Harris2 considers that the first category of the rule “seems clearly” to affect the validity of transfer of assets to the trustee. The third category does not. The third category is uncertain but the first and third category of rules are likely to be categorised as mandatory rules within Article 15 of the Hague Convention on the Law Applicable to Trusts (the Hague Trusts Convention) whose application the convention does not prevent.
This article discusses the nature of forced heirship, how a “clawback” action of a foreign state may play out in a common law jurisdiction and what a common law trustee may do to prepare for such an eventuality. It examines the experience of the English and New Zealand trustees. Forced Heirship Forced heirship can be described as a restriction on the freedom of an individual to write a will. It is a feature of many jurisdictions, in particular those with civil law or Islamic law traditions. Generally, the rules dictate that a prescribed portion of an individual's assets must go to their family on their death, and that they can therefore dispose of only the remainder in accordance with their own wishes. Forced heirship is a part of the public policy of the countries with these rules and any will made contrary to such rules would be null and void at least to the extent by which it contravenes the forced heirship rules. Duckworth1 categorises forced heirship jurisdictions into three types: - Strict forced heirship whereby the individual may dispose of only part of their estate; such as France, Scotland (which has forced heirship but almost total freedom to make lifetime gifts) and Islamic states; - -
In a civil law environment (subject to defences which are only briefly mentioned for the purposes of this article3) the only way in practice to avoid forced heirship rules from applying is to hold assets in a structure in a country in which such restrictions are not recognised. The avoidance of forced heirship rules may be a reason for establishing an inter vivos trust. Specific legal actions are possible against parties who have received donations for amounts that exceed the freely disposable part. Philanthropy is restricted. Anyone receiving a donation from an individual who is subject to forced heirship rules is, eventually, liable to actions by the heirs of the donor to reduce such donation. Any agreement in relation to the future estate is null and void. The transfer of rights can only be validly made after the death of the deceased.
To prevent reserved shares being undermined, lifetime gifts by the deceased are commonly taken into account when calculating the value of the estate on which the shares are based (clawback). Clawback may affect the validity of gifts made during a specified period before the Forced heirship by indivisible shares whereby the testator has power over all of death or during an unlimited period (as in France). his/her estate, but certain family members The value taken into account may be that at the date of the gift or at the date of death.4 have a minimum entitlement which they can enforce if the testator fails to leave Trustees should therefore consider their personal them the requisite amount, such as liability before dealing with assets where there Germany and a number of US states; and is a possibility of a forced heirship claim. They need to consider the likelihood of a claim based Judicial adjustment whereby certain on a foreign judgment being recognised by the family members may apply to court in its discretion, to make provision for them such common law courts and whether they should as England (if the deceased died domiciled be seeking directions from the court under the relevant Trust(ee)s Act. The Trusts Bill 2017 in England but it also applies to property section 8 specifically preserves the courts outside England), Ireland, New Zealand (if inherent jurisdiction to "supervise and intervene the deceased died domiciled in New in the administration of" a trust and section 125 of Zealand but it also applies to property, the bill replaces the Trustee Act 1956 section 66 other than real property, outside New power of the trustee to apply for directions. Zealand) and China.
Duckworth, A. “Forced Heirship and the Trust”, in International Trust Laws Section B Special Topics in International Trust Laws. Ch B1, p5 (1999-, Jordan Publishing, UK) 2 Harris, J. The Hague Trusts Convention (2002, Hart, UK) p 366 3 Below at p??? 4 See more at: http://www.step.org/tale-two-systems#sthash.Ni1aj0ov.dpuf 1