living or represented at the opening of the succession), succession taxes owed are reduced by a sum of €305 per child after the second-born, or €610 for successions in the direct line. It should also be mentioned that certain
In the presence of both the mother and father, the surviving spouse inherits half of the succession in property.
elements of property, such as a business or historical monuments, are exempt from inheritance taxes and fees.
SECTION 2: Power of the deseased’s wishes Subsection 1: Successional Public Order Regardless of the deceased's wishes, expressed during his life or mortis causa, the deceased cannot go against the "successional public order", which comprises mandatory rules that apply to all successions. I. Réserve Légale The réserve légale is a portion of the succession that cannot be withheld from certain legal heirs. The deceased cannot dispose freely of this portion. This means that the beneficiaries of the réserve légale may never be disinherited. The deceased may dispose of the portion of the succession above and over the réserve légale, whether by gift or bequeath, at his discretion. The amount of this available portion depends upon the proportion of the réserve légale. A - The beneficiaries of the Réserve Légale The law attributes the quality of rightful heir to the réserve légale: - To descendants (except children adopted by simple form of adoption, insofar as they are not rightful heirs to the réserve
légale for the succession of their adoptive parent's ascendants) (art. 913 C.civ.); - To the surviving spouse if and only if the deceased leaves no descendant (art. 9141 C.civ.). This means that in the presence of children, be they common or not, the surviving spouse is not a rightful heir to the réserve légale, so that the deceased can disinherit his spouse through his wishes during his life or mortis causa. However, the deceased can never disinherit his descendants. The Law of June 23rd 2006 has repealed article 914 C.civ, which granted ascendants the consideration of rightful heirs to the réserve légale. Also, the rightful heir to the réserve légale cannot claim his share of the réserve légale if he renounces the succession or if he becomes unworthy. B - Proportion of the Réserve Légale 1) Réserve Légale for Descendants: (art. 913 C.civ.) The réserve légale for the descendants is set according to the number of descendants, common or otherwise. If the deceased leaves: - One child, the total réserve légale is half of the property; - Two children, the réserve légale is two thirds;
- More than two children, the réserve légale is three quarters. The rightful heirs to the réserve légale share the total réserve légale according to the laws on distribution. 2) Réserve Légale for the Spouse: (art. 9141 C.civ.) The proportion of the réserve légale is one quarter of the property; provided there are no descendants. C - Sanction of the Réserve Légale 1) Gifts infringing upon the Réserve Légale: If a gift infringes upon the réserve légale, the rightful heirs to the said réserve can request an abatement of the gift. (Art. 920s. C.civ.) The Law of June 23rd 2006 substitutes a réserve in value to a réserve in kind, so that the legatees and donees may preserve the received property, on condition of monetarily compensating the rightful heirs to the réserve légale so they will fully benefit from the réserve. This same Law also permits a rightful heir to the réserve légale to exceptionally renounce in anticipation of action for abatement (art. 929ss. C.civ.) as part of a "successional covenant" or "family covenant". Thus, by a notarised act received before two notaries (one of which must necessarily be designated by the president of the Chambre des Notaires), the compulsory heir to the réserve légale may waive an action for abatement; failure to follow this requirement of form, the covenant is null and void. The covenant can provide whether the abatement is partial or total, in favour of whom this abatement is made, and which property is involved. Thus, the abatement shall be effective only if all the conditions of the covenant are met. Furthermore, this successional pact can be revoked for the following precise reasons: - Non-execution of the obligation to provide support by the person of whom the renunciator is a compulsory heir. - If the renunciator is in a state of need at the date the succession is opened and that this state would disappear if he had not renounced to his rights to the réserve légale.
- If the beneficiary of the renunciation is declared guilty of a crime or misdemeanour against the renunciator; The legislator created this unique exception to the fundamental principle of the réserve légale for the foremost reason of dealing with the situation of disabled children whose needs require a higher degree of family solidarity. 2) Gifts Accompanied by Charges Burdening the Réserve Légale The Cour de cassation has constantly ratified that the rightful heirs to the réserve légale must receive their share free from any burden. Consequently, a clause such as a clause of inalienability or a clause entrusting the administration of the property to a third party cannot apply to an heir's share of the réserve légale. Thus, such a clause would only be effective regarding the property not included in the réserve légale. Subsection 2: Gifts Mortis Causa I. Wills 1) Four Forms of Wills. - Holographic Will (art. 970 C.civ.): A will entirely written, dated and signed by the testator's hand. - Authentic Will (art. 971 & 972 C.civ.): A will drawn up before a notary, thus providing proof of its origin, contents, and date (barring a challenge to its validity). - Secret Will (art. 976 C.civ.): A will written by the testator or by a third party at his request; before the notary, and then closed and sealed (act of subscription). - International Will (1973 Convention of Washington): This will is called international, insofar as the goal of the Convention is to create a form of will common to all signatory States. The international will is first written by the testator or by a third party, then presented before two notaries and two witnesses. 2) Rules Common to all Wills Proof of the Will: If the heir contests the existence of the will, it falls to the legatee to establish, by any available means, the proof of the will he invokes. Prohibition of Joint Wills (Art. 968 C.civ.): An act stating the last wishes of two or more persons in favour of a third is prohibited. Revocability of Wills (Art. 1035 C.civ.): Wills may be revoked, in whole or in part,
Inheritance tax is a tax levied on the gratuitous transfer of capital; it is also referred to as "gratuitous capital transfer taxes and duties" whether tacitly or expressly by a subsequent will, or by a notarial act stating the revocation. Term of Wills: The Code civil names four causes for the lapsing of a will (art. 1039, 1040, 1042 & 1043), such as the death of the legatee prior to the testator's death. 3) The Different Types of Legacies (art. 1002 to 1024 C.civ.): Universal Legacy: The legatee(s) shall receive the entirety of the testator's estate. When there is more than one universal legatee, the succession is distributed among them. Legacy by Universal Title: The legatee by universal title receives a portion of the testator's estate or a category of property in an indeterminate fashion. Legacy by Specific Title: This legacy concerns one or many elements of property, individually identified, or a specific category of objects of indeterminate number from the testator's estate. II. Pre-Marital Agreements and Gifts Between Spouses 1) Pre-Marital Agreements (art. 1082 & 1083 C.civ.) Through this gift, a first person disposes all or part of her future successional estate, or of certain property that will constitute her succession, in favour of a second person (who accepts). This gift may not be revoked, even though it concerns future property. The pre-marital agreement may only be created, on pain of nullity, through a marriage contract, to the benefit of one or both spouses or of their descendants. 2) Gifts Between Spouses of Future Property Under article 1096 of the Code civil, the gift of future property made between spouses during the marriage may always be revoked.
Example: The gift to the last surviving spouse is an act taking effect only at the death of the donor, by which one or both spouses express their wish that the surviving spouse receives all or part of their present and/or future property, within the legal limits. This gift may always be revoked. III. Gradual and Residual Gifts Before the Law of the 23rd of June 2006, the Civil code prohibited substitutions as a rule, but allowed some exceptions in favour of certain persons. The Law of the 23rd of June 2006 admits and organises two types of substitutions: "gradual" gifts and "residual" gifts. 1) Gradual Donations (art. 1048 to 1056 C.civ.): This is a donation, gift or legacy, burdened with the obligation for the donee or legatee (the "burdened") to preserve the property or rights being granted so as to transmit it, upon his death, to a second designated person. The burdened person is obliged to preserve and transmit the object of the dona-
tion; the rights of the second person may only be exercised as of the burdened person's death. 2) Residual Donations (art. 1057 to 1061 C.civ.): This is a donation that provides that a person (the "second grantee") will be called to receive what will remain of the gift or legacy made to a first grantee at that latter's death. The objective of the residual donation is to obligate the first grantee to transmit the remaining property, but not to obligate him to preserve the received property.
SECTION 3: SETTLEMENT OF THE SUCCESSION Subsection 1: Administration of the Succession I. Co-Ownership of the Succession In principle, the administration of a succession follows the rules governing co-ownership (article 815-3ss. C.civ.) The Law of the 23rd of June 2006 has largely relaxed co-ownership rules, as
before this Law it was necessary to obtain the unanimity of the joint heirs to administer the succession's property. Since January 1st 2007, a two-thirds majority governs the administration. Moreover, the Law of the 23rd of June 2006 created a system for various types of mandates that allow the replacement of the co-ownership mechanism. II. Types of Mandates Beside the various mandates developed below, it should be mentioned that French law allows the testator to choose before his death an executor of the will, who shall personally proceed to the execution of the deceased's last wishes. A - Mandate with Posthumous Effect (art. 812 to 812-7 C.civ.) A true innovation brought about by the Law of the 23rd of June 2006 is that any person may now give to one or more other persons the mandate of administering or managing all or part of her succession, on the behalf and for the benefit of one or more heirs. This mechanism allows proper management of the succession for heirs lacking in
ment of the estate by all heirs or at the designation of a notary to prepare the distribution operations. Subsection 2: Distribution of the Succession It is governed by articles 816 to 892 of the Code civil. There are two types of distribution: - Friendly distribution; - Judicial distribution.
legal capacity, or when the succession requires specialised skills (i.e.: managing a business). This mandate must be justified and motivated by the serious and legitimate interest of an heir or of the successional estate. The notarial form is obligatory for this mandate. It may only be given for a period of two years, but it may be extended with the Court's approval. However, the length of the mandate may be of five years (extended judicially) when it is justified by the incapacity or the age of the heir(s), or by the necessity of managing professional property. B - Conventional Mandate (Art. 813 C.civ.) This mandate is governed by the legal regulations common to all mandates as provided in articles 1984 to 2010 of the Code civil. It thus allows the heirs to delegate, by common agreement, the administration of the succession to one of them or to a third party. C - Judicial Successional Mandate (Art. 813-1 to 814-1 C.civ.) This mandate to execute the succession is given to a third party on a temporary basis, in the case of inaction, mismanagement or fault on the part of one or more heirs, of a disagreement or conflict of interests between them, or due to the complexity of the successional situation.
An heir, one of the succession's creditors or more generally any party concerned may request this mandate. The judge may decide in equity, as the situation demands, when there are difficulties in the execution of the succession. This successional mandate shall, however, be limited to strictly conservatory or supervisory acts, as well as the acts necessary to the provisory execution of the succession. Finally, this mandate will come to an end at the signature of a co-ownership agree-
It should be mentioned that distribution can be declared null and void due to duress, deceit or error relative to the existence or disposable portion of the co-heirs' rights or relative to the property included in the estate to be distributed. However, it has now been added that if these causes of nullity can be repaired, the judge may then (at the request of a party) order a complementary or corrective distribution, thus avoiding the nullity of the distribution. 66
In any case, the distribution shall be governed by the deceased's last wishes and shall respect the successional public order. Distribution is the rule of principle in successional matters, joint ownership of the succession being, theoretically, only a temporary state. In consequence, any one of the heirs can require the execution of the distribution so as to force the end of the joint ownership. The Law of the 23rd of June 2006 brought about remarkable improvements that accelerate and secure the distribution. First of all, the principle of equality in kind has been abandoned in favour of distribution in value (art. 826-1 C.civ.); thus avoiding the friction that may arise when the time comes to divide the property by lots. The Law has also confirmed the possibility of preferential attributions, notably concerning any business (since the condition of the family nature linked to that attribution has been abrogated). Moreover, the execution of the distribution has been largely relaxed: the rules now allow making up for the absence, incapacity, or inadequacy of one of the persons entitled to a share of the distribution. Thus, in a notarised friendly distribution: - If the distribution concerns immovable property, if an heir entitled to a share of the distribution is absent or unable to manifest his will due to distance, the distribution of that property can be performed according to the provisions of article 116 C.civ., i.e. with the authorisation of the judge of guardianships. - If one of the persons entitled to a share on distribution fails to appear, after a formal demand that he obtain representation to the friendly distribution before 3 months have elapsed, a judicial demand may be filed to obtain the appointment of any qualified person as the representative of the absent heir until the complete exe-
cution of the distribution. This representative's consent to the distribution is subject to the authorisation of the judge. On the other hand, in a judicial distribution, if the notary in charge of the settlement faces the inaction of an heir, the said notary may request the judge to appoint a qualified person as the representative of the said heir until the distribution is executed in full. In this case also, the judicial request is subject to a prior formal request to the heir before 3 months have elapsed. Finally, the distribution process has been secured by mechanisms to avoid the nullity of a distribution. It should be mentioned that distribution can be declared null and void due to duress, deceit or error relative to the existence or disposable portion of the co-heirs' rights or relative to the property included in the estate to be distributed. However, it has now been added that if these causes of nullity can be repaired, the judge may then (at the request of a party) order a complementary or corrective distribution, thus avoiding the nullity of the distribution. Likewise, if the cause of nullity is the omission of an heir, he may request to receive his part in kind or in value rather than request the nullity of the distribution. The simple omission of a co-owned element of property shall lead to a complementary distribution of that element of property only. Finally, the rescission of the distribution above a quarter of the succession's value has been abolished. Today, the injured heir may only receive a complement to his share, either in kind or in value. The delay of prescription on such recourse is two years after the distribution.
Since its entry in force on January 1st 2007, the Law of the 23rd of June 2006 has brought about regulations allowing the relaxation of French succession law, which had too often been known and felt by the heir as a great burden-a complex and difficult process that leads to many family conflicts.
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GENERAL PRINCIPLES OF SUCCESSION LAW IN
Inheritance Law in
Germany 1. General overview German inheritance law is ruled by the German Civil Code, called Bürgerliches Gesetzbuch (abbreviation: BGB). You will find the most of the relevant settlements in Book 5 of the BGB (§§ 1922 - 2385 BGB), but also sporadically at other places, e.g. in § 1371 BGB which is part of Book 4, on the equalization of accrued gains in case of the death of a spouse. Finally, the right to an inheritance is protected of the German constitution, called Grundgesetz (abbreviation: GG), Article (Art.) 14 I GG. These rules determine who gets the assets in case of death of a person and who is liable for debts on the estate.
2. Power to authorize a valid will In principle any testator is allowed to dispose of his assets as he wishes, assuming he takes into account the legal forms available -he can make a last will or an inheritance contract. Moreover, the inheritance law is restricted in some areas. Therefore, you are not allowed to disinherit your nearest relatives completely, because they have at least a right to a compulsory portion, §§ 2303 2338 BGB. Within these limits, the so-called freedom of testamentary disposition is guaranteed, but the testator has to draw up his last will personally, § 2064 BGB. The determination through others is not allowed, § 2065 BGB.
All these cases are intended for situations in which the testator is no longer able to make an official testament before a Notary Public, especially in the face of an emergency.
4. Specific testamentary formalities concerning last wills To make an official testament before a Notary Public, the testator can express his last will verbally or he can give a last will in writing to a Notary Public, § 2232 BGB. A personal testament has to be written by the testator personally (in handwriting, not with a computer or similar means) and it has to include the testator's signature, § 2247 BGB.
5. Written languages for a valid will (including the official language). A testament must not be necessarily by written in German; other languages are also allowed. However, in cases involving a foreign country, the law of that country shall apply if the decedent is not a German (compare Art. 26 of the German Introductory Act, called Einführungsgesetz zum BGB, abbreviation: EGBGB).
3. Types and forms of last wills and testaments
6. Deposit of the last will's dispositions
You have to distinguish between ordinary and extraordinary testaments.
It is possible to deposit a last will at the competent surrogate's court which is a department of the local court (§ 2258 a) BGB).
a)Ordinary testaments, § 2231 BGB A so-called official testament can be made before a Notary Public, § 2232 BGB. The classical and simplest way to make a testament is the personal one, § 2247 BGB. b)Extraordinary testaments So-called emergency wills are allowed as well, and can be made: - Before a mayor (§ 2249 BGB), - Before three witnesses (§ 2250 BGB) or - On board of a German ship outside of a German harbour, before three witnesses (§ 2251 BGB).
In principle any testator is allowed to dispose of his assets as he wishes, assuming he takes into account the legal forms available -he can make a last will or an inheritance contract.
7. Capacity to draw up one's will § 2229 I BGB provides that the testamentary capacity exists if the testator: - is at least 16 years old (permission from the parents is not necessary § 2229 II; only an official testament is allowed, § 2229 II BGB) and - is not mentally ill (§ 2229 IV BGB).
8. Heirs ab intestato In the event that there is no last will or inheritance contract, the law of intestate
succession shall apply, §§ 1924 - 1936 BGB. Apart from a spouse -this is explained under 9; the remaining portion of the heritage shall be divided equally between the heirs, as follows: - Children, § 1924 BGB, - If none: parents and their children, § 1924 BGB, - If none: grandparents and their children, § 1925 BGB, - If none: great-grandparents and their children, § 1928 BGB. If there are no even more distant heirs according to § 1929 BGB the State where the decedent resided shall be the inheritor, § 1936 BGB.
9. Matrimonial property regime: inheritance law A spouse inherits: - Children aside: one fourth of the inheritance, - Parents of the decedent and their children aside or the grandparents of the decedent aside: one half of the inheritance, § 1931 I 1 BGB.
Furthermore, the spouse inherits an additional one quarter share due to the equalization of accrued gains in case of death, according to § 1931 III BGB in connection with § 1371 I BGB. Example: The husband dies. His wife has two children. Each one of the children receives one fourth of the heritage, the wife receives one half.
10. Right to the legitimate portion (freedom to draw up wills and legal protection in favour of certain members of the family) Even if a decedent makes a last will in which he leaves nothing to his rightful successors , his heirs will have right of compulsory portion, §§ 2303 - 2338 BGB. The minimum share of a spouse is one quarter of the inheritance; the minimum share of children is one eighth - half of what they would receive in the case of a legal succession.
11. The legitimate portion: legal nature and practise In lawyers' practise, a testator needs to be aware of the restrictions in the statute. § 2332 BGB provides that you can take legal
23. Individual real estate inheritance: legal provisions
30. Inheritance- Private International Law aspects
33. International treaties and conventions in inheritance Law
In the event that a testator has highly valuable real estate which exceeds the limits imposed by inheritance law, it is necessary to consider other solutions during the testator's lifetime, e.g. to donate parts of it in order to minimize the tax burden. Competent legal advice is necessary.
The German law relating to conflicts of laws concerning inheritance is governed by Art. 25 and 26 EGBGB. The citizenship of the testator is decisive; that is to say, German law will only apply if the decedent was a German citizen, whereas the law of a foreign country will apply if the decedent was a foreigner, if no renvoi in the foreign law exists.
Germany is signatory of many international treaties on inheritance law. The Hague Convention on formal requirements has been taken into consideration in the new Art. 25 and 26 EGBGB.
24. Inheritance transfer according to the contract If a decedent wishes to express his last will, he does not necessarily need to make a testament; he also can make an inheritance contract, §§ 2274 - 2302 BGB. The spouses will need to appear before a Notary Public jointly, § 2276 BGB.
25. Life insurance Life insurance is an asset which is part of the inheritance, unless -as often occurs- a beneficiary is already named in the contract.
26. Pension funds Statute law in the process of amendment
27. Proof of the status of the heir and the legatee action -if necessary, as it often is- up to 3 years after the date of the testator's death.
12. Legal relations between the coheirs: inheritance tax If there is more than one heir, you have a so-called community of heirs by law, §§ 2032 - 2057 a BGB. The community of heirs is a community of joint owners; they are liable for debts on the estate as joint debtors in relation to third parties and according to their share of the inheritance in the internal relationship.
13. The division of the inheritance Any one heir may place a claim to divide the inheritance at any time, § 2042 I BGB.
14. Collation of real estate It is advisable to try to find a solution which will provide how real estate should be handled. If such an agreement is not possible, a compulsory partition by public auction is necessary, § 180 et seqq of the German compulsory auction act, called Zwangsversteigerungsgesetz, abbreviation: ZVG.
15. Guarantee of the payment of the legitimate portion If an heir does not pay the share of the others voluntary, you will need to sue him. As a testator, you could consider appointing an executor to guarantee the payment of the legitimate portion, § 2197 BGB.
the inheritance, you will certainly have to apply for a change in the land registration, for formal reasons.
20. Restrictions regarding the heir's responsibility
The testator may appoint substitute heirs in his last will in the event that an heir dies or will not accept the inheritance, § 2096 BGB.
If the heir accepts the inheritance, he will not only become owner of all the assets of the decedent but he will also be liable for all the debts on the estate. Therefore, he should consider carefully whether it would be better not to accept the heritage, for which he will have6 weeks to reach a decision, § 1944 I BGB. Further, an heir can limit the liability for inherited debts on the estate.
21. Revocability of last wills
Legacies are certainly possible, too, § 1939 BGB. Therefore, a decedent can make sure that someone gets a special thing, e.g. a former gift, without making the legatee an heir.
§ 2253 BGB offers the possibility for the testator to revoke his last will at any time.
16. Inheritance taxes Statute law in the process of amendment
19. Ownership and use of inherited real estate The German inheritance law determines that the heir becomes owner of all assets ipso iure. However, if real estate is part of
22. Execution of last wills If the testator wants to guarantee that his last will is executed according to his wishes, he can either combine it with a burden (§ 1940 BGB) or he can appoint an executor in the last will.
31. Proffesio iuris in Inheritance Law In principle, proffesio iuris in inheritance law to determine the statute that will govern inheritance is negligible. Exception: The decedent can choose German law for real estate which is situated in Germany, Art. 25 II EGBGB. The choice has to be made in the testament or inheritance contract.
32. First and second grade remission in International Inheritance Law If a renvoi does exist, German inheritance law accepts the reference back to German law, Art. 4 I EGBGB.
To prove the status of an heir, you can ask the surrogate's court for a certificate of inheritance.
28. Inheritance Tax and measures to reduce it Statute law in the process of amendment
29. International Treaties and Agreements to avoid the double taxation in Inheritance Law Statute law in the process of amendment
To make an official testament before a Notary Public, the testator can express his last will verbally or he can give a last will in writing to a Notary Public 77
34. Model of an open will before a Notary Public A very simple model of a last will could look like the following example: My last will Herewith I determine that my only daughter shall be my heir. Furthermore, I determine the following legacy: I bequeath my coin collection to my nephew. In Munich, on the … Signed by:
Dr. Prymusala & Colleagues BALMS GROUP INTERNATIONAL
We became a member of Balms Group International in August 2000. The terms merger and globalisation nowadays influence all business life in Germany as well as the practice of German law. Thus the keywords of the German legal world are, nowadays, manpower, specialization, know-howmanagement, extension of cross-border activities, further international offices and extension of the areas of work and of legal services. A growing demand for national and international legal assistance exits because of the considerable competition in the areas of industry and services. A number of businesses-including small companies-have established offices worldwide and cooperate with international partners so as to increase sales. Further a lot of Germans invest in real estate for private reasons; in Spain alone about 500.000 properties are owned by Germans because they long for sun and the Mediterranean countryside. The demand is growing, an international active network is important for the economic and the private considerations of many clients. On the other hand Germany is still an industrial state which allows foreign investors to come to Germany. For this reason we are glad to be a member of Balms Group International, which enables us to provide our-German and internationalclients with German as well as international legal advice. Munich (main office) The firm Dr. Prymusala & Colleagues was founded in Munich in 1989. Our modern office is situated in the centre of Munich in the district NewhausenNymphenbrug, near subway U1. Thus we can offer easy access to for our clients. All the important courts are near the office, too. Our clients comprise medium-sized industry, services, associations and private persons. Branch in Au i.d. Hallertau Since July 2003 the firm Dr. Prymusala & Colleagues of Munich have a branch in the city of Au i.d. Hallertau as well. A number of people, including local tradesmen, wanted to be able to obtain legal advice without having to travel long distances. So the decision was taken to found a new branch. In Au i.d. Hallertau and the surrounding areaindustry is growing fast, especially medium-sized and family companies. And there are still tracts of undeveloped land - perhaps and opportunity for a foreign investor-only a short distance from Munich Airport.
PARTNERS Manfred Prymusala Jรถrg Zander
AREA OF SPECIALITY The areas of work in which we are specialized are among other things: - Civil Law (national and international), - Compensation for Damage, - Contract Law, - Employment Law, Inheritance Law and - Laws of Associations, including Sports Law. In the area of taxation we have for a number of years been and are still cooperating with tax consultants in Munich. We draft and implement all types of deeds and documents (for example real estate transactions and matters relating to corporate law) that require notarisation in cooperation with two experienced notaries in Munich. OFFICES Munich Au i.d. Halleartau BALMS GROUP INTERNATIONAL Dr. Prymusala & Colleagues Nymphenbruger StraBe147 a, 80636 Munich, Germany Tel: +49 89 13 27 23 Fax: +49 89 13 27 43 E.mail: firstname.lastname@example.org
GENERAL PRINCIPLES OF SUCCESSION LAW IN
Inheritance Law in
Gibraltar 1. General overview Inheritance is the practice of passing on property, titles, debts and obligations upon the death of an individual. It has long played an extremely important role in human societies. In common law jurisdictions such as Gibraltar, an heir is a person who is entitled to receive a share of the deceased's property via the rules of inheritance in the jurisdiction where the deceased died or owned property at the time of his death. Strictly speaking, one becomes an heir only upon the death of the deceased. It is improper to speak of the "heir" of a living person, since the exact identity of the persons entitled to inherit are not determined until the time of death. In the case where an individual has such a position that only his own death before that of the deceased would prevent the individual from becoming an heir, the individual is called an heir apparent. In modern legal use, the terms inheritance and heir refer only to succession of property from a decedent who has died intestate (without a will). It is a common mistake to refer to the recipients of property through a will as heirs when they are properly called beneficiaries
2. Estate Planning Estate planning is the process of accumulating and disposing of an estate to maximise the goals of the estate owner. The various goals of estate planning include making sure the greatest amount of the estate passes to the estate owner's intended beneficiaries, often including paying the least amount of taxes and avoiding or minimising probate and court involvement. Additional goals typically include providing for and designating guardians for minor children and planning for incapacity. It is important in an age where it is frequently common for individuals to own assets in numerous jurisdictions, for proper consideration to be given to estate planning. There are numerous ways of ensuring that ones estate will be properly managed and distributed on death and its important when advising on these matters that careful consideration is given to the laws of the different countries in which each asset is situate. The most common tools involved in estate planning include the drafting of a will, the corporate ownership of assets, various types of trusts, powers of attorney and various forms of property ownership (joint tenancy with rights of survivorship, tenan-
cy in common etc), some of which are set out in more detail later in this article.
3. The Will 3.1 General In common law, a will or testament is a document by which a person (the testator) regulates the rights of others over his or her property or family after death. In the strictest sense, a "will" is a general term, while "testament" applies only to dispositions of personal property, although this distinction is seldom observed. A will may also create a trust that is effective only after the death of the testator. As a general rule, it is advisable for the individual to have a valid will drafted in each jurisdiction where his or her assets are situate - this overcomes any potential issues regarding conflict of laws. A person of sound mind is able to execute a will and he or she must appoint an executor who will be responsible on the testators death of ensuring that the deceased's wishes are adhered to. A will is normally made for the purpose of making dispositions of property to take effect on or after the testator's death, but it may also be made for the purpose of appointing executors to manage or assist in
managing any part of his estate, for appointing guardians of his minor children after his death, for exercising any power exercisable by him by will, for revoking or altering any previous will of his, or for any similar purpose taking effect on or after his death. Every will has the essential characteristic that during the life of the testator, it is a mere declaration of his intention and may be freely revoked or altered. Until his death the will is without a fixed effect, and capable of operating on property which is acquired by the testator after the will is made. On his death it crystallises and takes effect according to the testators wishes contained therein. 3.2 Requirements for a valid will The will must be made in writing, and it may be written in any language, by hand or any other means, but it need not be written by the testator himself. The testator must declare in the presence of two witnesses that the document is his will. He need not inform the witnesses, or the executor of the contents of the will. The testator must sign the will in the presence of the witnesses. The witnesses must there and then attest the will by signing in the presence of the testator. The sig-
natures must be placed at the end of the will. The date of the will is the date of its signature by the testator. The original will is then usually kept at the lawyers office and a copy given to the testator. 3.3 Revocation of a Will Under the laws of Gibraltar the voluntary revocation of a will or codicil (see below) can only be effected: (i)
by another later will or codicil duly executed; (ii) by some writing declaring an intention to revoke the will or codicil and duly executed as a will; or (iii) by the burning, tearing or otherwise destroying of the will or codicil by the testator, or by some person in his presence and by his direction, with the intention of revoking it. As a will speaks from the testator's death and can be revoked only in one or other of the above mentioned ways, a testator cannot delegate the power to revoke his will after his death neither is a will revoked, nor the construction of it altered, by reason of any subsequent change of domicile of the testator.
It is important in an age where it is frequently common for individuals to own assets in numerous jurisdictions, for proper consideration to be given to estate planning A codicil is a document that amends, rather than replaces, a previously executed will. Amendments made by codicil may add or revoke a few small provisions (e.g., changing executors), or may completely change the majority or all of the gifts under the will. Each codicil must conform to the same legal requirements as the original will, such as the signature of the testator and two witnesses. When confronted with testamentary writings executed after the date of the original will, a probate court may need to decipher whether the document is a codicil, or a new
5. Administration of an estate on death (what happens if there is no will?)
will. Generally, if the second document does not make a complete disposition of the testator's property and does not revoke the will in its entirety, it will be presumed to be a codicil. 3.4 Exception to a written Will Donationes mortis causa are one of the relatively rare exceptions to the general rule of public policy in common law countries that dispositions upon death must be under a will that complies with applicable statutory requirements. A donatio mortis causa (Latin, meaning "gift on the occasion of death") is a gift made during the life of the donor which is conditional upon, and takes effect upon, death. It is separate and distinct from both a normal inter vivos gift, under which title passes immediately to the transferee, and from a testamentary gift, which takes effect under the provisions of a properly executed will. Where the subject matter is a chattel which has been delivered to the donee, the donee's title is complete on the donor's death, no further act being necessary. In the case of a chose in action or land, the donee's title is not complete on the donor's death as the legal title vests in the donor's personal representatives. The donee can seek the assistance of the courts to compel the personal representatives to do whatever is necessary to perfect the donee's title, and this is one of relatively few exceptions to the equitable maxim that "equity will not assist a volunteer." There are three requirements for a valid
donatio mortis causa, and these were laid down by Lord Russell CJ in Cain v Moon  2 QB 283: (i)
the gift must have been made in contemplation of, though not necessarily expectation, of death; (ii) the subject matter of the gift must have been delivered to the donee; and (iii) the gift must have been made under such circumstances as to show that the property is to revert to the donor if the donor should recover.
4. Probate (what happens if the deceased made a will?) Probate is the legal process of settling the estate of a deceased person, specifically resolving all claims and distributing the decedent's property under the valid will. Probate is a service that a court provides to confirm the validity of a deceased person's will. Once a will has been probated by the court, everyone can rely on its authenticity. Probate protects the instructions of the deceased, confirms the executor as the personal representative of the estate, protects the interests of family members who may have claims against the estate, and protects the executor against claims and law suits. It is not always necessary to obtain a grant of probate; some organisations, including insurance companies, banks and building societies, will release funds to the executor of the will without seeing a grant of probate if the amount is small and the situation is not complex.
In Gibraltar law, the administration of an estate on death arises if the deceased is legally intestate. If no will is left, or the will is invalid or incomplete in some way, then administrators must be appointed. The Administrator of an estate is the legal term referring to a person appointed by a court to administer the estate of a deceased person who left no will. Where a person dies intestate, i.e. without a will, the court may appoint a person to settle their debts, pay any necessary taxes and funeral expenses, and distribute the remainder according to the procedure set down at law. Such a person is known as the administrator of the estate and will enjoy similar powers to those of an executor under a will. They perform a similar role to the executor of a will but, where there are no instructions in a will, the administrators must distribute the estate of the deceased according to the rules laid down by statute and the common law. It is important to note however that certain property falls outside the estate for administration purposes, the most common example being houses jointly owned that pass by survivorship on the first death of a partner into the sole name of the survivor. Other examples include discretionary death benefits from pension funds, accounts with certain financial institutions subject to a nomination and the proceeds of life insurance policies which have been written into trust. Trust property will also frequently fall outside of the estate but this will depend on the terms of the trust.
6. Letter of Administration Upon the death of a person intestate, or leaving a will without appointing executors, or when the executors appointed by the will cannot or will not act, the Probate Division of the Supreme Court of Gibraltar
In Gibraltar law, the administration of an estate on death arises if the deceased is legally intestate
will appoint an administrator who performs similar duties to an executor. The court does this by granting letters of administration to the person so entitled. Grants of administration may be either general or limited. A general grant occurs where the deceased has died intestate.
7. Dependants Excluded by Will
7.1 The Inheritance (Provision for Family and Dependants) Act The Inheritance (Provision for Family and Dependants) Act provides provision for persons as set out below, to apply to Court for financial provision on the grounds that the deceased's will does not provide reasonable financial provision for the applicant. Section 3 (1) of the Act provides for (i) the wife or husband of the deceased (ii) a former wife or former husband of the deceased who has not re-married or (iii) a child of the deceasedâ€Ś" to apply to the court for an order on the ground that the deceased's will does not make reasonable financial provision for the applicant. The Act goes on to provide powers for the courts to order settlement of property as it so provides. 8. Simultaneous death Simultaneous death is a problem of inheritance which occurs when two people, at least one of whom is entitled to part or all of the other's estate on their death (usually a husband and wife) die at the same time in an accident. Under common law, if there was any evidence whatsoever that one party had survived the other, even by a few moments, then the estates would be distributed in that order, though the decedents could write (have written) a clause in the will that requires their property to be distributed as though each had predeceased the other. The common law does not accept the possibility of simultaneous death. Where there is no satisfactory medical evidence as to the order of death, the elder of the two is deemed to have died first. This can cause difficulties where for example the elder person had children prior to marriage. The rules can be ousted if inappropriate by an explicit provision in a will.
9. Forced heirship Wealthy individuals domiciled in a country with forced heirship laws sometimes seek to circumvent these laws by transferring assets into an offshore company and seeking to settle the shares in the company in a
trust governed by the laws of a jurisdiction outside their domicile. A Gibraltar company and trust are frequently used in this situation.
10. Corporate ownership of assets The corporate ownership of assets can be a very effective inheritance planning tool. On death a change in the shareholding or beneficial ownership of the company can be effected thus allowing ownership of the company and in turn the assets to be transferred to the beneficiaries. This method allows for a seamless transition from the testator to the beneficiaries. A letter of wishes is kept with the company documentation and on death the company managers will give effect to the deceased's wishes.
11. The Gibraltar Trust The concept of a trust can be confusing for those individuals used to a civil law based legal system. Developed under the common law legal system, a trust is essentially a method by which the individual or settlor divests his assets to his trustees for the benefit of those beneficiaries of the settlors' choosing, usually his or her spouse and children. The trust becomes the legal owner of the assets and manages the same for the benefit of the beneficiaries. No transfer takes place therefore on the settlors death, as the assets are already owned by the trustees. Trusts established for non-residents of Gibraltar do not pay any tax in Gibraltar even where the trustees are Gibraltar resi-
dents and the trust is fully managed from Gibraltar.
12. Why Gibraltar? Gibraltar is a sound jurisdiction from which to plan ones estate. It offers all the services expected of a top quality finance centre ("well regulated financial sector" confirmed an IMF report in May 2007) with an abundance of private banks as well as branches of well known international banks. Gibraltar also has a well regulated work force with expert advice readily available. The following taxes are not applicable in Gibraltar: Capital gains tax Wealth tax Inheritance tax Gift tax Estate duty Finally, there are no exchange controls in Gibraltar.
13. Conclusion Tackling inheritance issues earlier on in life is becoming increasingly important, in what is frequently an uncertain and quickly changing world. Proper legal and tax advice is important to ensure that ones assets and wealth are properly protected and also to ensure that ones heirs are adequately catered for. Writen by Paul L Borge BA (Hons) Partner Cruz & Co
Cruz & Co
BALMS GROUP INTERNATIONAL
Cruz & Co and the Acquarius Trust Company Limited were founded in 1996 and 1998 respectively. Cruz & Co is a general legal practise with specific expertise in Property Law, commercial and company law, civil litigation, financial services and private client works. The firm is known for its commercial approach ad progressive problem solving. Acquarius Trust Company Limited, are trust and company managers licenced by the Financial Services Commission. The company manages substantial international trusts for both corporate and private clients alike.
AREA OF SPECIALITY The areas of work in which we are specialise are among other things: - Commercial Law, - Company Law, - Contract Law, - Employment Law, - Laws of associations, including sports law, and - Compensation for damage. MEMBERS NICHOLAS P CRUZ LL (Hons) TEP SENIOR PARTNER PAUL L BORGE BA (Hons) PARTNER MOIRA T. BOSSINO LLB (Hons) ACQUARIUS TRUST LTD Nicholas P Cruz LLB TEP Director Serge Garcia FICS FICB TEP Director Paul L Borge BA (Hons) Director Pepe VAughn MBE MCIPR Director Paul Crudginton DIP DM MIDM Senior Company Manager CRUZ & CO Suite 2 y 3 1st & 2nd Floor ICOM House 1/5 Irish Town Gibraltar Tel: + (350) 20076552 Fax: + (350) 20076553 When dialling from Spain use 9567 E- mail: email@example.com Website: www.cruzlaw.gi
GENERAL PRINCIPLES OF SUCCESSION LAW IN
Inheritance Law in
1. General overview Succession is the transfer of a deceased's property to one or more heirs. The aim of 'succession law' is not only to secure the will of the deceased after his death, but also to support the continuity of economic life, protect the family and the interests of the decedent's creditors. These frequently opposed interests must be regulated by the succession law, which remains affected from the formality of the Roman law, structured into as many as 325 articles.
2. The ability to make a will. According to Art. 1719 CC, the persons who have no legal capacity to draw up a will are: 1. Minors 2. Persons under privative judicial assistance in whole, or those who have been deprived of the specific capacity to make a will. 3. People who are not conscious of their actions or who do not enjoy the use of their reason due to mental illness. One critical aspect is the moment at which a person makes his will. In all the above cases, a testators' will is null and void (Art. 1718 CC).
3. Forms of the wills and revocability Two general categories of wills are regulated in the Greek law: ordinary and the extraordinary wills. The difference consists in the extraordinary circumstances under which a person drafts an extraordinary will (at sea - on board, during a military campaign and during a blockade). Ordinary wills may be classified into three categories: a) holographic wills, b) public wills and c) secret wills. 1. Holographic Will A holographic will is handwritten by the testator in full, and dated and signed by him. The date must contain year, month and day (Art. 1721,1 CC). No further formalities are required. Any additions or amendments written by a third party, or any typed part leads to nullity. Persons who are unable to read a written document can not draft a holographic will.
2. Public Will The testator who intends to draw up a pubic will orally states his last will before a notary in the presence of three witnesses or another notary and one witness (Art. 1724 CC). The notary composes the proper notarial deed in accordance with the formalities of the Civil Code (Art. 17251737 CC). Next, the notary reads the deed to the testator and to other witnesses and finally all of them sign the deed. A mute or deaf mute person can not draw up a public will. 3.Secret Will In case of a secret will, the testator needs to deliver a document to a notary public in the presence of three witnesses or a second notary and one witness, stating to the notary that the document contains his last will (Art. 1738 CC). The document in question may be drawn up by the testator or by a third person, it may be handwritten or typed, but the testators' signature is needed on each sheet. Afterwards, the document must be sealed by the notary, who writes the name and surname of the testator and the time of the delivery on the envelope. Next, the document is signed by the testator and the witnesses (Art. 17411742 CC). If the testator states that he is unable to sign, a mention of the fact shall be made. A will, which is invalid as a secret will, may be valid as holographic will, providing it is written by the testator's hand, and dated and signed by him. Any form of will is freely revocable by the testator. The form of the testament is irrelevant. A will can be revoked by a subsequent will, if the latter contains a declaration that the previous will is revoked or contains testamentary dispositions that abrogates the former one. The revocation
can also take the form of a declaration before a notary in the presence of three witnesses. At this point we should mention that a subsequent will abrogates a previous one only to the extent that the subsequent will contradicts the previous one. The revocation can be legally revoked (Art. 1764 par. 2 CC). In this case the former will shall produce its effects as if it had never been revoked. Additionally to the above-mentioned general ways of revoking a will, Greek civil law regulates special ways that are applicable only to specific testamentary forms: a holographic will may be revoked if the testator destroys the document containing the will with the intention of revoking it or attempts such changes to it which normally would lead to the conclusion that somebody wished to revoke the written document (Art. 1765 par. 1 CC). As far as the secret will is concerned, if the testator retrieves from the notary a document he had previously delivered to him with the declaration that it contains his last will (secret will), then the will is automatically revoked, even if the testator had no intention to revoke the testament as such.
4. Written languages for a valid will The testator may draw up his last will in any spoken language, not only in the official (Greek) language. However, if the preferred language is not the testators' native language and additionally there is no adequate explanation for the use of that language, testators' animus testandi is to be searched and if the conclusion is that the testator had no testamentary intent, then the will is null. In a public will where, in the conviction of the notary, a testator ignores the Greek language or if the testator has declared that he ignores the Greek language, an interpreter shall be called upon to be present and sign the deed (art. 1737 CC).
5. Legacy (art. 1967-2010 CC) An heir, trustee or legatee may be burdened with the obligation to furnish a legacy. The legatee acquires a specific property, although the testator does not intend to give him the status of an 'heir'. In practice, the legatee is not liable for the liabilities of the succession. The testator may burden him with a legacy in favour of a third person (sublegacy).
In case of a secret will, the testator needs to deliver a document to a notary public in the presence of three witnesses or a second notary and one witness, stating to the notary that the document contains his last will
In his will, a testator may appoint one or more persons as executors of the will.. If more than one executor is appointed, they will act jointly. The decisions are taken by the rule of majority. 5. Fifth level If there are no relatives at the first, second, third and fourth level, the surviving spouse is called as the only intestate heir to the entire estate (Art. 1821 CC).
6. Intestate succession The intestate succession intervenes when there is no testament or transfer by virtue of a testament has been frustrated in whole or in part (Art. 1710 CC). Time of transfer is the time of death of the deceased. The intestate succession is affected by levels and lines. 1. First level Heirs in the first level of an intestate succession shall be the descendants of the deceased: children, grandchildren, great grandchildren etc. The closer descendant excludes the more remote descendent of the same in the same line. If a descendant is not living at the time of the deceased's death, his place is occupied by the descendant who is related to the deceased as a descendent of the deceased heir (succession by lines) (Art. 1813 par. 1 and 2 CC). At the first level the descendants are called to three quarters of the estate and the surviving spouse to one fourth of the estate. Children inherit in equal shares (Art. 1813 par. 3 CC). If the spouse is dead, the entire estate devolves to the descendants in equal shares. 2. Second level The second level of inheritance includes the deceased's parents, siblings, and the children or grandchildren of predeceased siblings (Art. 1814 par. 1 CC). The parents and siblings are called in equal shares
whereas the descendants of predeceased siblings inherit per lines (Art. 1814 par. 2 CC). The surviving spouse inherits one half of the estate when inheriting jointly with the relatives of the second level (Art. 1820 par. 1 CC).
6. Sixth level If , at the time of transfer of the estate, there are no relatives in the first four ranks and no surviving spouse, the estate belongs to the Greek state (Art. 1824 CC).
3. Third level The third level includes the grandfathers and grandmothers of the deceased and the children and grandchildren of their descendants (Art. 1816 CC). If at the time of transfer of the estate the grandparents on both sides are alive, they are the only heirs and they inherit in equal shares. If at the time of transfer the grandfather or the grandmother from either the paternal or the maternal side are predeceased, in his or her place enter his children or grandchildren (Art. 1816 par. 2 CC). The spouse inherits one half of the estate, when he/she is called at the third level. If the spouse is not alive, then the estate will be divided among the persons who belong to the third level.
Greek law protects family institution through the rule of forced heirship (Art. 1825 CC). This rule secures for the deceased' closest relatives and for the surviving spouse a part of the estate (pars hereditatis) that consists in the one half (Â˝) of their intestate share, even against deceased's intentions. An heir can be deprived of his share by the testator for a justified reason as specified in the Act (Art. 1839 CC) (Disinheritance). The reason must exist at the time the will is drawn up and must be mentioned in it. In general, forced heirs are the descendants, the parents and the surviving spouse of the deceased. If the testator's dispositions, by virtue of will, exclude the forced heir or imposes a restriction, such testamentary dispositions shall be deemed not written to the extent that they infringe on the heir's statutory portion. As in intestate succession, the closer relative excludes the more remote one. The surviving spouse of the deceased is a forced heir in any case, together with the descendants or the parents of the deceased.
4. Fourth level At the fourth level of intestate succession, only the deceased's great grandfathers and great grandmothers who are alive at the time of transfer are called. They inherit in equal shares regardless of their line (Art. 1817 CC). The surviving spouse inherits one half of the estate (Art. 1820 CC).
7. Forced heirship
8. Heirship certificate An heir to an estate may request a competent Court to issue a certificate stating his/her right to an inheritance and the portion attributable to him (heirship certificate). The person who is qualified as heir on the heirship certificate shall be deemed to have the right of inheritance referred to therein with no limitation other than those that may be mentioned in the certificate (1962 C.C.). The practical aspect of the heirship certificate is that any legal transaction entered into by a person indicated as heir in an heirship certificate with a third party, or by a third party in regard to the heir, shall be valid for the benefit of the third party to the extent of the above presumption of the capacity to inherit, unless if such third party was aware of the inaccuracy of the heirship certificate or of its revocation by the Court (Art. 1963 CC).
9. The executor of the will In his will, a testator may appoint one or more persons as executors of the will.. If more than one executor is appointed, they will act jointly. The decisions are taken by the rule of majority. The executor accepts his appointment unconditionally by a statement addressed to the registrar of the competent Court for the succession, before he assumes his duties. The registrar draws up a relevant report.
The appointment of an executor is void, if at the time of the acceptance of the function he was fully incapable or limitedly capable to conclude judicial acts (Art. 2018 CC). The main task of the executor is to take the legal actions expressly authorised by the testator or necessary for the execution of the dispositions. The executor has the right to manage the succession in whole or in part and his authority is a restriction to the rights of heirs and legatees or other beneficiaries. In turn, the executor's authority is limited, as he needs the permission of the Court for the succession, whenever it becomes necessary to sell real estate, treasury bonds or shares or bonds of joint stock companies belonging to the succession, or to contract loans, or to compromise a claim to which the heir does not consent, or when the testator has not released him from the above restrictions by an express declaration in his will (Art. 2021 CC). Under certain circumstances, the executor may demand reimbursement for everything he spent in order to implement the testamentary dispositions, as well as compensation for any damage he suffered in the performance of his duties. He is liable for any damages he causes to the succession, even if it is due to slight negligence (Art. 2023 CC). The executor's function ceases if he dies, becomes incapable or resigns. The
Court has the power to remove him from his function if he violates his duties or is unable to administer the estate. The function of executor shall cease where an heir has provided security deemed sufficient at the court's discretion to guarantee performance of the testamentary dispositions in relation to which the executor was appointed.
10. Inheritance transfer and contracts Article 368 CC prohibits every form of inheritance regulated by contract. A contract having as subject the succession of a living person concluded either with such person or with a third person, relating either to the whole or to a portion of the succession or a contract that limits the freedom of disposition by last will is null and void. A more specific form of the above prohibition is provided in Art. 1717 CC, which excludes the ability of more than one person to draw up a will in the same deed.
11. Inheritance tax and tax declaration Any property which is transferred by succession is subject to taxation, which is assessed according to the value of the property at the time of death of the deceased. Furthermore, the heir must enter any real estate at the land registry; otherwise the properties in question cannot be sold or transferred.
If the will was drawn up abroad by a person who does not possess Greek citizenship, then, according to Greek law, the will must first be probated at the country where it was made more assets that belonged to the heirs' personal property, and the heirs' creditors may confiscate elements of the succession. If the heir wishes to accept the succession and restrict his liability only up to the assets belonging to the succession (liability cum viribus hereditatis), he must accept it 'under the benefit of inventory' (Art. 1902-1912 C.C.). To enjoy this benefit, the heir must make a statement of acceptance 'under the benefit of inventory' before the clerk of the competent court of succession. The inventory must be made within four months after the declaration. The heir will lose the benefit if he does not make the inventory on time, if he
The amount of the tax is affected by the relationship between the deceased and the heir. Heirs must pay inheritance tax after submitting a tax declaration to the competent tax authorities. If an heir lives in Greece, the tax declaration must be submitted before six months elapse from the date of the deceased's death or from the date the will was probated. If the heir or the deceased lived outside of Greece at the
time of the death, the tax declaration must be submitted within one year from the above dates. The above time period of six months and one year may be extended for a maximum of other three months at the decision of the competent tax authorities, providing the heir applies for the extension and the tax authorities decide upon concurrence of serious grounds. If the tax declaration is submitted after the above time limits, then the heir will pay a fine
which depends on the delay.
12. Restrictions regarding the heir's responsibility Heirs are liable for the charges and debts of the succession, even with their own personal property. Estate and personal property will be aggregated at the time of the death of the deceased. The practical consequence of this is that every estate's creditor is entitled to confiscate one or
intentionally makes an incorrect inventory, if he administers the estate fraudulently or if he sells its immovable or securities without the permission of the court.
13. Ownership, acceptance and renunciation of the inherited property The succession devolves at the time of the deceased's death. The heir acquires the right to it ipso jure upon transfer (Art. 1846 CC). The time of transfer of the inheritance is the moment of the deceased's death (Art. 1711 par. 3 CC). Acceptance is the explicit or implicit declaration of a person that wishes to be an heir. However, the acceptance of the inheritance or legacy pertaining to the acquisition of ownership - or any real right- on real estate must be registered in the land registry (Art. 1193 par. 1 CC), otherwise the heir will never obtain the ownership or the real right on the real estate. If an heir wishes to renounce the succession, the time limit for the renouncement is four months as from the time he had knowledge of the transfer and the reason thereof or, in case of transfer by virtue of a will, the time period of four months will not start before publication of the will. In the event that the deceased's last residence was abroad or the heir knew of the transfer while he was residing abroad, the above time period for renouncing to the succession shall be one year. The succes-
sion shall be deemed accepted after the expiration of the above time periods.
14. Substitution of testamentary Heir (Art. 1809-1812 CC) A testator may designate a substitute heir in the event the heir instituted would forfeit his rights either before or after transfer (common substitution, Art. 1809 CC). The testator can indicate a substitute for the substitute. In case of doubt, a substitute heir shall be deemed designated as such, not only when the heir first called cannot inherit, but also when he does not wish to inherit.
15. Pension funds Pension funds are fully independent from the participation in the succession and they can not affect the succession as such or the participation rate and vice versa.
16. Inheritance- Private International Law aspects If the will was drawn up abroad by a person who does not possess Greek citizenship, then, according to Greek law, the will must first be probated at the country where it was made. Then it will be registered in the court of Athens. Registration requires the following documents: a certified death certificate translated into Greek, a certified copy of the will translated into Greek, and a certificate from the registrar indicating that the will has been probated in the foreign country.
KMG as a Law Office was established in 1973 and is situated in the center of Athens near the Courts and close to the commercial and administrative center of the city. The firm's partners and associates benefiting from their education and experience offer to its clientele high level legal services in the local business environment and in the international financial community with emphasis in the business, corporate, civil and real estate legislation. We are strongly committed to our clients, whether companies or individuals, and we offer the best legal solutions for them in the most effective and personalized way. Our lawyers are trained to understand the client's specific needs, goals and requirements and are focused in respecting any deadlines and setting pragmatic solutions. We can serve our client's main interests in many countries and continents as our firm is a member of BGI (Balms Group International), an association of international independent law firms. Our partners and associates speak Greek, English, German, Italian and Spanish.
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GENERAL PRINCIPLES OF SUCCESSION LAW IN
Inheritance Law in
Inheritance (succession) is regulated by the Act IV of 1959 on the Civil Code of the Republic of Hungary. Before reviewing the most important rules of the inheritance law, some remarks should be made. Inheritance is the absolute succession (universalis successio) of the property (estate) occurring upon the death of a person. Hungarian law regulates within the framework of the law of inheritance other forms of successions, i.e. legacy and testamentary gift (donatio mortis causa), which can be regarded only as special successions (singularis successio) and not as inheritance, since in these cases the heir acquires only certain part of the estate without being obliged to discharge the burdens and debts of the estate. Although forced share is also regulated within the framework of the law of inheritance, however, it neither can be regarded as inheritance, rather as a claim of a contractual nature.
I. Testamentary inheritance Testamentary inheritance is the principal form of inheritance, since statutory inheritance can only take place if no last will and testament is left, or even if there is, but it is null and void, or even if it is valid and effective, it still fails to dispose of the entire estate of the decedent. I.1. Types and forms of last wills and testament a.) Will: unilateral statement b.) Contract of inheritance: the decedent undertakes the obligation to name the contracting party as his heir in exchange for support or a life-annuity, provided that the named person outlives him. c.) Testamentary gifts (donatio mortis causa): the gift is given under the condition that the recipient outlives the donor. I.2. a. Capacity to inherit All persons and legal entities which have legal capacity. I. 2. b. Capacity to make a last will and testament Only those persons who have full capacity, which means persons older than 18 years and whose competency is not limited or disqualified by law. Incompetent persons cannot make a last will and testament under any conditions. Persons of limited capacity (between 14 and 18 years and persons being under guardianship which limits their capacity) shall only be entitled to
I.6. Consequences of the invalidity and inoperability of wills By the final and binding order of the court concerning the determination of the invalidity and inoperability of the will, the person who impugnated sucessfully the will becomes the heir and the testamentary heir becomes psuedo-heir. If any disposition from the several dispositions of a will is invalid or inoperative, it shall not affect the validity or effect of the other dispositions, unless otherwise provided by the testator.
make public wills. Blind or illiterate persons or persons who are incapable of reading or signing their names shall not be entitled to draft holographic private wills, they can only make validly public wills and nuncupative wills. Mute and deaf-mute persons cannot validly make nuncupative will.
I.3. Wills I.3.1. Decedents shall be entitled to dispose of their property, or a part thereof, by a will for the time of their death. Wills must be drafted only in person. Will is an unilateral statements of the decedent which can be withdrawn/revoked at any time. Appointment of a heir belongs to the typical content of a will, however, under the valid Hungarian law (contrary to i.e. roman law) it is not considered to be a legal requisite of a will, which means that documents which leave a legacy or contains only a negative disposition regarding the estate (exclusion from inheritance or disinheritance) can also be regarded as wills. I.3.2. Types of wills a.) Holographic wills1. in form of a public document (public will) 2. in form of a private document holographic private will (written by the own hands of the decedent) allographic will (written by other person) private wills deposited by notary public
ciles to the disappearance of it as well. A private will deposited with a notary public shall become inoperative if it is recovered by the testator, unless the deposited document is otherwise in conformity with the requisites of a holographic will. A nuncupative will shall become inoperative if the testator had the opportunity to draft a will in another form without any difficulty during a period of three consecutive months following the termination of the situation that provided the conditions for making the nuncupative will.
b.) Nuncupative wills (can be made only under extraordinary circumstances validly, and its term of validity is restricted). I.4. Invalidity of the wills Wills could only become invalid by way of the impugnation thereof by the person who himself would inherit or would be relieved of a burden if the will is declared invalid or inoperable. He shall be entitled to impugnate the will at any time. The will is invalid if it is defective owing to the 1. absence of the testamentary capacity 2. deficiency regarding the testamentary intent of the testator 3. default of the expression of testamentary intent 4. content of the will
I.5. Inoperative (null, repealed) wills This expression means that the will fails to produce the originally intended effects aimed by the testator by any reason specified by law which occurs after the disposition of the testator. Impugnation of the entitled person can produce it, like in case of invalidity. 1. 2.
Wills shall become inoperative if revoked with explicit declaration. If the testator drafts a new and valid will, the previous will shall be deemed abrogated/revoked. A holographic will shall become inoperative if it is destroyed either by the testator, having testamentary capacity, or by another person with his consent, or the testator reconciles himself to the destruction beyond his control (i.e. it is burnt) and if he recon-
I.7. Legacy Legacy is an institute which can be made only in a will. As it was mentioned before, under Hungarian Law legacy is not considered to be inheritance, it is only a special succession (successio singularis), according to which the legatee acquires certain property which exist in the inheritance without being obliged to be responsible for the estate debts, except for the case that the legatee received satisfaction at the expense of another estate creditor, in this case he shall, in accordance with the regulations governing unjust enrichment, be liable to that creditor if the creditor has not been
Hungarian law regulates within the framework of the law of inheritance other forms of successions
has not made a testament or if the latter only disposed of a part of the estate.
able to obtain satisfaction from the heir. However, the legatee shall be responsible, as would an heir, only with respect to the legacy or enjoinder burdening him. I.8. Enjoinder A testator shall be entitled also to burden a person who receives a part of an estate with an obligation (which can be material or non-material service) for which the recipient (who is not necessarily indicated) will not become entitled to claim by way of court. Interested bodies, however, shall be entitled to request the performance of a public interest enjoinder by the mentioned way that consists of a service suitable for being the subject of a contract. I.9. Designation of substitute heir The testator can obviously exclude the intestate inheritance in his will with an explicit declaration. In the absence of such an explicit declaration the regime of the intestate inheritance will apply also if it can
be deducted from the interpretation of the will that the testator's intent was that the estate should be inherited only by the testamentary heirs. This testamentary intent is principally the designation of a substitute heir. The substitute heir will only inherit if until the time of the descent and distribution (time of the death of the decedent) the designated heir is disqualified from inheritance. The testator can designate the substitute heir either for the disqualification of his testamentary heir, or for his legal heir.
II. Statutory inheritance (Intestate inheritance) Under Hungarian law inheritance can occur under the law or by testamentary disposition. If a testamentary disposition has been left by a decedent, it shall determine the order of succession. If there is no testamentary disposition, law shall provide for the order of succession. Thus, statutory inheritance is applicable in case that the deceased
II.1.Regime of the statutory inheritance according to the Civil Code a) Child of a decedent shall be the primary legal heir. Two or more children shall succeed in equal shares. If the child or a more distant descendant is disqualified from inheritance (i.e. the descendent predeceases the testator, is considered unworthy of inheriting or is disinherited), the children of a disqualified person shall inherit the respective part of the estate in equal shares. (in case the descendents inherit, the spouse inherit the right of survivorship on the estate). b) in the absence of descendants, the spouse shall inherit, except the property being subject to lineal inheritance. Until there are descendents of the decedent, the spouse cannot inherit. c) if there is no descendant or spouse, parents of the decedent shall inherit in equal shares. In the place of a parent disqualified from inheritance, the descendents of such parent shall inherit in the same manner as the descendents of a child inherit in stead of the child. If a parent disqualified from inheritance has no descendant, the other parent alone or his descendants shall inherit. d) in the absence of the above-mentioned, the grandparents of the decedent shall become legal heirs in equal shares. In the place of a grandparent disqualified from inheritance, the descendants of the grandparent shall succeed in the same manner in which the descendents of a disqualified parent succeed in the stead of the parent. If a disqualified grandparent has no descendent, the spouse of such grandparent (the other grandparent) shall inherit, and if he is also disqualified,
A testator shall be entitled also to burden a person who receives a part of an estate with an obligation
his descendents shall inherit in his place. If either couple of grandparents has been disqualified and their descendants neither can inherit in their place, the entire estate shall be inherited by the other couple of grandparents or their descendents. in the absence of the mentioned, more distant ancestors of the decedent shall become legal heirs in equal shares. In this case descendents of these ancestors cannot inherit under any circumstances, and secondly, all ancestors of the decedent shall inherit at the same time in equal shares (i.e. great-grandparents and great-great-grandparents together in equal shares). If there is no other heir, the estate shall pass to the state. The state is a legal heir. It should be remarked that adopted person shall, during the existence of adoption, can inherit as a blood descendant of the adoptive parent. Adoption shall not affect the adopted person's legal right to inherit from his blood relatives. Cohabitants cannot inherit under Hungarian law, but the new Code Civil which will probably enter into
force in 2009 plans to introduce the possible inheritance of cohabitants. II.2 Right of survivorship II.2.1. The law confers the beneficial right on the surviving spouse until his death, namely usufruct on all property which he does not otherwise inherit, namely which the descendents inherit or which property belongs to lineal inheritance. The right of survivorship devolves on the widow ipso iure at the time of the decease of the descent. In case of testamentary inheritance the spouse instead of inheriting this right, he can only claim the beneficial right of certain properties of the estate on the ground of forced share. II.2.2.The two preconditions of this right is the existence of a valid marriage with the decedent at the time of the descent and distribution of the estate, and secondly the non-existence of reasons of disqualification regarding the surviving spouse. With regard to the cases of disqualification two important remarks should be made: a.) In case of an existing (absence of a final and binding ruling of dissolution) and valid marriage the surviving spouse can be still disqualified if the spouse lived separated at the time of
descent and distribution and it is demonstrated by the circumstances that restitution of conjugal community was not expected. b.) n case the testator bequeaths his property to a third person and fails, ignores to refer to the beneficial right of his spouse, this should mean that the testator disqualified his spouse from this right and in this case the surviving spouse will only be entitled to forced share relative to right of survivorship. II.2.3. It should be distinguished the beneficial right based on law and on testament. a.) Beneficial right based on/granted by testament basis of this right is the testament this right does not cease when a new marriage is entered to limitation or redemption of this right is not possible b.) Beneficial right based on law (right of survivorship) basis of this right is the law The beneficial right of the surviving spouse ceases if the spouse remarries, but a possible cohabitant relationship of the surviving spouse does not affect this right. limitation or redemption of the right is possible
title must prove the lineal nature of the property. Only that person is entitle to put forth a claim for the lineal inheritance who would inherit according to the order of inheritance. Lineal inheritance can be excluded by a testament, however, in this case parents of the decedent shall be entitled for forced share regarding the lineal property.
Only descendants may request any limitation of right of survivorship, but this limitation can only exist to such degree that the limited right provides for the needs of the spouse, in consideration of the property he has inherited, his own property, and the earnings from his labor. Limitation can be requested without time limitation. Both the spouse (by unilateral act) and descendants, including lineal heirs (by unilateral act or by common assent) shall be entitled to request the redemption of the right of survivorship, with condition that the redemption of the beneficial right regarding the dwelling in which the spouse lives and regarding the furnishings and household accessories being used by him cannot be requested (in case of a common assent by the interested heirs redemption can be extended to such things as well). II.4. Lineal inheritance II.4.1. Lineal inheritance is a special Hungarian legal institute. Lineal inheritance, in case that legal heir is not a descendant of the deceased, restores/returns the property to the relative in the ascending or collateral line from whom the property come down to the decedent by inheritance or by gratuitous bequest. Lineal inheritance (inheritance by family line) is a system which supplements the
system of statutory inheritance. Estate being subject to lineal inheritance (ancestral estate) forming a separate part of the estate being subject to statutory inheritance. II.4.2. Conditions: no descendents are left after the decedent, or all descendents are disqualified, property acquired by the decedent by inheritance or by gratuitous bequest and property acquired from an ancestor, namely from one of the parents or more distant ancestor, or from a brother or sister in case that the property had been inherited or gratuitously received by the brother or sister or their descendant from their and the decedent's common ancestor. there is a lineal heir. If there is no lineal heir, lineal property shall be treated like the decedent's other property (being subject to statutory inheritance). II.4.3. Lineal inheritance shall not apply to: lineal property that no longer exists at the time of the decedent's death; property that has replaced the lineal property or was purchased for the
value of the lineal property; gifts of common value. Substitution or compensation for the value of lineal property that does not exist at the time of the decedent's death (transferred, perished, consumed, etc.) shall not be effected.
As a general rule, lineal property shall be surrender in kind. With regard to the supplementary nature of the lineal inheritance, whosoever would put forth an inheritance claim under this
Both the spouse (by unilateral act) and descendants, including lineal heirs (by unilateral act or by common assent) shall be entitled to request the redemption of the right of survivorship
II.4.4. Regime of the lineal inheritance a parent shall inherit the property that has come down to the decedent from him or from one of his ancestors. Descendants of a disqualified parent shall inherit in his place according to the general provisions on intestate succession. if there is neither a parent who is entitled to inherit a lineal property nor a parental descendent, the grandparent, and if there is no grandparent, a more distant ancestor of the decedent shall inherit the property that has come down to the decedent from him or one of his ancestors. as it was mentioned before, if there is no lineal heir, lineal property shall be treated like the decedent's other property. II.4.5 Accordingly, the regime of lineal inheritance has the following differences comparing to statutory inheritance: 1.
Descendents of the grandparents cannot inherit as under statutory inheritance The property is inherited only in the family line from whom the property is
originated, and it is not divided between the couples of the ancestors (parents, grandparents). The lineal property is inherited only until that ancestor from whom the property (directly, indirectly or gratuitously) got/formed part of the inheritance More distant ancestors cannot inherit together at the same time and in equal shares, but from them only that ancestor inherits from whom the property (directly, indirectly or gratuitously) got into the inheritance.
II.5. Exclusion from the intestate succession The testator can name any person as a heir in his testament, and with regard to his legal heirs or persons who could become his legal heirs he is entitled to exclude them from the intestate succession, either by naming other persons as his heirs (in this case the descendents of the disregarded legal heir are also excluded) in his will or by making an explicit statement in his will (in this case the descendents of the explicitly named and excluded legal heir will not be excluded). Exclusion needs not to be justified, but the exclusion does not affect the claim of the legal heir for forced share in case he is entitled for it. II.6. Disinheritance Disinheritance affects only those who are entitled for forced share pursuant to the law. If a person is validly disinherited by a testator in his testamentary disposition, he shall be deprived of a forced share of inheritance.
The testator can name any person as a heir in his testament, and with regard to his legal heirs or persons who could become his legal heirs he is entitled to exclude them from the intestate succession Disinheritance shall be valid only if the testamentary disposition expressly indicates the reason thereof and which reason is explicitly determined by the Civil Code. The reasons can be i.e. if the person entitled to force share is unworthy for inheritance, has committed a serious crime to the injury of the testator, has attempted to take the life of the testator's spouse or his next of kin, has seriously violated his legal obligation to support the testator; lives by immoral standards; his spouse can also be disinherited for conducts which seriously violating matrimonial duties. II. 7. Forced share II.7.1. Persons entitled for forced share According to the valid rules it is a minimum share/proportion of the closest relatives of descendent, and the Hungarian Civil Code stipulate it rather as a contractual claim against the inheritance (against the heirs), which takes place with the death of the decedent, but the persons entitled for force share do not become successors of the decedent, but will have the same position as creditors of the estate. The descendants, spouse (in form of beneficial use), and parents of a testator shall be entitled to a forced share of inheritance if such person is, at the time of descent and distribution, a legal heir of the testator or would be one in the absence of a testamentary disposition, in the following manner: -
descendents: in order of disqualification, applying the principle of substitution spouse: in form of beneficial use, beside descendants and lineal ascendant;
in the absence of descendents, against the whole estate parent(s): in the absence of descendents, against the lineal property (with the forced share of the spouse regarding the beneficial use); in the absence of descendents and spouse, against the whole estate.
II.7.2. Basis of forced shares: The basis of a forced share of inheritance is the net value of an estate, and the net value, at the time of donation, of the donations granted by the decedent inter vivos. However, donations shall not, but only property items included in the estate shall serve as a basis for the forced share of inheritance due a spouse in the form of beneficial use. Costs of burial of the testator, cost of acquiring the estate and cost of probate proceeding, plus testators debts must be deducted before handing over the forced share. II.7.3. Extent of forced share: Descendants and parents shall be entitled to half of what is due to a legal heir as calculated on the basis of the forced share of inheritance. If a spouse is entitled to beneficial interest as a legal heir, his forced share of inheritance shall be the limited degree of beneficial interest that provides for his needs, in consideration of the property he has inherited, his own property, and the earnings from his labor. Otherwise the spouse shall be entitled to half of his legal share of inheritance as a forced share. Redemption
of the forced share based on the right of survivorship is possible, but the spouse will receive not a share of child (like in case of redemption of right of survivorship), but half of it. II.7.4. Value serving for satisfaction of a forced share. Inclusion Everything received by a beneficiary from the estate under any title as well as any gratuitous donations he has received from the testator shall be applied to satisfy the forced share of inheritance, on condition that it shall be added to the basis of the forced share of inheritance, since testator is entitled to cancel inclusion of the mentioned into the basis of the forces share with express statement. In this case donations whose inclusion has been canceled by the testator shall not be added to the basis of a beneficiary's own forced share of inheritance. Cancellation of inclusion shall not injure the forced share of another eligible person. If a person entitled to a forced share of inheritance has been disqualified from inheritance, not only the value of all of the donations received by that person shall be included in his descendant's forced share, but also those received by his descendants. Two or more descendants shall include donations in proportion to their shares in the estate. II.7.5. Responsibility for Satisfaction of a Forced Share
Responsibility for satisfaction of a forced share primarily falls on persons receiving a share from the estate. In case that those donations which form part of the basis of the forced share, donees have only secondary responsibility, thus they shall be responsible for that part of the forced share of inheritance that cannot be satisfied from the estate, irrespective of the temporal order in which the donations were received. The proportion of responsibility of several persons shall be determined by the applicable value of the benefits received, thus in contrary to the estate debts where they have joint and several liability, heirs are responsible for the satisfaction of the forced share only in proportion of the grants received. A person who has lost a benefit through no fault of his own shall not be liable for a forced share of inheritance. As a general rule a person who has
Descendants and parents shall be entitled to half of what is due to a legal heir as calculated on the basis of the forced share of inheritance
received a benefit shall be responsible for satisfying a forced share up to the total value of his grant. However, law moderate the responsibility of whom itselves are also entitled for forced share: this forced heir shall be responsible only up to the value of the grant that is in excess of his legitimate hereditary share. II.7.6 Dispensation of Forced Shares of Inheritance Claim for forced share is not an automatic claim, since, although the claim for forced share is produced at the time of the death of the decedent, it shall be enforced by those who are entitled for it within 5 years. Forced shares of inheritance shall be dispensed without any encumbrance or limitation. If a testator has left property with any limitation or encumbrance to a forced heir, the limitation shall only apply to what is above and beyond the forced share of inheritance. If a forced share of inheritance is dispensed and the remaining property is insufficient to ensure the spouse's limited right of survivorship, the part of the forced share of inheritance ensuring limited enjoyment can only be dispensed after enjoyment is terminated. Dispensation shall be made principally in money with two exceptions. III.1. Legal effects of inheritance Descent and distribution shall occur upon the death of the testator. Upon descent and
distribution, heirs shall acquire the estate, their legitimate shares in an estate, or certain objects from an estate (inheritance) without acceptance or other legal act. This means that the heir acquires the right of ownership of the estate and is entitled for the right of possession, right of use and enjoyment, and the right of disposition of the objects forming part of the estate. The debts of the deceased also pass to the heirs as well. III. 2. Estate Debts a) costs of a proper burial for the testator; b) applicable costs of acquiring, securing, and handling an estate (estate costs), as well as the costs of probate proceedings; c) the testator's debts; d) obligations based on the forced share; e) liabilities based on legacies and enjoinders. Debts shall be satisfied in this sequence established for the different categories of estate debts. In case that full satisfaction of all of the debts of a debt category is no longer possible, satisfaction shall be made according to the proportion of claims. If an heir fails to observe these provisions for reasons attributable to him, he shall, for this reason, be responsible with his entire property to creditors who remain unsatisfied. After the full satisfaction of the debts
determined in section a)-e) the remaining part of the estate can be handed over to the heirs. III.3. Limited Responsibility for Estate Debts Heirs (only if obtaining the estate free of charge, contractual heirs and persons entitled for forced share are excluded) shall be responsible for estate debts (until their hereditary share), however, their responsibility is restricted/limited, since they are responsibilities with the objects and proceeds of the estate. If the objects or proceeds of an estate are not in the heirs' possession at the time the claims are enforced, the heirs' other property shall also be appropriated up to the value of their inheritance to cover the claims. III.4. Joint and several responsibility for estate debts Heirs shall be subject to joint and several liability for common estate debts both before and after the distribution of the estate, with two exceptions: a.) the heir to whom a testator has left a specific thing or right that is of no greater value than a gift of usual value shall be liable for the claims of estate creditors only if the claims cannot be recovered from the other co-heirs b.) responsibility for the satisfaction of forced share shall be determined by the applicable value of their grants.
III.5. Distribution of the estate In case there are two or more heirs, before the estate is distributed they are jointly entitled to the estate. The general provisions of co-ownership shall be applied to the community of co-heirs, whereby the estate's claims can only be demanded in the name of all of the heirs and in their favor, and debtors shall only be able to effect performance to all of the heirs. The community shall cease with the distribution of the estate. Usually it takes place after the satisfaction of the estate debts. The shares of the heirs should be determined in the course of the distribution. Testators shall be entitled to determine, by testamentary disposition, the manner in which their estates will be distributed. IV.1. Disclaimer of inheritance: In a written contract concluded with the decedent persons entitled legal inheritance can disclaim their inheritance in whole or in part (unless it is otherwise agreed by the parties, it also implies disclaimer of the forced share). The disclaimer only affect the descendents of the disclaimant if it is so stated in the agreement or if it occurs in return for a satisfaction reaching the forced share of inheritance. IV.2. Repudiation of inheritance: A (testimonial or legal) heir shall be entitled to
repudiate, with an unilateral declaration made in any form, the inheritance after descent and distribution. The state, as a legal heir, shall not be entitled to disclaim an inheritance. The repudiation never affects the descendents of the heir making the repudiation. The consequence of the repudiation is the disqualification from the entire inheritance part of the respective person making the repudiation, partial repudiation is invalid with one exception. An heir who explicitly or implicitly waives the right to disclaim his inheritance after descent and distribution shall no longer be entitled to disclaim the inheritance. Waiver of the right to disclaim an inheritance shall be effected by a statement filed with the notary public competent for the probate proceeding. V. 1. Special provisions relating to companies: Upon the death or termination of a member, his business share shall pass on to his heirs. The company's article of incorporation may prohibit such transfer. V. 2. International private law in succession: According to the Act XIII of 1979 on International Private Law legal relationships of inheritance shall be adjudged on the basis of the law which was the personal law (nationality) of the decedent at the time of his death. A will shall be adjudged on the basis of the law which was the personal law of the testator at the time of his death. A will and the withdrawal thereof shall be formally valid if they comply with the Hungarian law, or with the law in force at the place and time of the making and withdrawal thereof, or the law which was the personal law of the testator at the time of the making of the will and the withdrawal thereof, or at the time of the testator's death, or the law in force at the testator's place of residence or usual place of abode at the time of the making of the will and the withdrawal thereof, or at the time of the testator's death, or in the case of a will relating to real property, the law applicable at the place of location of the real property. V.3. Life insurance civil law: in case that the no beneficiary is named in the contract, heirs of the insured will be entitled for the insurance premium in such proportions which would be applicable for
In case there are two or more heirs, before the estate is distributed they are jointly entitled to the estate.
them in case of inheritance. The Supreme Court of Hungary has, however declared that in this case the premium payments shall not form part of the estate. -tax legislation: like in Spanish law, Hungarian tax legislation considers that the sums received by insured persons or beneficiaries on the basis of an insurance contract are subject to tax according to Act 117 of 1995. V.4. Property insurance: insurance premium payable pursuant to property insurance is forming part of the estate. V.5. Marital property: According to the rules of marital property only Â˝ of the asset acquired in the course of the matrimonial cohabitation are forming part of the estate. V.6. Inheritance tax Act XCIII of 1990 on Duties determines the provisions of inheritance tax and donation inter vivos in the same chapter. V.6.1. Basis of Inheritance tax The tax base shall be the net value of an inheritance which shall be the market value of the property acquired, after the following deductions: a.) the estate debts and the value of any other encumbrances prorated to each heir, shall be deducted from the market value of the property acquired. b.) The estate charges pertaining to individual property items that are subject to payment of duties as forming part of the estate shall be deducted from the market value of the property in question. The estate charges applicable to the entire estate shall be taken into consideration in the proportion of dutiable property acquired by the heir in comparison with the non-dutiable property. c.) If the estate or gift includes an automobile or trailer as well, the value of such shall not be considered when calculating the net value of other estate or gift.
d.) The value of the forced share of inheritance shall be deducted from the hereditary share of the heir required to surrender such share. An heir who satisfies the claim of another party entitled to a compulsory share with cash or some other consideration, which is not part of the estate, shall pay a duty on onerous transfer of property, while the party entitled to such compulsory share shall pay inheritance duty. V.6.2. Subject of inheritance duty Property acquired on the basis of inheritance - including redemption of usufruct, legacy or enjoinder, a compulsory share of inheritance, or a gift causa mortis (testimentary gift). Any and all property items granted to a third party from the estate based on the testator's disposition shall be considered as legacy devolved from the testator directly upon the third party for duty assessment purposes. The value of such property items shall be deducted from the value serving as the basis of the duty on the inheritance (legacy). Any inheritance (legacy) devolved upon, but not yet delivered to the decedent shall be added to the estate. In this case, duty on inheritance shall be paid separately for the estate devolved upon the decedent, in accordance with the family relationship between the first and the further decedents. Such duty shall be paid by the heirs in proportion to their shares of inheritance.
No duty shall be payable if inheritance is waived/disclamed without consideration. If the inheritance is waived for consideration, the duty on gifts shall be payable upon such consideration. An heir or legatee who disclaims the inheritance or legacy after descent and distribution is not obliged to pay inheritance duty. V.6.3. Rate of inheritance tax The amounts of duty on inheritance shall be calculated on the net value of the inheritance received by any one heir, legatee or donee, according to progressive rates which are lower in case of acquisition of residential property. Inheritance tax payers are classified into three groups: -
Group I.: decedent's children, spouse, parents, and grandchildren supported in the decedent's household in the absence of a parent (adopted, step-, and foster children shall be considered as being the same as biological children and adoptive, step-, and foster parents shall be considered as being the same as biological parents) Group II.: decedent's grandchildren, grandparents, and brothers and sisters not included in Group I Group III.: all other heirs
V.6.4. Duty exemptions inheritance (legacy) bequeathed for scientific, artistic, educational, cultural, and public welfare purposes in
Hungary inheritance of and property contributions (business shares, co-operative business shares) due to members of business associations; the part of movable inheritance whose market value is less than 300 000 HUF per heir. inheritance of usufruct or use of residential property by the surviving spouse; the inheritance if the decedent is a minor, and his estate is inherited by his parents, including adoptive, step, and foster parents; inheritance of ownership (ownership share) of a plot of land suitable for the construction of a residential house, and rights of pecuniary value in respect of such real property, if the heir builds a residential house on such inherited real property within 4 years of the definitive delivery of the estate.
V.6.5. Duty allowances an heir under the legal age shall have until the second year from his reaching legal age to pay the inheritance and real estate registration duties without any late penalties imposed. Prior to the expiration of this deadline such debts may be paid off with a reduction of 10 per cent, not to exceed 70 per cent, for each calendar year preceding the deadline when payment was effected in respect of the inheritance of title of ownership or certain rights to agricultural land, half of the regular inheritance duty shall be paid V.7. International treaties and agreements to avoid double taxation on succession with Austria, Romania
Hungarian tax legislation considers that the sums received by insured persons or beneficiaries on the basis of an insurance contract are subject to tax
Kovács Réti Szegheo Attorney´s BALMS GROUP INTERNATIONAL
Kovács Réti Szegheo Attorney´s Office was established in 1992 and has Brown and expanded ste-adily ever since to become one of the largest Hungarian-owned law offices now. The Office was one of the first to contribute to the creation of a market economy in Hungary by solving complex legal tasks related to the establishment and operation of business organizations and privatization. To meet the expectations of business organisations and the challenges of the increasingly competitive legal counselling market, Kovács Réti Szegheo? Attorney´s Office has expanded its staff by hiring associates prominent in the knowledge and practise of fields of primary importance in terms of the professional focus of the Office, particularly including corporate law, securities law, bankruptcy law, competition law and intellectual property law. Due to the development of the Hungarian legal system and the economy, the Office continues to extend its practice to new fields such as the application of laws on the Internet, e-business, data protection, environmental protection, etc. Our Office can perform its tasks at the same standard in German and English as in Hungarian. In addition to the high expertise, the availability of technical means and their application for quick, precise and proficient legal counselling are also considered very important.
MEMBERS Associates: Árvid Hauck Ágnes Iványi Mónika Kapetz Attila Kóvacs Erno Lovász Zita Orbán
András Réti Olga Réti Edit Sjamsuddin Miklós Szegheo Zita Tamás Enikó Vida Office manager: Anita Ihász Dr. Kovácsné
AREA OF SPECIALITY - Financial and securities law, - Acquisitions, organisational transformation, - Competition law, - Corporate law, - Bankruptcy, liquidation and execution law, - New branches of law related to the information society, - Consumer protection, product liability, environmental protection, - Protection of industrial property, intellectual property rights, copyrights and neighbouring rights, - Real estate law, - Employment law, - Customs law, - Representation in economic lawsuits and arbitration proceedings. KÓVACS RÉTI SZEGHEO ATTORNEYS AT LAW Zugligeti úl 41, H 1121 Budapest. Hungría Tel: +361 275 2785 Fax: +361 276 2784 E-mail: email@example.com
GENERAL PRINCIPLES OF SUCCESSION LAW IN
Inheritance Law in
REGULATORY FRAMEWORK Like much other legislation in Morocco, the legislation regulating the courts and court procedure has been amended over the last few years. There have been two main sorts of amendment: the first is the amendment to the Civil Procedure Code in 2007 effected by Law N째 08 05 on arbitration and conventional mediation, which put in place a formal mediation framework and improved the local laws on arbitration. Secondly, Law N째 53-95 also established commercial courts. Both of these steps are aimed at bringing Moroccan legal procedure in line with international standards and providing a suitable forum for commercial disputes, particularly as foreign investment in the country increases. There are a number of sources of law on the judiciary and civil procedure: the constitution, Laws and Dahirs and Codes.
Constitution Article 82 of the Moroccan Constitution ensures the independence of the judiciary. Magistrates are appointed by Royal Decree and are irremovable. Magistrates are supervised by the Supreme Council of Magistracy, which is ultimately presided over by the King. Laws The judicial system is regulated by Law No 1-74-338 of 15 July 1974. Law N째 53-95 governs the commercial courts. Dahirs are decrees that give effect to the laws. Codes The Civil Procedure Code regulates civil, labour, commercial and administrative procedural matters; it also contains rules relating to arbitration. The Criminal Procedure Code deals with matters relating to criminal procedure.
THE COURT SYSTEM IN MOROCCO There are six components to the Moroccan judicial system. These can be roughly divided into 3 types of courts: general jurisdiction courts, specialized jurisdiction courts and special courts. Communal and District Courts/Regional Tribunals The majority of legal matters fall within the jurisdiction of these courts, which rule over minor civil and criminal matters and matters of personal property damages.
Generally, judgments may be appealed against to the Court of Appeal. There are 837 municipal and district courts, each with a single magistrate. The Court of First Instance The Court has jurisdiction over general disputes unless specific jurisdiction has been given by law to another court. Courts of First Instance adjudicate crimes punishable by up to five years imprisonment and commercial cases. Awards or fines of small amounts (equal or less than Dh 3,000) do not have the right to appeal. There are 68 first instance courts. Matters are usually decided by a panel of three judges, although the presiding judge has jurisdiction to decide summary and urgent matters and ex parte orders. Administrative Courts These Courts have jurisdiction over claims filed against decisions of administrative authorities, litigation relating to contracts with administrative authorities, actions for damages for loss caused by public authorities, tax litigation, expropriations, electoral litigation and the legality of administrative acts. There are administrative tribunals in each of the Kingdom's regions. There are 7 administrative tribunals established by a 1991 law. The judges are specifically recruited and have completed a special training curriculum at the National Institute for Judicial Studies.
Administrative courts are widely respected. There are plans to establish administrative appeal courts. Appeals are currently filed with the administrative division of the Supreme Court. Commercial Courts The Commercial Courts rule over all commercial litigation matters including commercial contracts, commercial activities and disputes regarding bills of exchange, where the amount in dispute is over Dh 20,000. Road traffic matters are excluded from the jurisdiction of the commercial courts. There are eight primary commercial courts and three appeal courts of commerce. Courts of appeal Courts of appeal are the appeal courts for decisions of the Courts of First Instance, the Administrative Courts and the Commercial Courts. Their decisions may be appealed to the Supreme Court on specific grounds. The Court of Appeal has a separate civil and criminal division. The Supreme Court The Supreme Court is the highest Court in Morocco and may review the decisions of all other courts and tribunals. The court has six
specialised divisions. The Supreme Court may only review procedural issues and cannot rule on the merits of the case. Its role is to ensure a uniform interpretation of law. The High Court of Justice has jurisdiction over criminal matters allegedly committed by government officials. There are also specialized Employment Tribunals which settle disputes by means of conciliation. The Permanent Armed Forces Tribunal hears cases involving military personnel and offences involving the exterior security of the State. Judges Candidates for judicial positions are Moroccan nationals who must posses appropriate academic credentials and pass a civil service examination conducted by an independent panel before entering the I.N.E.J (Institut National d'Etudes Judiciaire). They are appraised during the training period, and must pass a final examination before graduating. Judges are appointed by a Royal Decision based on a proposal made by the High Council for the Judiciary. Judges are irremovable and can only be impeached, suspended or transferred in accordance with the law. No explicit code of judicial ethics exists in Morocco.
There are 68 first instance courts. Matters are usually decided by a panel of three judges, although the presiding judge has jurisdiction to decide summary and urgent matters and ex parte orders.
Administrative Claims These are begun by the filing of a written petition with the Court. On filing the written petition, the matter is referred to a reporting judge and a Royal Commissioner for the Law. The role of the Royal Commissioner for the Law is to provide an objective and independent overview of the matter in hand with reference to the applicable laws to enable the magistrates to make a decision. A decision is made by three magistrates with the assistance of the Court clerk. Criminal proceedings Criminal proceedings are governed by the rules of criminal procedure.
ALTERNATIVE DISPUTE RESOLUTION ('ADR') The two types of ADR in Moroccan law are mediation and arbitration. Mediation Parties can either insert an agreement to mediate into their contract by means of a mediation clause or agree that any dispute arising out of the agreement will be settled according to mediation. In any event, a mediation agreement must be established in writing and must specify the mediator(s). The mediator does
THE LITIGATION PROCESS
The procedure for bringing a civil, administrative or commercial claim is governed by the Civil Procedure Code. The procedure for criminal proceedings is governed by the Criminal Code. Generally the specific procedure will be governed by the type of claim.
Civil Claims In civil claims it is the judge that will decide the procedure:
In the Court of First Instance, the judge supervises the procedure and takes whatever measures are necessary to investigate and decide the case. The judge has the power to request an expert evaluation, an investigation or a verification of documents. In the Court of Appeal, the judge outlines the procedure, requests the production of the necessary documents and/or any prosecution measures. In the Supreme Court, the President of the chamber appoints a reporting counselor to conduct the procedure.
Commercial claims Commercial claims are commenced by written petition filed at the court. The case is then referred to a reporting judge within 24 hours. A summons is issued through the means specified by the Civil Procedure Code. There will then be a hearing, after which a judgment will be issued. There is usually a fifteen day period in which to make an appeal. A magistrate is tasked with ensuring that the sentence is implemented within a certain time period.
not rule over the dispute and his decision is not binding unlike a judge or an arbitrator - he simply assists the parties in amicably settling their dispute. Arbitration In 2007, a new law was enacted that amended the Civil Procedure Code and provided for international arbitrations as well as mediation. Domestic arbitration Arbitration agreements and clauses can be concluded to address any disputes that fall within the jurisdiction of the commercial courts, with the exception of disputes arising from contracts concluded with the state (unless the state body has regulations that provide for arbitration), disputes with collectives, disputes relating to personal rights that are not of a commercial nature, and disputes arising from state fiscal matters. Parties can insert an arbitration agreement in their contract or agree on an arbitration procedure after their dispute arises. The decision of an arbitrator is binding. If there is no voluntary enforcement of the award by the parties, the award must be enforced through the courts. National arbitration awards can be subject to appeal, by request for annulment to the competent court on various grounds.
However, if the President of the Court orders enforcement, this decision cannot be appealed. International arbitration The Civil Procedure Code and the 2007 law apply to international arbitration. In disputes relating to foreign trade, the parties generally include an arbitration clause in their contract and refer to the ICC. The arbitration can take place either in Morocco or abroad. Morocco is party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958 (the New York Convention), which means that international arbitration awards can be enforced in Morocco.
In 2007, a new law was enacted that amended the Civil Procedure Code and provided for international arbitrations as well as mediation
Balms & Cruz Morocco BALMS GROUP INTERNATIONAL
Balms & Cruz Morocco was set up in January 2007, by the Balms Abogados and Cruz & Co (two important firms of Spanish and British origins respectively). As in the case of its two founder members of Balms & Cruz Morocco is quite independently a member Balms Group International (BGI), an international partnership of independent law firms represented in more than 20 countries in Europe, America, Africa and Asia. In an emerging country like Morocco, great commercial opportunities appear. Balms & Cruz Morocco enables its clients to take advantage of those opportunities safely by offering its clients a wide range of legal services, underlined by an efficient and professional approach. Our professionals are renowned for their familiarity with the Moroccan's culture, its tradition and people, and its administrations, for speaking different languages and for finding the best legal solution in accordance with the proposals and objectives identified by the clients. Balms & Cruz Morocco´s headquarters are in Tangier, the economic capital of northern Morocco. The offices are well situated neighbouring other similar administrative offices, consulates, etc. Tangier is currently at the cusp of an extraordinary property and tourist boom. This was the reason behind choosing the city for our main offices. Our objective is to be in the center the boom that the city and all the northern region of Morocco at this time know. A branch in Marrakech of Balms & Cruz Morocco will be soon opened.
PARTNERS Juan Luís Balmaseda de Ahumada - Senior Partner Nicholas Cruz - Senior Partner Julio Aguado Arrabé - Senior Partner Katja Blackmer - Partner Jorge Martín Losa - Partner Oscar Gómez- Partner ASSOCIATE Soad Jalou MANAGEMENT Mohamed Oulkhouir
AREA OF SPECIALITY -. Commercial law, -. Property law, -. Taxation and Customs law, -. Administrative law, -. Company formation and administration, -. Competition law, -. Foreign investment, -. Company financing, -. Mergers and acquisitions, -. Banking and insurance law, -. Social law -. Joint ventures -. Environmental law -. Registration and protection of trademarks, patents, designs and copyrights -. Civil law -. Infrastructure and transport -. International private law -. Outsourcing/ subcontracting -. Company liquidation and insolvency -. New technologies, telecommunications, and communication media Balms & Cruz Morocco 5, route de Boubana, California, 90.000 Tanger, Morocco Tel: + 121 39 37 44 48 Fax: + 121 39 37 44 47 e-mail: firstname.lastname@example.org www.balmscruz.ma
GENERAL PRINCIPLES OF SUCCESSION LAW IN
Inheritance Law in
Portugal 1. The succession is a juridic effect, more specifically an acquisition mortis causa, achieved on the nomination of one or more persons to the "holderness" of a dead person patrimonial relations. The succession opens in the moment of his author´s death and on his last address. 2. The issue is not the competence to the authorization, but yet a notarial approval in order to validate the will. 3. There are in Portugal two types of wills: Public and Closed; the first ones are written by the notary public remaining transcripted on his notebook for that purpose; these are written by the testator or by a person requested by him, needing a notarial approval. The freedom of the testamentary disposition is not absolute, existing situations in which the individual cannot testify in favour of certain people (for example, the doctor who treats him), as well as the restrictions that influence the content of the dispositions (for example: it is null the placement of conditions that force the heir to some of the following obligations as, to marry or not to marry, to live or not in a certain place, amongst others). 4. In case of public will, this one has to include as special mentions the birth date and the marital status of the testator, both parents' complete names, a statement about the existence of necessary heirs and the presence of two witnesses. On the closed will, the notary public instrument of approval may include that the testator declares that the written document presented includes the dispositions of his last will, that it is written and assigned by him or written by another person, required by him if he doesn't know how to assign; in case of a will not written by the testator, the instrument of approval must refer that the testator had read the will and acknowledges his content.
5. In Portugal the wills only can be written in Portuguese; whether is necessary to translate a foreign will it is necessary a certificated translator. 6. The public wills remain in the archive of the notary public. The close wills can be bailed in the notary public or stay in the possession of the testator. 7. All the individual ones have the capacity of testing, except for the minors none emancipated and the one disabled due to insanity. 8. In the absence of the decedent expression of will, under the achievement of a will, the heirs are called to the succession, by this preference (art.2133ºof the Civil Code): -
Spouse and descendents Spouse and ascendants Brothers and their descendents other collateral relatives until the 4th grade The State
9. The Matrimonial Property Regime by whom a marriage is celebrated doesn't have any relevance to succession purposes. But it may be relevant by the time of the partition of a succession because this one is different whether we are dealing with an asset of the decedent itself or whether we are dealing with a common asset of the spouses. 10. The author of the succession is free to dispose from its assets, since it doesn't affect his necessary heirs as the spouse, the descendents and the ascendants. This portion of assets that the testator cannot dispose is called legitimated portion. Its value depends on the number of heirs. Therefore, when there is only one necessary heir his legitimated portion corresponds to half the inheritance; if there are two or more necessary heirs their legitimated portion is of 2/3 the inheritance.
The public wills remain in the archive of the notary public. The close wills can be bailed in the notary public or stay in the possession of the testator 11. The "legitimated portion" has a mandatory nature, working as a limit to the free disposal of assets after death. 12. - After the legitimated portion is calculated, the same is divided in equal parts, except for 4 situations: a) succession of a spouse with 4 or more children- the share of the spouse cannot be inferior to ¼ of the will; b) succession of the spouse with ascendants- 2/3 of the will to the spouse and 1/3 for the ascendants c) succession of the spouse with ascendants and if some of the last ones cannot accept or didn't want to accept, his part increases to the others ascendants;
if they don´t exist increases to the spouse. d) succession of brothers and their descendents- german and blood brothers, the amount of each one of the germans must be twice as much the amount of the blood ones. Afterwards, the partition of will is achieved by award of the assets supposed to fill each share. If it exceeds his amount it will be demanded the payment of a compensation to the other heirs, to equalize the shares. 13. The partition of will can be achieved by judicial way - if there isn't any agreement between the interested parts-, notarial way or through a proceeding of succession and partitions of will, that works in the Register. In the case of minor heirs even if the partition is achieved by extrajudicial way, it requires a judicial authorization. 14. It is the restitution that, for succession equalization, the descendents may do for the partitions of the assets and the values that they were donated by the ascendant, in which succession they intend to enter. Therefore, the hotchpot appears as a cause for the extinction of donations in life, being established for purposes of capital
inheritance reconstitution, intending that the donees participy in the partition of succession as the other heirs, like they haven't received any donations. This figure and the way it works grounds on the presumption that the author of the inheritance when he had achieved the donation in favour of one of his descendents doesn't pretended to benefit him against the others, but only anticipate what subsequently would be attributed to him on the inheritance. Nevertheless, nothing prevents the donor from moving away from this presumption and benefits one of the descendents against the others, since it doesn't affects the legitimate that the last ones deserve as necessary heirs. That only requires that he achieves the donation through the share available. 15. Legitimate portion's payment is protected by the "inoficiosidade" institute. Therefore, all the donations or of graces that affect the legitimate portion, that is to say, that exceeds the share available of the author of the will are considered unofficiosum, having to be reduced so that/ to allow that the necessary heirs receive what is in debt to them. By this statement, we can say that these ones are very well protected.
Portugal has agreements with almost every country in order to avoid the double taxation inheritance law. to give, whenever he knows from the death of the insured or its subscriber, until 30 days after his knowledge. After the beneficiary proves its quality and the occurrence of the death, the insurer must immediately perform the payment of the amounts in debt to the beneficiary. 26. In order to transmit the values applied in pension funds and subsequent reimbursement, it is only necessary to prove the presentation of the assets relation in Finances, which may include the values of the pension funds. This transmission is tax free. 16. It is possible that the testamentary dispositions include duties to the heirs and to the legatees, except in cases of impossible duties, duties against the law or against the public order or still offensive to morality. 17. There are three forms of substitution, in Inheritance Law. a) Direct substitution- the successor is called to the succession, not because of a special relation with the author of the succession but because he has a special relation with the successor that he did´t want or couldn't accept. b) Substitution Cestui que trust- situation in which the testator imposes to the heir instituted the charge of keeping the inheritance, to therefore reverse, by his death, in favour of another one; this person who charges the duty of keeping
Any heir has the freedom to dispose by contract or will from his right to the unliquid will or indivised will.
the inheritance works as a temporary owner. c) Ward Substitution or Almost Ward Substitution - Exception to will's principle of personality, such as the cases of legal representation in the executor business; situations in which the progenitor defines heirs or legatees to the minor son or to the person disabled by insanity. 18. The legacies refer to successions over determined goods- these successors are called legatees. Juridically they are considered as will burden and their holders accepting the position of will creditor, remaining the heirs responsible for its payment. 19. In the period between the death of the will author and the partition, the property right over the assets is the community, and the possession belong to all of them. Until the partitions of succession, the inheritance administration belongs to the head of a family that may practice all the acts necessary to the patrimonial maintenance. 20. The responsibility for the charges cannot exceed the value of the assets inherited, but the heir is charged to prove that in the inheritance there are not enough values to
fulfil/accomplish the charges. Therefore, there is a limitation to the value of the inheritance. 21. The testator has total freedom in what concerns to the revocation of the will, except for the clauses in which has been recognized acknowledgment of paternity. The revocation of the testamentary dispositions can be expressed or tacit; the possibility of revocation is a faculty non renounceable. 22. The testator appoints a person charged to fulfil the will as an expression of his last wish. That functions can be performed by any person with judiciary capacity. These functions include the fulfilment of the legacies and other inheritance duties, selling goods/ assets, amongst others. 23. In Portugal there aren't individual real estate inheritances. 24. Any heir has the freedom to dispose by contract or will from his right to the unliquid will or indivised will. 25. The insurer has the duty to inform the insurer beneficiary, by written, from the existence of an insurance contract, of his quality of beneficiary and from his right to the amounts that the insurance contract has
32. The conflict rules demands the application of one or the other law depending on the results. Concerning the form, it establishes that the dispositions by death will be valid if they correspond to the place prescriptions where the act was celebrated, or to the personal law of the will´s author, whether in the moment of the statement whether in the moment of death, or, still, if corresponds to the law prescriptions to where he sends the local conflict's rule. Therefore, we verify that, the system of renvoi in inheritance law has the goal to ensure the benefit of the juridical business, based on the principle of "favour Negotti". For example, if L1 sends to L2 that in turn send it to L3, if the will is not valid in accordance with L2 but valid in accordance with L3, the idea of favour negotti, demands the acceptance of the renvoi and the application of L3. There is only the following exception: in case of the personal law of the will´s author is demandable, under nullity penalty or inefficiency the observance of certain form, still the act is performed abroad, that
27. Through the deed of a heir qualification or legatee qualification, or still through the simplificated proceeding of qualification on the Register of Legal entities. The documents that justifie the legal succession can be presented or referred his existence on a database of the Register of Legal Entities. 28. There aren't any means of reducing the tax charge; but there is an exemption of taxation when the heirs are spouse, ascendants or descendents, remaining in those cases the obligation of notify the transmission near the financial governmental office. In all the other situations, assets conveyonce by succession is submitted to the payment of stamp tax, about 10% over its value. 29. Portugal has agreements with almost every country in order to avoid the double taxation inheritance law. 30. The succession by death is ruled by the personal law of the succession's author by the moment of death, being the personal law the nationality law. 31. For a Portuguese citizen the truth autonomy, in this matter, is limited by the so called above "legitimate portion".
demand will be respected, as in cases in which the rules about death dispositions are internationally mandatory, rule that needs to be observed even if it is not the applicable rule in conflict's rule. In Portugal we have a rule like this that acts the following: "The will achieved by a citizen on a foreign country with the observance of the foreign law only produces effect in Portugal if it has been observed a solemn form on its achievement or approval", what means that even if the will is in accordance with the law of the place where it was achieved, it has to have a specific form to produce effects in Portugal. Demand of specific form even in international situations. 33. - European Convention about the fixation of a register will´s system. - Convention about International administration of wills - Convention referent to the Uniform Law about the form of an International Will.
Jose Serrao, Dias Silva e Asociados Soicedade de adrogados RL BALMS GROUP INTERNATIONAL
José Serrão Dias Silva e Associados - Sociedade de Advogados is a law firm established in 1998, having its head Office down town Lisbon and branches in Albufeira-Algarve and Oporto. José Serrão, Dias Silva e Associados provides comprehensive Professional services, covering the needs of local and foreign corporative activities. We offer our clients a full strategy advisement concerning the investments in Portugal, providing services in company forming and establishing, real estate operations, tax consulting and planning, and MA operations. Based on the excellent relations with Speaking Portuguese African countries, JSDS developed a net of opportunities of investments in that area of the globe. JSDS lawyers´team, with different kinds of experience and backgrounds, provides a high level of experience in several areas, mainly the Bank and Assurance Law, Company Law, Consulting, Real Estate, Urbanism and Labour Law. As a medium law firm, JSDS has the advantage of a personal service and friendly relation with each and all of the clients, which reflects on the fulfilment of the clients need and also in the pricing of our services. JSDS has a standard of twenty four hours / day commitment with the clients, thus making them sure that the lawyer is present, no matter what the problems and needs may be. As members of BGI, they do feel proud of establishing frequent professional relations with our partners, in order to satisfy our clients need, underlining BGI permanent presence.
MEMBERS Partners: José Serrão João Pedro Dias Silva
LAWYERS Ana Serrão Sandro Polonio de Matos Andreia Reivas
AREA OF SPECIALITY - Property - Commercial conveyancing - Residential conveyancing - Landlord and tenant - Planning - Licensing - Company/Commercial - Company formation - Shareholder agreements - Franchising - Joint ventures - Loan agreements - Management buy-outs - Partnerships - Private client - Court of protection - Estate planning - Matrimonial agreements - Probate - Trusts - Wills - Litigation - Civil/Commercial/Litigation - Contentiuous probate - Divorce procreedngs - Debt collection - Employment proceedings - Injunctions - Personal injury - Insolvency - Corporate insolvency/winding up - Bankruptcy - Statutory demands Lisbon Rua Luciano Cordeiro, 123 - 4º Esq. 1050-139 Losboa, Portugal Tel: +351 213 103 320 Fax: +351 213 103 321 e-mail: email@example.com
GENERAL PRINCIPLES OF SUCCESSION LAW IN
Inheritance Law in
Russia In Russia Inheritance law has been significantly amended in the past two decades due to political, social and economic changes. Before enacting the Third part of the Civil Code of the Russian Federation in 2002, Inheritance law was governed by the Civil Code of 1964 and the Fundamental Principles of Civil Legislation of the USSR of 1991, to the extent consistent with the law of the Russian Federation. Nevertheless, those acts were seriously outdated as they did not reflect the tremendous changes in the Russian legal system which had occurred by the end of the twentieth century: the development of property rights and the law of business associations, recognition of inalienability of human rights and freedoms, and, more important, the rights to a fair trial and protection of rights and interests, including inheritance rights.
All those processes consequently led to the renovation of the civil law of the Russian Federation. The Civil Code of Russia (hereinafter also referred to as CC RF), consisting of four parts, has been enacted part by part since 1995. In 2002 the third part of Civil Code was enacted and comprised a division V "Inheritance law". Among other changed aspects of Inheritance law several principles of great importance were reconsidered. Inter alia, a new understanding of the principle of universal legal succession was introduced, freedom of disposal by will was broadened, the range of heirs by statute was augmented, the composition of inheritance was altered, etc. Despite the fact that the updated Inheritance law was enacted recently, its application has already led to an assortment of different problems, some of them connected with geographical peculiarities of Russia. For instance, it was not clear how to identify the timing priority of inheritance of an heir and the deceased in a case where the heir died on 27 of March at 1.15 a.m. in Khabarovsk (GMT +10) and the deceased died at 11.00 p.m. in Moscow (GMT +3). Sometimes complications arise in connection with identifying the "deceasesed's last place of residence". So let's take a look at the general provisions of Inheritance law of the Russian Federation. The legal definition of "inheritance" is provided in article 1110 of the Russian Civil Code: by inheritance the property of the deceased (the inheritance, the inheritance property) passes to other persons by way of universal legal succession, i.e., in
unaltered form as a unified whole at one and the same time, unless otherwise provided by the rules of the Civil Code. This provision reflects the inherent characteristics of inheritance. 1. Inheritance is one of derivation, i.e. based on succession, ways of acquisition of rights and responsibilities. Inheritance entails a transfer of rights and responsibilities of the deceased, i.e. rights and responsibilities that belonged to him, to other persons. 2. In the case of inheritance, the property of the deceased passes to other persons by way of succession of a particular kind - universal legal succession. 3. In the case of universal legal succession, the inheritance passes to the heirs in an unaltered state. The principle of unalterability means that everything that is included in the inheritance passes to the heir in the same state, kind and location as when it has been owned by the testator. 4. In case of universal legal succession, inheritance is considered as a unified whole. Inheritance is a mixture of different civil law rights, but as a unified whole it is called "the mass of the succession". 5. Universal legal succession occurs at one and the same time. This means that all rights and responsibilities of the deceased pass to the heir simultaneously. It is impossible to accept some elements of the mass of the succession earlier than the others. So, if an heir has accepted any element of the mass of the succession, he is regarded as having
accepted all rights and responsibilities known or unknown. One of the main concepts in inheritance law is "the inheritance", which is governed by article 1112 of the Civil Code of the Russian Federation. Inheritance is everything that that falls to heirs in the way of universal legal succession including things, property rights and duties. Currently, Russian legislation establishes two foundations or two types of inheritance: by law (on intestacy) and by the deceased's will or testament (art. 1111 CC RF). Current law does not contain a definition of testament. Russian doctrine commonly understands testament as: 路
a unilateral transaction that contains a personal disposition of a testator effective on his death; made in the requisite form prescribed by legislation; regulating the process of distribution of the deceased's property among persons identified by him.
Inheritance by law means that testator has not changed the conditions set by law. So, all rights and duties pass to persons listed by law according to the stated priorities (art. 1141 CC RF).
It is important to note that the law sets priorities of inheritance by will. It is one of the principles of inheritance in Russia. Even the structure of division V of CC RF demonstrates this. Chapter 62 governs inheritance by will, whereas Chapter 63 governs succession by statute. Legislation pays much more attention to regulating inheritance by will. There are 23 articles in CC RF concerned with it. As for inheritance by law, this is governed by 11 articles only. But during the Soviet period, priority favoured inheritance by law. In a decision issued on the 16th January1996, the Constitutional Court of the Russian Federation ruled that the constitutional guarantee of inheritance (part 4 article 35 of the Constitution of the Russian Federation) and the opportunity to dispose of property provided by part 2 article35 of the Constitution of the Russian Federation, are the bases of inheritance. The right to dispose includes the opportunity to dispose on death. The Constitutional Court also reminded the legislature of the impossibility of depriving deceased persons of the right to make a will according to their wishes. The process of inheritance commences with the deceased's death. A declaration of death entails the same consequences. CC RF defines the commencement of the
inheritance process as a legal fact that entails the emergence of the hereditary relationship. The commencement of inheritance means that a special property state occurs. That is to say a complex of property rights and duties of the deceased become the mass of the succession and passes to the heirs. The commencement of inheritance means endowing every element of the mass of the inheritance with the qualities of inheritance. The time (the moment) of the commencement of succession is of high importance in establishing heredity, since, first, it helps to determine a range of persons, who acquire the status of successor, i.e. acquire rights of succession; secondly, at the commencement of inheritance the mass of the succession, i.e. property, proprietary interests and the responsibilities, the assignees
It is important to note that the law sets priorities of inheritance by will. It is one of the principles of inheritance in Russia
day, estimated in hours, has no legal significance. Indeed, if one of the deceased has died at least an hour after the first, but on the next calendar day, he (or she) is considered as having died afterwards. Place of commencement of the inheritance is the last residence of the deceased. If the last residence of the deceased, who had property in the Russian Federation, is not known or is located abroad, the place of commencement of inheritance is the location of such property. If such property is located in different places, the place of commencement of inheritance is the location of its immovable components or of the most valuable part of real estate, and in the absence of immovables - the location of a movable estate or its most valuable part. The value of property is defined on the basis of its commercial value (Article 1115 of the Civil Code of the Russian Federation). The ascertainment of the place of commencement of inheritance is necessary for the purpose of determining a variety of practical questions arising in connection with hereditary succession. The notary opens hereditary case and carries out all the necessary notarial actions (Articles 61 - 66, 69, 70 Fundamental Principles of Legislation of the Russian Federation on the Notariat). More specifically: -
of which will become the successors, will be defined; thirdly, the commencement of inheritance identifies the legislation applicable to the heredity; and, fourthly, the commencement of inheritance constitutes the beginning of a hereditary process, as from this date the main periods of time begin to run, including periods for acceptance of the inheritance by the successors, issue of the inheritance certificate, recoveries of claims by creditors etc. Item 2 of Article 1114 of the Civil Code
of the Russian Federation contains a provision dealing with the problem of commorientes, i.e. where persons have died simultaneously. People who have died in one calendar day (from 00:00 hours to 24:00), are considered, for the purposes of heredity, as having died simultaneously and they do not inherit the property of each other. In this case their respective successors are to inherit their property and so the notary has to treat them as separate inheritance cases. The time difference within one calendar
the notification of successors on inheritance; reception of applications for acceptance of inheritance or renunciation of a succession by an heir; acceptance of claims from creditors of the testator; taking steps to protect and manage the succession, and also the issue of commissions on taking steps concerning the succession which is not in the place of commencement of inheritance; the inventory of the succession and its transfer for storage; the issue of orders on payment of the costs of the inheritance, compensation for which is provided by legislation; the issue of the certificate on the right of inheritance.
Therefore the place of commencement of inheritance is determined with a view to localising hereditary legal relations, tying matters to a notarial district. Hence the legal integrity of the succession is secured, and successors, creditors of the deceased
and other interested persons have the means of establishing which notarial office is handling matters. The Civil Code of the Russian Federation establishes an exhaustive list of persons who can be successors. According to Article 1116 of the Civil Code of the Russian Federation persons who are alive on the day of commencement of succession and also those conceived during the life of the deceased and living after the commencement of succession may be included within the succession.. Legal persons, subjects of the Russian Federation, municipal bodies, foreign states, and international organizations may be entitled to testamentary succession. The range of testamentary successors is wider than the circle of successors by operation of law. Article 1117 of Civil Code of the Russian Federation defines a range of persons who have no right to be included in a succession (unworthy heirs). They are: First, persons who, by their intentional unlawful acts directed against the deceased, any of his heirs or against the fulfillment of the last wishes of the deceased, as expressed in the will, facilitated or tried to facilitate the succession for themselves or other persons or aided or tried to facilitate an increase in the share of the deceased's estate due to them or other persons, if these circumstances are confirmed by judicial proceedings. However, persons to whom the deceased bequeathed property after their loss of the right of succession have the right to inherit. (item 1 of Article 1117 of the Civil Code of the Russian Federation) Secondly, parents are not to inherit in the case where children with respect to whom
If the last residence of the deceased, who had property in the Russian Federation, is not known or is located abroad, the place of commencement of inheritance is the location of such property.
the parents were, in judicial proceeding, deprived of parental rights and were not reinstated to those rights by the date of commencement of succession (part 2 item 1 of Article 1117 of the Civil Code of the Russian Federation). Deprivation of parental rights and reinstatement to those rights can be made in judicial proceedings (Articles 70, 72 of the Family Code). This category of unworthy heirs is prohibited only in cases of intestacy. Thirdly, persons who have maliciously avoided performance of responsibilities imposed on them by law for the support of the deceased (item 2 of Article 1117 of the Civil Code of the Russian Federation). The responsibility to support the deceased arises for heirs in connection with maintenance obligations. A petition for removal from succession can only be submitted by an interested person - the heir by reason of intestacy. In accordance with Chapter 60 of the Civil Code ("Obligations Arising as a Consequence of Unjust Enrichment"), a person who does not have the right to inherit or is removed from succession on the basis of the present Article (an unworthy heir) must return all property unjustly received by him from the estate.
It has to be borne in mind that the rules about the recognition of an unworthy heir extend to heirs that have a right to a compulsory share in the estate (forced heirs) (item 4 of Article 1117 of the Civil Code of the Russian Federation). This provision is a new rule in the law of succession. According to the Civil Code of the RSFSR (1964) forced heirs cannot be removed from succession. To sum up, the law of succession in Russia is an established branch of Russian law and has its own features. The Civil Code, in the part dealing with succession, has introduced a set of positive changes: succession now seeks to give the fullest expression to the wishes of the deceased (testator). The legislation dealing with succession is systematic, the range of heirs in an intestacy has been so expanded that the transfer of property to the state becomes possible only in the rarest of cases. All these circumstances suggest the increasing "liberalisation" of provisions dealing with succession, and this is a necessary condition for the stability of succession to property, the aspiration for which is declared by the Russian Federation.
Elena Kazankova YURBUREAU LLC BALMS GROUP INTERNATIONAL
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GENERAL PRINCIPLES OF SUCCESSION LAW IN
Inheritance Law in
1.Overall comments Civil law in Spain comprises ordinary law (contained in the Civil Code) and regional laws (in Aragon, Catalonia, the Balearic Islands, Galicia, Navarre, and certain areas of the Basque Country). This diversity needs to be taken into account when studying inheritance law. Being subject to ordinary law or regional law depends on the point of connection known as "legal residence" (ordinary or regional).
A will can be made in any language known to the Notary Public who authorises it, or it can be translated by an official translator who must be present when the will is made
2. Competence to authorise an valid will Competence is given to the Notary Public (Art. 694 of the Spanish Civil Code, hereinafter, the Cc) and diplomatic agents -in regards to wills made by people of Spanish nationality in a foreign country- (Art. 734 Cc).
3. Types and forms of last wills and testaments
1. Wills The Spanish Civil Code governs the following types of wills: A) Ordinary wills: 1)Holographic wills (Arts. 688-693 Cc.). 2)(Valid) nuncupative wills (Arts. 694-705 Cc.). 3)Closed wills -on the envelop of which the Notary Public is required to indorse a statement of all the facts surrounding the transaction - (Art. 706-715 Cc.). B) Special wills: Special wills are wills made up in times of war by military men during a campaign, hostages, prisoners, army employees and people who follow the army, and mariner's wills and wills made in a foreign country. 2. Other types a)Inheritance covenants and contracts are not allowed by the Spanish Civil Code. However, some regional compilations allow an inheritance covenant to be made. b)Codicils, or inheritance memorandums, which supplement or alter an extant will but has no effect on the appointment of beneficiaries, are only allowed in the
regional laws of Catalonia, Navarre and the Balearic Islands.
4. Special formalities of valid acts regarding last wills and testaments In addition to the Notary Public, the presence of two witnesses is required in the following cases (Art. 697 Cc.): - When the testator states that he does not know how to sign the will or is unable to do so. - When the testator, although able to sign it, is blind or states that he does not know how to read the will for himself or is unable to do so. - If the testator who not know how to read or is unable to do so is completely deaf, the witnesses shall read the will before a Notary Public and state whether it matches the testator's stated wishes. - When the testator or the Notary Public so request.
5. Language(s) in which a valid will can be written (aside from Spanish) A will can be made in any language known to the Notary Public who authorises it, or it can be translated by an official translator who must be present when the will is made.
6. Deposit of last wills and testaments authorized by a Notary Public
1. Deposit The original copy of a nuncupative will, before and after the opening of the inheritance, is always kept in the Notary Public's records. The testator, beneficiaries and other people with a legitimate concern have a right to be given copies of the will.
a) The Civil Code regime
1) Communication The Notary Public must notify the Registro General de Actos de Ultima Voluntad (Central Registry of Spanish Wills), which depends on the Spanish Ministry of Justice and is of a singular nature, with its main office in Madrid) that the will has been made, the date of the same, its entry number in his records, the personal circumstances of the testator, and the authorizing Notary Public's details. 2) Professional confidentiality During his lifetime, only the testator has a right to obtain copies of the will. After his death, the beneficiaries, beneficiaries and other people with a legitimate concern may request copies (Art. 226 of the Notarial Regulations).
1.The descendents (without distinction). The closest descendents exclude the ones who are furthest removed. Among relatives of the same degree of kinship, the descendents inherit per head (equal shares). In the event that a descendent predeceases the testator, is disinherited or is deemed unworthy of inheriting, his descendents will represent him (inheriting by lineage). 2.If there are no descendents, the ascendants inherit. The father and mother inherit equal shares. If only one parent is alive, he or she will take the whole of the estate.
8. Beneficiaries by intestacy
If both parents have died, the closest ascendants will inherit. If several ascendants have the same degree of kinship and belong to the same bloodline (paternal or maternal), then the estate shall be divided per head. If the ascendants are from different bloodlines, but of an equal degree of kinship, half will go to the paternal ascendants and half to the maternal descendants. In each line, the distribution will be made per head.
An intestate inheritance is opened when a person dies without having made a valid will, or in a will that does not state beneficiaries.
3.In the absence of descendants and ascendants, the surviving spouse will inherit by intestacy, providing the spouse has
7. Capacity to make a will As a general rule, anyone over fourteen who the authorizing Notary Public judges to be of sound mind may make a will (Art663 Cc). Only those who are older than eighteen may make a holographic will.
been separated by a final ruling or a de facto separation -by virtue of an agreement of which proof can be provided) 4.In the absence of the above, the bothers and sisters shall inherit (the former per head and the latter by lineage). If there are full siblings as well as half-siblings, the former will take twice the share of the latter in the inheritance). 5.In the absence of the above, the testator's collaterals will inherit by intestacy (up to the forth degree, inclusive). The closest kinsmen will exclude the ones who are furthest removed. The collaterals' succession shall take place without distinction being made between lines or preference given by reasons of whole blood. 6.Lastly, the State will inherit by intestacy, in which case it will assign one third of the inheritance to the (public or private) municipal charitable institutions, court, and social or professional services of the municipal district where the deceased resided. One third will go to the provincial institutions of the same characteristics, and the remaining third will go to the public debt redemption fund (unless the government decides to use the inherited estate for other purposes). The inheritance shall be deemed accepted by the State for the benefit of inven-
- The ascendants (in the absence of descendants). Their forced share will be the half of the inheritance, unless the succession of the surviving spouse occurs simultaneously. In the latter case, the ascendants' forced share will be one third of the inheritance. - The widow or widower. Their forced share consists in the usufruct of one third of the inheritance (if it occurs simultaneously with the descendants); the usufruct of one third of the inheritance (if it occurs simultaneously with ascendants); and in the usufruct of two thirds of the inheritance if it does not occur simultaneously with descendants or ascendants). B) Regional laws ARAGON (Civil Code Compilation of Aragon). The global forced share of the descendants is two thirds of the inheritance. A widowed spouse's forced share consists in the lifetime usufruct of any real estate and commercial, industrial and agricultural establishments that are part of the inheritance.
tory (that is, with limited liability for the testator's debts). b) Regional rights ARAGON (Regional compilation of Aragon). As a general rule, the same regulations as the ones in the Civil Code apply. One particularity of Aragonese law is that when a testator dies without descendants, the property which is unalienable from the bloodline (the property that the testator had inherited or been donated by his ascendants) will be inherited by kinsmen of the same lineage as the said estate. CATALUĂ‘A (Inheritance Code of Catalonia). The inheritance is conveyed in first place to the testator's descendants. In the absence of descendants, the surviving spouse who has not been separated legally or de facto will inherit. In the absence of descendants and spouse, the ascendants will inherit and, in the absence of ascendants, collaterals up to the fourth degree (with preference given to the closest kin). If the inheritance does not occur with any of the above, the autonomous region of Catalonia shall inherit by intestacy. NAVARRE The order of intestate succession in
Navarre is as follows (Compilation of the Autonomous Community of Navarre): 1.The testator's matrimonial and nonmatrimonial issue (adopted children included). 2.The testator's full siblings 3.The testator's half siblings 4.The testator's ascendants (with preference given to the closest kin) 5.The surviving spouse 6. The remaining collaterals, up to the seventh degree of kinship 7.The Autonomous Community of Navarre BISCAY (Regional compilation of Biscay). Intestate inheritance defers, firstly, to the testator's issue and descendants. In the absence of these, the ascendants will inherit (with preference given to the closest kin); after them, a spouse who is not separated legally or in fact. In the absence of the above, the inheritance will go to the next of kin (up to the fourth degree, inclusive) and, if there are none, to the regional government of Biscay, the beneficiaries by intestacy.
9. Marital property arrangements: bearing on inheritance law In general, marital property arrangements
have no bearing on inheritance law. When the marital property is shared, the testator's inheritance comprises the value of half of the property shared by husband and wife.
10. Right to the legitimate or natural portion (freedom to bequeath and legal protection in favour of certain family members) I. Concept: The legĂtima is the portion of property that the testator is not free to dispose of at will because the law reserves it for certain beneficiaries, the so called compulsory or legal beneficiaries (Art. 806 Cc). II. The forced share A) Civil Code regime. The compulsory heirs are: - The descendants, in regards to two thirds of the inheritance. One third (called the strictly compulsory third part) is divided equally between all of the issue (with a right of representation in favour of the issue of predeceased, disinherited or unworthy issue). The testator may dispose freely of other third -called the 'third for betterment'- but only in favour of and among his descendants.
BALEARIC ISLANDS (Balearic Compilation). The testator's issue and descendants are the compulsory heirs. Their forced share consists in one third of the inheritance (when there are four or more descendants). In the absence of descendants, the compulsory heirs are the parents (not the rest of the ascendants). Their forced share is one fourth of the inheritance, except on the islands of Ibiza and Fomentera, which are governed by the Spanish Civil Code.
During his lifetime, only the testator has a right to obtain copies of the will. After his death, the beneficiaries, beneficiaries and other people with a legitimate concern may request copies
As a compulsory heir, a surviving spouse has the right of usufruct over: - One half of the inheritance, in there is issue. - Two thirds of the estate, if the testator's parents are alive. - All of the estate, in the absence of descendants and ascendants. CATALONIA (Inheritance Code of Catalonia) The descendants and, in their absence, the ascendants are compulsory heirs. Their global forced share consists in one fourth of the cash value of the estate (assets minus liabilities), calculated on the date of the testator's death. The global forced share must be divided among the descendants or
ascendants according to the rules for intestate succession. The surviving spouse: - has universal usufruct of the estate, in intestate succession. - In succession with a will, when the surviving spouse does not have sufficient financial means to ensure his or her subsistence, he or she has right to what is known as the cuarta viudal, (the surviving spouse's right to demand from the successors the cash value -assets minus liabilities- of one fourth of the inheritance, calculated on the day of the testator's death).
There is no special procedure for distributing an estate out of court. In practice, whenever there is real estate among the property of an estate, the fact is documented in a public notarial document. NAVARRE (Regional Compilation of Navarre). The testator is completely free to settle his or her estate, as a rule. However: - The testator's issue and descendants must be mentioned specially in the will. - The will must contain a formula called the 'formal forced share' or the 'regonal forced share', which has no financial content. - The surviving spouse has universal right of usufruct over the testator's estate (known as the usufruct for faithfulness).
ry heir -with certain exceptions- the right to receive a portion of the inherited property (pars bonorum). II. Execution of the right to the forced share Compliance with the forced share must be claimed from the appointed beneficiaries.
12. Legal relationship between joint beneficiaries: the distribution of an estate
I. The relationship between joint beneficiaries A 'Germanic' type of sharing is created between the joint beneficiaries (with no undividable shares in regards to each one of the properties that make up the estate) II. Disposal of testamentary rights Each joint beneficiary can use his or her testamentary right separately, but not of separate parts of the estate (not even undivided portions of them). If the assignment were made to a third party, the remaining joint beneficiaries will have the right of first option of the part of the assigned object for a period of one month after the assignment is announced (Art. 1067 Cc).
13. Distribution of an estate There is no special procedure for distributing an estate out of court. In practice, whenever there is real estate among the property of an estate, the fact is documented in a public notarial document. In the absence of an agreement between the beneficiaries, a court distribution may be demanded.
14. The collation of property (Arts. 1035 and following of the Cc). When a forced beneficiary coincides with another beneficiary of an estate, the former must add the value of any property he or she received from the testator during his lifetime as a donation or other gift to the gross estate, in order to compute the said value in the regulation of the forced shares. It is the concept known as a 'collation'. A collation will not take place if the testator expressly stated that it should not (when making the donation or in his or her will), nor if the recipient has repudiated the estate. A bequeathed estate is not deemed to be subject to collation if the testator did not make express provision for the contrary.
A valuation is deemed to be referred to the moment that the distribution of an estate begins. To calculate the forced shares, the value of the releases made by the testator during his lifetime in favour of the compulsory heirs is added to the gross estate's cash value (assets minus liabilities).
BISCAY The compulsory heirs are the issue and, in the absence of issue, the testator's ascendants. The descendant's forced share is four fifth parts of the estate; the forced share of the ascendants is one half of the inheritance. However, as in the case of Aragonese law, the testator may divide the forced share freely among the compulsory heirs (even assigning the entire forced share to one of the beneficiaries, without considering the degree of kinship involved). The testator must make express mention of the compulsory heirs who have been left out. The surviving spouse is a compulsory beneficiary in regards to the usufruct of half of the estate if the deceased has descendants or ascendants, and to two thirds of the estate if the deceased had neither.
15. Warranty of payment of the forced share Generally, the compulsory heirs must agree to the distribution of an estate, since they have right to part of the property that belongs to the body of the estate. Furthermore, Spanish law tries suits to claim and complement the forced share, and to diminish unofficial disposals (those which are detrimental to the forced share). Firstly, they will be the object of a reduction in the legacies, followed by donations inter vivos (the latter, by inverse order of their age) (Art. 817 and following of the Cc).
11. Nature and execution of the forced share
16. Settlement of estates with instructions
I. General rule Under the Civil Code and most of regional laws, the forced share gives the compulso-
Certain settlements of estates can be burdened with instructions. Generally, the instructions are of two types: condition and manner.
The manner or instruction in the strictest sense is a fuzzy legal precept that is difficult to define. It consists of an obligation (to give, to do or not to do) imposed upon the beneficiary by a settlement of estate. Compliance cannot be claimed by anyone, because otherwise it would be a legacy. A breach -according to most of the doctrine- leaves the settlement without effect (Art. 797 Cc). Modal instructions are the instructions that the testator leaves as to what use should be made of his property, without imposing any conditions. The effect of the instructions depends on their nature. In general, it could be said that the nullity of the instructions does not imply the nullity of the settlement burdened with it (Art. 790 and following, Cc). The forced share cannot be the object of a burden or instruction of any sort (Art. 813 Cc).
1 7. Substitutions There are four types of substitution in Spanish law: a)The ordinary substitution. The testator may substitute the beneficiary or the legatee in case they die before him, or if they do not want, or cannot, accept the estate (Art. 774 Cc).
b)The substitution of minors. Parents and other ascendants may name a substitute for their descendants under age 14, in case they die before that age (Art. 775 Cc). c)Exemplary substitution. Parents and other ascendants may name a substitute for an issue who is over fourteen and who, in accordance with law, has an officially recognised mental derangement. The exemplary substitution will be made without effect by a will made by the disabled person during a lucid interval, or after he has become sane again (Art. 776 Cc). d)Fiduciary substitution. By virtue of the fiduciary substitution, the beneficiary or legatee is entrusted to preserve all or part of the property object of the substitution and to transfer it after his death. The substitutions will only be valid and have effect if they are done in favour of people who are alive when the testator dies or, to the contrary, if they do not have more than two succession calls (Art. 781 and following, Cc).
burial and funeral, pay any legacies in cash (with the beneficiary's knowledge and consent), watch over the execution of the will, defend its validity in and outside of court, and take the necessary precautions for the conservation and custody of the property (with the help of the beneficiaries who are present) (Art. 892 and following Cc). Furthermore, the testator may entrust, by an action inter vivos or causa mortis the distribution of the estate to one or more people called 'counters-distributors' (who may not be beneficiaries or legatees). At the request of beneficiaries and legatees who represent at least 50 percent of the estate assets, the judge may appoint a counter-divider (Art. 1057 Cc).
23. Special successions. Special legal provisions I. Provisions relating to agricultural enterprises The Spanish Agrarian Reform and Development Act, dated 12 January 1973 (reformed by Act 19/1995, dated 4 July) has special provisions on succession (Art. 32 and following).
I. General comments The testator may burden his heir and other legatees with legacies (Art. 858 and following, Cc). II. Conveyance of property The legacy of a specific thing conveys the ownership of the thing from the instant that the testator dies. However, the legatee may waive the legacy. Despite the foregoing, the legatee may not occupy the legacy under his own authority. He must ask the beneficiary or the trustee, when he is authorised to give it, for the property to be deliv-
From the death of the testator to the instant in which the beneficiary's acceptance takes place, the inheritance is said to be vacant.
ered and to take possession (Art. 882 and 885 Cc).
19. Ownership and possession of inherited property
I. Ownership of inherited property Although the Spanish Civil Code does not contain a final statement on this point, according to the doctrine and jurisprudence it can be construed that if the beneficiary accepts the estate, ownership of the estate is transferred from the instant the testator dies (Art. 440 and 989 Cc). An estate can be accepted expressly or tacitly (Art. 999 Cc). From the death of the testator to the instant in which the beneficiary's acceptance takes place, the inheritance is said to be vacant. During this period, the beneficiaries shall manage the estate themselves. II. Possession of inherited property Possession of inherited property is construed as conveyed to the beneficiary without interruption and from the instant the testator dies, in the event that the beneficiary accepts the inheritance.
If the beneficiary waives the inheritance, it shall be construed that he did not possess it at any time (Art. 440 Cc).
20. The beneficiary's limitation of liability The beneficiary may accept an estate under the benefit of inventory, even when the testator may have forbidden it (Art. 1010 Cc). In such case, the beneficiary's own property is not confused with the body of the estate. The beneficiary keeps any lawsuits he may have against the testator and only answers for the estate's debts with the estate's property.
21. Revocability of last wills and testaments
II. Provisions relating to leases of rural and urban property Lease relationships are not part of a lessor and lessee's estate. Succession causa mortis as a lawful tenant is governed by special regulations. III. Special provisions relating to companies A) Civil law Compliance with the provisions of a company's articles of incorporation is required in regards to the transfer causa mortis of equity interest and stock shares. We should mention that an ascendant who wishes to keep an agricultural, industrial or commercial enterprise undivided may give it to only one of his descendants, ordering him to pay the forced share to the other issue in cash (Art. 1056 Cc).
22. Execution of last wills and testaments
IV. Further provisions Succession causa mortis of titles of nobility are subject to a special regime determined by the act of disposal and legal history.
A testator may name one or more administrator of an estate, called 'executors' who have the powers granted to them expressly by the testator. If the testator has not decided which will be the executor's powers, the latter shall arrange and pay for the testator's
B) Tax law Spanish Act 66/1997, dated 30 December, introduced an inheritance tax premium of 95 percent of the value of an sole partner company, professional business and shares
A will may be revoked at any time by making a new will (Art. 738 Cc).
in family businesses, providing those who acquired a company, business or corporate shares are the spouse, issue (adopted children included), ascendants (adopting ascendants included) or next of kin up to the third degree. The abatement, which is separate from any other reductions that may apply, requires that the companies, businesses or shares thus received are not the object of transfer inter vivos during a period of ten years. The same abatement shall apply to gift taxes, in regards to conveyances inter vivos, even when there are additional requirements:
II. Tax law Tax legislation adopts the opposite criterion. The Spanish Act dated 18 December 1987 considers the sums received by the beneficiaries of life insurance are subject to tax, and adds the sum received from the life insurance to the beneficiary's share of an estate.
- The donor must be 65 or older and in a situation of absolute permanent incapacity or severe disablement.
Beneficiaries and legatees can certify their status by:
- The donor ceases to carry out the functions of management (although he may continue to be a member of the Board of Directors).
24. Transfer of estate by virtue of a contract A testator may make the distribution of an estate in his will or set forth certain rules for distribution thereof. No contracts may be made on future inheritance under the provisions of the Spanish Civil Code (Art. 658 and 1271.2 Cc). Any donations which are to have effect upon the death of the donor are of the same nature as the provisions of last wills and testaments (so they can be freely revoked). They are governed by the rules set forth in the section on testamentary succession (Art. 620 Cc).
25. Life insurance
I. Civil law The majority of the doctrine deems that benefits arising from a life insurance policy are not part of succession causa mortis.
26. Pension funds The benefits from pension funds are not part of succession causa mortis for any civil or taxation effects.
27. Proof of the status of beneficiary or legatee
- Exhibiting an authorised copy of the will. - Exhibiting an authorised copy of a notarial deed issued by a Notary Public, in regards to deceased who died intestate, and whose beneficiaries are their spouse, issue or ascendants. - Exhibiting a testimony of a final court order stating that they are beneficiaries by intestacy.
28. Inheritance tax and ways to lower the tax burden
a) General system The same rates apply to Inheritance Tax as the ones that apply to the tax on donations inter vivos. The tax base shall be the cash value (assets minus liability) of the each beneficiary or legatee's share (according to law or according to will). To that value we must add any sums received by virtue of life insurance; the value of any property and rights that may have been acquired for valuable consideration in usufruct by the testator during the three years immediately prior to his death, and in bare legal title by the beneficiary, legatee, spouse or kin of the testator up to the third degree; and the
value of donations made by the testator during the five years immediately prior to his death, providing that the donor reserved the right of usufruct of the donated property, or of other property, or of any other lifelong right, unless it is a single premium annuity taken out with institutions that deal in operations of that nature legally. The value of any household furnishings, estimated for legal purposes at three percent of the body of the estate, shall also be added to the tax base. To the contrary of what occurs in gift taxes, beneficiaries and legatees enjoy a minimum tax exemption (the minimum varies according to the degree of kinship with the testator and it is generally revised annually). The acquisition causa mortis of the testator's main family home enjoys an abatement of 95 percent of its value (up to a maximum of Euros 120,000), providing the following two requirements are met: - That the acquirers of the house are the testator's spouse, his issue (adopted children included), his ascendants (adopting ascendants included) or his collaterals up to the third degree (those who are over 65 and have lived with the testator during at least two years immediately prior to his death). - That the acquirer does not dispose of the house inter vivos during a period of ten years. Inheritance tax taxpayers are classified into four groups:
I) Group one includes any issue (adopted children included) under 21; II)Group two, issue (adopted children included) who have reached 21, the spouse and the testator's ascendants (adopting ascendants included); III) Group three includes second and third degree collaterals, ascendants and descendants by affinity. IV) Group four includes any other relatives of the testator, as well as beneficiaries and legatees who have no kinship with him. The tax rate is computed by tranches, with progressive rates. One peculiarity of inheritance tax is the existence of multiplying coefficients that vary according to the value of the beneficiary or legatee's own patrimony. In regards to beneficiaries and legatees who reside in Spain, the estimate of their patrimony will take into account all property and rights, wherever they are situated. For non-residents, only the property and rights that are in Spain or that could be executed in Spain are considered. The multiplying coefficients also affect gift tax. Inheritance tax (and, therefore, the multiplying coefficient) applies in successions cause mortis deferred in favour of non-residents in Spain when the property or rights are or can be executed in Spain, and when any insurance policies were taken out with companies that are Spanish or that operate in Spain. b) Special tax systems Special tax systems are the ones in the Basque Country (Alava, Guipuzcoa and Biscay) and in Navarre. Free transfers inter vivos and causa mortis to the testator's descendants, ascendants and spouse are exempt from succession and gift taxes.
29. International treaties and agreements to avoid double taxation on succession Agreements with France, Greece and Sweden have been ratified.
30. Private international law in succession: unity and division of succession Spanish international private law includes the principle of the unity of the legal system in succession causa mortis. Any property and rights pertaining to the gross estate (aside from its movable or immovable nature and where it is situated) are subject,
To the contrary of what occurs in gift taxes, beneficiaries and legatees enjoy a minimum tax exemption in regards to the applicable succession system, to the law of the testator's last nationality (Art. 9.8 Cc). Nonetheless, any provisions in a will and succession covenants ordered pursuant to the domestic law affecting the testator or disponent when he makes his will shall remain valid, even when the law that governs succession differs. The forced shares, however, shall adjust to Spanish law. Any rights assigned to the surviving spouse by law shall be governed by the same law that governs the matrimonial effects, except in regards to the issue's forced shares (Art. 908 Cc).
31. Professio juris in regards to succession This concept is not accepted in Spanish private international law.
32. Renvoi (of first and second degree) in private international inheritance law Spanish private international law accepts the concept of renvoi to the first degree. Renvoi to the second degree shall only be taken into account when, as a result of the renvoi, the applicable law is Spanish law.
33. International treaties and agreements relating to succession Spain ratified the Treaty of The Hague of 5 October 1961 on Conflicts of Law relating to the Form of Testamentary Dispositions.
34. Beginnings and endings of forms or a model of a valid will NONCUPATIVE WILL MADE BY NUMBER At , on . Before me, Notary Public of the Association of Notaries Public of …, with residence in… APPEAR ... (name and surname), of legal age, of … nationality, a native of ..., province of ...,
where he/she was born on …, with residence in …, …. street, number …, the son/daughter of …., who lived (or died, as the case may be). He/she shows me his/her Spanish national identity number … (or passport or other document issued by a public authority for the purpose of identification. That is the usual manner of identification, although the Notary Public may also testify that the testator is known to him or her, or verifies the testator's identity by means of two witnesses who know the testator and who are known to the Notary Public). He/she states his/her wish to make a will and has to my knowledge sufficient legal capacity to make this will, which he/she orders according to the following CLAUSES ONE. The testator states that he/she is married to …. The marriage, which is the only one entered into by the testator, has ... children, named ... Likewise, he/she states that he/she is subject to ordinary law (or the applicable regional law) and that the financial arrangement that governs the marriage is of … TWO. He/she bequeaths to his/her spouse, …, universal and lifelong usufruct of his/her estate, with exemption of an inventory and a bond, and authorises him/her to take possession for him/herself. If any of his/her beneficiaries should oppose this legacy in any way, the said beneficiary's inheritance shall be strictly limited to his/her forced share and the remaining estate shall increase for the other beneficiaries. The legatee may, in any event, have the option to receive full ownership over the third of the total value of the estate, in addition to his/her lawful usufruct share. THREE. The testator bequeaths his/her property, in equal portions, to his children … If such beneficiaries do not survive him/her or have a disability, they shall be replaced by their respective descendants. FOUR. Revokes all previous wills. BEQUESTS AND AUTHORISATION I inform the testator of his/her right, which he/she waives, to read this will to him/herself (or, "the testator, at his/her choice, reads this will). After it is read aloud in its entirety by me, the testator expressly states his/her agreement, and makes the will and signs it with me (if the testator declares that
he/she does not know how to sign or cannot do so, one of the witnesses shall sign for him/her, which will be expressly recorded in the will. A thumbprint is not necessary, although it is frequently used). In witness whereof, having complied with all due formalities, I issue this public instrument in a single act, on … pages of official paper for the exclusive use of Notary Publics, class…, numbers …, at … hours … minutes. Special comment In the event that witnesses are required, the ending may be:
This will is made in the presence of witnesses who state that they are of sound mind and proper age to witness a will. The witnesses are … Having been read by me aloud and in full, the testator expresses his conformity and signs the will with me, and with the aforementioned witnesses. In witness whereof, having complied with all due formalities, I issue this public instrument in a single act, on … pages of official paper for the exclusive use of Notary Publics, class…, numbers …, at … hours … minutes.
Balms Abogados BALMS GROUP INTERNATIONAL
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GENERAL PRINCIPLES OF SUCCESSION LAW IN
Inheritance Law in
United Kingdom People, be they resident or non-resident, domiciled or non-domiciled who own property in the UK have long been accustomed to the payment of or liability for tax on assets following death. The current regime for taxing the passing of wealth on death is set out in the Inheritance Tax Act 1984, which Act is regularly updated both for the purpose of increasing allowances and for closing off loopholes and tax-avoidance schemes. In 2006 there were some 34,000 estates subject to Inheritance Tax in the UK This is a small percentage of the estates throughout the country. However, due to higher property values in the southeast of England, the majority of chargeable estates derive from this area. The tax yield from Inheritance Tax is quite modest at around 1.5-2% of the total sum raised in direct taxes. As a consequence of this, many argue that Inheritance Tax should be abolished as the tax yield does not justify the cost of collection and administration involved in maintaining the tax. Inheritance Tax is chargeable on both on death and in certain circumstances on lifetime gifts. In our memorandum below we concentrate on the change arising on death and set out a brief synopsis of the current regime.
Basis of Charge Inheritance Tax ("IHT") is payable on all estates (comprising assets owned at death and where relevant assets gifted during the lifetime of the deceased), the value of which exceed the threshold for the tax year of the date of death. The IHT threshold for the current year to 5th April 2009 is £312,000 (up from £300,000 in the fiscal year to 5.4.2008). In relation to persons who are domiciled or deemed domiciled in the UK, IHT is charged on all worldwide assets with a value above the relevant annual threshold. Unless persons have a specific exemption or agreement with the HM Revenue and Customs ("HMRC"), anyone who has been resident in the UK for 17 out of the previous 20 income tax years is deemed domiciled in the UK and is accordingly liable to the full extent of the IHT regime on their worldwide assets. Credit is of course given for any similar and corresponding taxes to which foreign assets may be subject where appropriate double taxation treaties are in place. Mere residence in the UK does not expose someone to liability to IHT but rather must consider the domicile of the client and the location of the assets.
Example 1 A dies domiciled in Spain with a worldwide assets of £5,000,000 of which:(i) UK assets were worth £300,000. No IHT is payable (ii) UK assets were worth £1,000,000. IHT would be £275,200 (£1,000,000 £312,000 x 40%)
Liability to Account Inheritance Tax is a self-declaratory tax. Accordingly, it is the responsibility of the executor/personal representative ("PR") to file the tax return. The information set out in the return must be correct, accurate and comprehensive. Accordingly, the PR must make appropriate enquiries to ensure that he has full details of the assets and wealth of the deceased and must ensure that open market valuations of assets are taken up. Fines and penalties can be imposed for failing to make a return or making an incorrect or incomplete return. Interest begins to accrue on unpaid tax 6 months after the end of the month of death, so PRs should seek to complete their investigations and file their IHT return within this 6 month period. Correspondingly, the donees of lifetime gifts which have become chargeable because the donor has died within 7 years
of making the gift, also have a duty to file an IHT return and similar provisions regarding penalties, fines and interest apply. Example 2 A, a single person, domiciled in the UK leaves the following assets: House Bank Account Shares Total
£500,000.00 £ 25,000.00 £150,000.00 £675,000.00
No lifetime gifts are known. Hence the IHT is: Estate Less IHT Allowance
£675,000.00 £312,000.00 £363,000.00
Tax @ 40% = £145,200.00 Net Estate = £529,800 (£675,000 - £145,200) is available for distribution. Consider the following alternatives: (i) After some years a lifetime gift by A of £300,000., which had been made six years before his death and was poten-
tially exempt when made, is discovered. Although no inheritance tax was chargeable on that gift the personal representatives are accountable for extra inheritance tax on the death estate of £120,000; or, (ii) A gift of £1,000,000 made one year before AB's death is discovered. In this case not only are the personal representatives accountable for extra inheritance tax of £ as above, but in addition if the donee fails to pay inheritance tax on the £1,000,000 gift, the personal representatives are liable to pay that inheritance tax (limited to the net assets in the estate which have passed through their hands).
Liability for IHT Usually the PR is primarily liable for the payment of IHT. Accordingly, it is imperative that the PR ensures prior to releasing any assets to beneficiaries that all of the IHT payable on the estate has been discharged or appropriate arrangements made with HMRC concerning the discharge of the tax so as to remove any liability for outstanding tax on the PR.. The liability to discharge the tax is personal to the PR and hence the need for care. Special arrangements may be required in relation to :
(i) Land/Houses/Flats. IHT chargeable on this type of property is payable immediately (if funds are available) or by instalments over 10 years. As the PR will wish to wind up the administration of the estate long before the 10 year period has expired, arrangements should be made with HMRC to ensure that any future claims to outstanding instalment tax will be levied against the beneficiary of the relevant asset, rather than the executors; (ii) In the case of jointly-owned property, the ownership of which passes by operation of law directly to the surviving co-owner, the PR has a secondary liability for the tax if the principal beneficiary does not pay it.
Anyone who has been resident in the UK for 17 out of the previous 20 income tax years is deemed domiciled in the UK
members and accordingly, unmarried couples who have entered into a civil partnership agreement or unmarried couples who are in a relationship of more than 2 years, are also entitled to the benefit of the legislation as is a person to whom the deceased stood in loco parentis. Only persons who are domiciled in the UK can bring a claim.
Exemptions There has been a lot of criticism of the UK government that the exemptions from IHT and the annual allowances are neither generous nor have they taken account of the rapid rise in property/asset values in the UK within the last 10 years or so. The Principal Exemptions The following are the principal exemptions: (i)
an annual exemption of £3,000 (in total). If a gift has not been made in the previous year this exemption can be doubled to £6,000. (ii) small gifts of not more than £250 may be given in an unlimited number. (iii) gifts in consideration of marriage/civil partnership up to £5,000 by the parent of either party to the marriage. HMRC has a right to register a statutory charge against property to secure the payment of any outstanding tax. The PR also has a contingent liability for tax in relation to : (i) additional tax which may arise on certain lifetime gifts (chargeable lifetime transfers) which become subject to additional tax on death; (ii) lifetime potentially exempt transfers (gifts to individuals) which become chargeable because the donor has died within 7 years of making the gift; and (iii)assets owned by a third party which are the subject of a gift with reservation (i.e. the asset was not gifted outright by the donor/deceased). Unless the PR has made full and proper enquiries for the purposes of administering the estate and filing the IHT tax return, HMRC may hold a PR personally liable for tax on lifetime gifts or additional tax on an estate which was not discovered until after the administration of the estate is complete.
Assets Subject to Charge All assets are subject to IHT, be they land, chattels, intellectual property rights or statutory rights. So long as a value can be placed on the relevant asset or right, it is
subject to a charge to tax. Where assets may be co-owned, appropriate discounts are given to reflect the co-owned situation. Accordingly, in relation to property, a 1015% discount on the value of a the relevant share or interest in a house, flat or land is usually conceded by HMRC. In relation to the valuation of company shares, the size of the relevant shareholding, be it a controlling interest or minority holding, are taken into account in the valuation process.
Transmission of Assets IHT is chargeable irrespective of the means by which the asset passes from one person to another. Accordingly, it is irrelevant whether the asset passes pursuant to a will or on intestacy or by operation of law in the case of co-owners as joint tenants. UK law does not impose any forced heirship provisions on a testator or family member. Accordingly, one has freedom of testamentary capacity to bequeath one's estate to whomsoever the testator wishes or in default of making a Will, the law stipulates which family members will benefit. This general statement must however be tempered in the light of certain statutory provisions pursuant to the Inheritance (Provisions for Family and Dependants) Act 1975, which give to the courts interventionist powers to adjust the distribution
of an estate on the application of a dependant in circumstances where the distribution of the estate does not make any or any adequate and reasonable provision for that dependant person. These powers arise both where a testator may make a will or if no will is made, where the statutory intestate distribution does not make such reasonable provision for the dependant person. The will does not have to be capricious (for example, leaving one's entire estate to a charity or a dog's home!) but rather the grounds for the application by the dependant person are that the distribution of the estate is not reasonable and the benefit, if any, which the dependent person takes is not adequate for their future maintenance having regard to the previous financial support which they enjoyed from the deceased. These inheritance dependency claims are usually made by spouses and children. However, they are not restricted to family
UK law does not impose any forced heirship provisions on a testator or family member
(iv) normal expenditure out of income. Any gifts made out of income are exempt from IHT. To avail of this very useful exemption, the gift must not be a one-off gift, but must be made on a regular basis and it is only exempt to the extent that : (a) it is made as part of the normal expenditure of the donor; and (b) that taking one year with another, it was made out of income; and (c) that after allowing for all transfers and payments forming part of the donor's expenditure, the donor is still left with sufficient net income to maintain his usual standard of living. (v) Potentially Exempt Transfers. Lifetime gifts which are made to an individual are exempt. If, however, the donor dies within 7 years of the gift, the gift is brought into account in assessing the taxable estate of the deceased as at the date of death. Taper relief is given if the donor dies between years 4-7. No taper relief applies in years 1-3 but the value of the asset at the date of transfer and not the value at the date of death is taken into account.
Example 3 In June 2003 AB gave a painting to his son worth £350,000. No IHT is payable. In July 2008 AB dies with a net estate of £1,000,.000. The IHT calculation is: Death Estate Add lifetime gifts Less IHT Allowance Tax @ 40% =
£1,000,000.00 £ 350,000.00 £1,350,000.00 £ 312,000.00 £1,038,000.00 £ 415,200.00
Taper relief applies on the lifetime gift as AB died 5 years after making the gift, so Portions of tax applicable to lifetime gift 350,000 - 312,000 x 40% = £15,800. (vii) Spouses Exemption. This now falls into two categories as follows: (i) no Inheritance Tax is payable on transfers/inheritances between spouses. This means that on a first death, the surviving spouse who inherits the entire "joint" estate does not have to pay any tax. Correspondingly however, tax may become payable on that entire estate when the second spouse dies. This bunching of assets in the survivor's estate is a well-known problem. (ii) to deal with this problem, HMRC introduced in October 2007 a special exemption in the case of married couples and persons in a civil partnership. Where on a first death of a married person or civil partner, the annual IHT allowance (currently £312,000) has not been utilised by a transfer of assets to a third party for example, a child or other person (a non-exempt party is a person other than the surviving spouse/civil partner or a charity), the unused part of the Inheritance Tax Allowance can be utilised on the second death. Example 4 (assume IHT allowance remains unchanged) (a) husband H dies in August 2008 and wife W inherits entire estate. There is no Inheritance Tax and the annual Inheritance Tax Allowance of £312,000 has not been utilised.
(b) In 2015 wife W dies. Her estate is valued at £1m. The tax position is: 1. Gross estate £1,000,000.00 Less Annual IHT Allowance £312,000 (x2) (£ 624.000.00) Chargeable estate £ 376,000.00 Tax @ 40% £ 150,400.00 Net estate available for distribution £ 849,600.00 2. (c) Correspondingly, if on the first death gifts are made to children, which utilise say 50% of annual Inheritance Tax Allowance, then the remaining 50% allowance of the first to die is available and can be set against the estate of the second spouse/civil partner. So in the above example : W dies in 2015 £1,000,000.00 Gross Estate IHT Allowance of W £312,000 50% of H's allowance at current rates £156,000 (£468,000.00) chargeable estate £532,000.00 chargeable estate tax @ 40% £212,800.00 Net estate available for distribution £787,200.00 This double spouses relief has been welcomed, but it was a relief which the government was effectively forced to make and is not very generous, but it does help to alleviate tax on the second death.
Please Note: Following the introduction of civil partnerships by the Civil Partnership Act 2004, same sex civil partnerships are treated in the same way as marriage and same sex civil partners enjoy the same benefits as spouses. Unmarried couples do not enjoy these exemptions. The exemption from tax of spouses/civil partners only applies to persons with the same domicile. If two spouses/partners do not have the same domicile, the total exemption from IHT does not apply. In these situations the estate of the first to die enjoys the normal Inheritance Tax annual exemption and a reduced spouses exemption of £55,000. Accordingly, it is imperative that the domiciliary status of married couples and civil partners are ascertained. The double exemption or use of a deceased spouses allowance is only available on the death of the second spouse. the surviving spouse is not entitled to make lifetime chargeable gifts (e.g. creation of trusts) of £624,000
(viii)Agricultural and Business Property Relief. Agricultural and business property may qualify for Inheritance Tax relief which is given by a percentage reduction in value. Subject to the relevant
conditions being met, relief is currently available at a maximum of 100%. Further, if 50% relief only is available, any Inheritance Tax that is payable on business and agricultural property may normally be discharged by instalments if the appropriate election is made and provided that each instalment is paid on time, interest is not charged on the outstanding Inheritance Tax. Accordingly, an outright gift of an unincorporated sole trade to the son of the deceased trader attracts 100% relief (subject to the conditions being met). By contrast, if such property is left to a surviving spouse (who is in any event an exempt transferee) agricultural or business property relief is "wasted". (ix) The conditions for eligibility for relief previously referred to are (post 9th March 1981 rules): Agricultural property - the relief only applies to the agricultural value of any agricultural property so land which may have a higher value as development land or for use for another purpose will only attract the exemption up to the agricultural value of the land. Agricultural property is agricultural land or pasture, including woodland and any buildings used in connection with rearing live stock or fish and buildings ancillary to agricultural use. (a) the Transferor must have occupied the property for the purpose of agriculture throughout the period of 2 years ending with the transfer of the land or death. The period of ownership of the land is disregarded for this purpose; or (b) the Transferor must have owned the property throughout the period of 7 years ending with the date of transfer/death and the land has been occupied by himself or another throughout for agricultural purposes. A landlord who has not taken possession of agricultural land would qualify under this heading. Business Property Relief - 100% relief is given in relation to a business or interest in a business or a holding of shares in an unquoted company. 50% business relief is given for a controlling holding of shares in a publicly quoted company, land, buildings or plant used in a business in which the deceased was a partner at the date of
his death or used by a company controlled by the deceased or land, buildings and plant held in a trust of which the deceased was a beneficiary and the assets were used in a business carried on by the deceased. (a) The general ownership condition is that property must have been owned by the transferor/deceased throughout the 2 years immediately before the transfer/death. Only assets which are used wholly or mainly for the purposes of the business throughout the 2 years immediately before the transfer (or since its acquisition by the business if more recent) are allowed. The following businesses do not qualify for BPR: Business or company engaged in dealing in security, stocks or shares, land or buildings or in making or holding investments; Businesses not carried for a gain; A business which is the subject of a
contract for sale; Shares in a company which are subject to a contract for sale or the company is being wound up. A letting business including the ownership and letting of caravan parks(!) do not qualify. Shares in a holding company may qualify for relief, but if the group includes a company whose business falls outside to scope of the relief, then partial relief only is given. Business property relief and agricultural property relief are complex subjects which require detailed investigation before one can be certain of the relief applying. Example 5 A widower on his death bed has the following assets:a business worth £500,000 which qualifies for 100% relief and a business overdraft of £300,000. (ii) a house worth £250,000 (iii) £350,000 cash and realisable securities.
His estate is left to his son. The IHT calculation is :Business £500,000.00 Less overdraft £300,000.00 £200,000.00 Less 100% Business Relief £200,000.00 0 Other assets Deduct - threshold
Tax at 40%
If the widower had paid off the overdraft out of cash and realisable securities the position would be:Business 100% BPR Remaining
500,000.00 500,000.00 0
Other assets £300,000.00 (less than annual exemption) (having paid off overdraft) IHT nil
After 21st March 2006 only relevant property trusts can be established during lifetime by an inter vivos creation of a settlement. In general accordingly, the form of settlement and the identity of the beneficiaries is irrelevant Trusts. In 2006 HMRC introduced changes to the taxation of trusts in the UK. As a result, it is considered that the traditional use of trusts for the purpose of protection of assets and tax planning will reduce. Broadly, trusts now fall into two categories :
discretionary trusts/relevant property trusts; (ii) interest in possession trusts. The recent changes have replaced various other trust mechanisms primarily used for the benefit of children and passing assets to children such as accumulation and maintenance trusts. As a result of these changes trusts are taxed on the following basis : (i)
interest in possession trusts - as a specific beneficiary enjoys use of the relevant assets and has an interest in possession therein, the trust mechanism is effectively ignored and tax is imposed at the beneficiaries' rates; (ii) discretionary trusts/relevant property trusts - in these arrangements, assets are held in the name of trustees and the beneficiaries do not have any specific estate, right or title to the assets. Distributions and appointments from the trust can be made at the discretion of the trustees. The trustees are taxed on the income and capital gains receipts of the trusts at trust rates. Every 10 years an IHT charge is levied on the value of the assets in the trust above the relevant annual IHT
threshold (currently ÂŁ312,000). On an appointment or distribution from the trust an exit charge arises and tax may be payable depending on the value of the relevant distribution and the tax threshold at the time of distribution. After 21st March 2006 only relevant property trusts can be established during lifetime by an inter vivos creation of a settlement. In general accordingly, the form of settlement and the identity of the beneficiaries is irrelevant. All inter vivos settlements created after 21st March 2006 are taxed in the same way under the relevant property regime. Gifts in to settlement above the annual threshold i.e. gifts transferred in to a trust with a value above ÂŁ312,000 will now be chargeable to IHT at the lifetime rate of 20%. If the Settlor dies within 7 years further tax will be payable. In contrast to the inter vivos creation of settlements, it is possible for a testator to set up a number of "privileged" trusts which are not taxed as relevant property trusts and briefly these are:(i)
immediate post-death interests in possession: these trusts arise where a beneficiary is given a life interest in
the trust fund. These trusts are taxed on the basis that the beneficiary with the interest owns the capital in the settlement; (ii) disabled trusts: these are trusts under which a disabled person is the main beneficiary. They are taxed on the basis that the disabled person is treated as owning capital (i.e. as an interest in possession trust); The following two trusts can only be set out for the children of the testator; (iii) bereaved minor trusts: capital and income must vest in the child no later than the age of 18 years. Income is to be paid or accumulated for the benefit of the minor beneficiary as of right and capital and income (unless accumulated) can be applied only for the benefit of the beneficiary. A tax charge may arise whenever property ceases to be held on a bereaved minor trust if for example the trustees enter into a depreciatory transaction or direct funds in breach of trust to a third party, but no tax charge arises where :
(a) the minor becomes absolutely entitled to capital at 18 years (or earlier); (b) on the death of the bereaved minor before he became entitled to capital; or (c) if the trust fund is paid or applied for the benefit of the bereaved minor. (iv) aged 18-25 trusts (section 71d trusts): these are trusts where the vesting of capital and income is postponed until the child of the testator attains the age of 25 years. The basic conditions for an age 18-25 trust are the same for a bereaved minor trust. Pending entitlement to capital, the beneficiary must either be entitled to income or it is accumulated for his benefit and there must be no power to apply the income for the benefit of any other person. The entirety of capital and income can be applied for the benefit of the relevant beneficiary before he attains 25 years. Vesting of capital can only be postponed to the age of 25 years and a special inheritance tax charge applies, calculated by reference to the period from when the beneficiary attains 18 years to whenever (before 25 years),
the capital is applied for his benefit or appointed. The maximum period covered by this charge is therefore 7 years (18-25). No tax charge is levied if the trust ends when the beneficiary attains 18 years because the trust fund has been applied in full for the benefit of the minor beneficiary or appointed in his favour on attaining 18 years. The calculation of the IHT charge is complex but the IHT charge is not penal and testators may prefer to incur the IHT charge rather than allowing children to inherit the trust fund before the age of 25 years.
Pre-owned Assets Originally IHT was designed to tax assets which a person owned at death and took into account assets which had been given away at various times during the lifetime of the deceased. Lifetime transfers were of two varieties namely "chargeable transfers" such as gifts into a discretionary trust or "potentially exempt transfers" such as gifts to an individual or in former years before the changes to the taxation of trusts mentioned above to a life interest settlement or accumulation and maintenance settlement.
If the lifetime donor died within 7 years of making the lifetime gift, the gift is aggregated with the estate and IHT or additional IHT will become payable thereon. If the deceased continued to derive any benefit or use and occupation from the gifted asset (a gift with reservation), such lifetime gifts would be wholly ineffective for IHT purposes. Much tax planning in recent years has centred around schemes which seek to avoid the gift with reservation provisions of the legislation and this is culminated in the pre-owned asset provisions which were introduced in the Finance Act 2004 and came into effect in 2005. The details of pre-owned asset tax ("POAT") are complex and there are separate rules for the tax treatment of land/buildings; chattels (furniture and paintings); and intangible property such as an interest in trust or money. (i)
Land and chattels. Where the donor occupies or uses any land or chattels (either alone or with other persons) and (i) the donor previously disposed of that asset at any time after 17th March 1986 or (ii) gifted funds to enable somebody to acquire an asset after that date which the donor then uses or occupies the donor may be liable to POAT as an annual income tax charge. In the case of land, the tax will be payable on the
open market rental value of the land and in the case of chattels, tax is payable on the notional interest on the value of the asset at an initial rate of 5%. For example:(a) If the annual rental value of a house subject to POAT is £20,000., a higher rate taxpayer would have an additional income tax bill of £8,000 p.a. (b) If a painting worth £240,000 is subject to POAT and the notional interest is £12,000., a higher rate income tax person would pay additional income tax of £4,800 p.a. (ii) Intangible property. In relation to stocks, shares, securities, insurance policies and bank accounts, POAT is payable on the annual value which is again based on a notional rate of interest - currently 5%. POAT is unusual in that it creates an annual charge to income tax in relation to gifts rather than a one-off charge to capital tax and is yet another means by which HMRC seek to tax the transmission of wealth. A number of exemptions/excluded transactions do apply, the most important of which are:-
(i) (ii) (iii) (iv)
transactions at arm's length; transfer to a spouse; small gifts up to £3,000 p.a. transactions which are within the existing gifts with reservation provisions;
Gifts with Reservations The Gifts with Reservation Rules are designed to prevent a transferor escaping tax liability by simply surviving by 7 years a gift made to another (usually a family member) but nevertheless continuing to derive a benefit from the gifted property in one form or another. Accordingly, where an individual disposes of any property by way of gift on or after 18th March 1986 and either :(a) possession and enjoyment of the property is not bon fide assumed by the donee at or before 7 years before the date of death or (b) at any time within 7 years of the date of death the property is not enjoyed to the entire exclusion or virtually to the entire exclusion of the donor then IHT will be payable. The consequence of a gift where a benefit is so reserved is that the gifted property as treated as being subject to a reservation and is included as part of the Estate as if the donor continued to own it as at the date of death.
If a property is subject to the Gift with Reservation Rules then it will not be subject to the Pre-Owned Asset Rules. As property subject to a reservation is accordingly treated as property to which the deceased was beneficially entitled immediately before his death all exemptions from IHT as set above apply except:(i) the annual exemption (iv) normal expenditure out of income exemption. The donee who notionally received legal title to the gift is liable for tax on property such to a reservation and the tax fall due for payment six months after the end of the month in which the donor's death occurs. If the tax remains unpaid for 12 months after the end of the month in which the death occurs the PR shall also become liable. In such circumstances the PR's can pay the tax out of the residuary estate. The gift with Reservation Rules have been subject to
much scrutiny by the Court and the various aspects of the definition of such gifts have been examined so that transfers have to be:(i) disposal, (ii) by way of gift, (iii) possession and enjoyment of the gifted property is not assumed by the donee and (iv) the gifted property is not enjoyed to the entire or virtually to the entire exclusion of the donor A relaxation of the Gift with Reservation Rules is allowed in the case of an interest in land where occupation by the donor is disregarded if:(i)
It results in a change in circumstances since the time of the gift which change was unforeseen at that time and (ii) It occurs at a time when the donor has become unable to maintain himself through old age infirmity or otherwise and it represents a reasonable provision by the donee for the care and maintenance of the donor and (v) The donee is a relative of the donor or is his spouse. If a property is subject to the Gift with Reservation Rules then it will not be subject to the Pre-Owned Asset Rules.
Conclusion IHT is a complex subject. As will be seen from the above the rate of tax, once the value of an estate exceeds the relevant annual threshold is quite penal being calculated at the rate of 40%. Notwithstanding the large range of anti-avoidance provisions which are contained within the Inheritance Tax Act 1984 and the subsequent Finance Acts for each year, there remains ways and means of mitigating the tax. This is certainly possible as regards persons who are neither resident nor domiciled in the UK, however, it is increasingly difficult as regards persons who are both domiciled and resident in the UK.
Disclaimer The information set out in this note is believed to be correct and accurate as at May 2008. Specific advice must however be taken in relation to each transaction as circumstances differ and points which are particular to an individual case may affect the advice given and/or inheritance tax treatment of that case. Unless Black Graf & Co. have specifically advised in relation to a particular case, no responsibility is taken by Black Graf & Co. in relation to the preparation and/or dissemination of this Note or any reliance placed by any person on the information contained herein.
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