EU Succession Regulation and Ireland – Law Society Gazette published Dec 2013
1. What is the Regulation about?
As Irish solicitors we can advise on Irish succession law conscious that the law of succession and the method of administering estates can be significantly different in other jurisdictions. Does this matter to us? It does if a deceased has cross border connections, whether it is that he held personal connections abroad or assets abroad.
When cross border issues arise in determining succession law, private international law (PIL) rules for each country are applied. These are known as conflict of law rules. Unfortunately PIL rules differ between jurisdictions. Some, like Ireland, use the concept of domicile as the basis of determining what jurisdiction’s succession law applies, others the concept of habitual residence, others the deceased’s residence and other’s the deceased’s nationality. Some, like Ireland, distinguish between moveables and immoveables, others do not. Even if a state recognises the law of another state it may only recognise the internal and not the PIL of that state. The courts in one state might not recognise a decision made by the court of another state or it might consider the other court to be more appropriate yet the other court might refuse to take jurisdiction.
The EU Regulation on Succession Law (No. 650/2012), also known as “Brussels IV”, seeks to resolve the concern that to date different member states of the European
Union apply different PIL conflict of law rules for succession purposes. Unfortunately though, it has created ambiguities of its own.
The Regulation seeks to apply to member states a uniform system of recognition of succession laws broadly based on the habitual residence of the deceased and with no distinction between moveables and immoveables. The Regulation will govern the PIL for succession (testate and intestate) in the participating member states. All assets should therefore pass based on the succession laws of the member state in which the deceased was habitually resident.
Ireland, the UK and Denmark however have opted out of the Regulation, somewhat frustrating the purpose of the Regulation. Nevertheless the Regulation is still very relevant for Irish practitioners because a testator can elect to choose the law of his nationality to apply to the succession of his assets, even if that state is not a participating state. Therefore it is possible for an Irish national to elect to apply Irish law for the succession of his assets which will be binding on the EU signatory members of the Regulation.
While the Regulation came into force on 17 August 2012 most of it will not apply until 17 August 2015. Notwithstanding this delay, the Regulation is relevant for practitioners now as clients have the opportunity now to make Wills that could come into effect on a death after 2015.
2. Why are conflicts of law relevant?
The determination of where a deceased’s estate passes is relevant in determining
• if forced heirship provisions are to apply;
• if the matrimonial regime or survivorship provisions under a joint tenancy is to be accounted for; and
• if the clawback provisions for gifts made during a deceased person’s lifetime is applicable.
Forced heirship is the term used where a state provides that specified persons have automatically rights to the succession of a portion of a deceased’s estate, taking precedence over any will of the deceased. We are already familiar with the Irish fixed and discretionary based forced heirship provisions under Section 111 Succession Act
1965 giving a spouse a right to elect to take a legal right share and under Section 117
Succession Act 1965 which provides children with the right to claim for a share.
Succession should not be considered in isolation to matrimonial property regimes. Before applying any inheritance rules to the estate of a deceased it is first necessary to determine exactly what the estate includes, this process includes consideration of the matrimonial property regime and joint tenancies where the asset may pass outside of the succession under matrimonial contract law or by survivorship.
Clawback provisions often feature in forced heirship regimes. These provide that where a statutory heir is not able to received his correct share on the death of the deceased because the assets are eroded, assets given away during the deceased’s lifetime can be brought back into account for the purposes of calculating the share of the statutory heir. We are familiar with this in Ireland under section 121 Succession Act 1965.
The Regulation only deals with assets passing under a deceased person’s Will or intestacy and so assets passing by survivorship are still dealt with under local law. Nor does the Regulation affect the taxation that may arise in any member state on the death of a person (albeit the EU is currently reviewing harmonisation of inheritance tax but this is still at an early stage). Nonetheless the impact of the Regulation on where assets are to pass will inevitably impact on the tax payable.
3. Conflicts of law – Ireland and the Regulation
When it comes to ascertaining what law should apply to the estate of a deceased, different jurisdictions look to different connecting factors and apply their PIL rules accordingly. The connecting factor for Ireland is the domicile of the deceased. Irish law provides that the lex domicilii determines the succession of moveable property whereas the succession of immoveable property is determined by the law of the country where the property is situate (the lex situs). In contrast the Regulation
provides that between the participating member states generally the habitual residence of the deceased will determine the forum that applies the succession law of that deceased.
The Regulation however recognises that a person may wish the law of his nationality to apply even if the person has acquired a habitual residence in another state. The effect of a choice of law is that the internal law of the nationality applies and not its PIL and so the national court should accept jurisdiction. Irish practitioners should therefore consider with Irish national clients who have cross border issues whether to elect to apply Irish law to the entire estate to avoid foreign forced heirship provisions to apply in contrast (or possibly in addition) to Irish forced heirship provisions.
4.5 Doctrine of Renvoi – Ireland and the Regulation
The Doctrine of Renvoi occurs in the process by which a court adopts the rules of a foreign jurisdiction with respect to any conflict of laws that arises. In some instances, the rules of the foreign state might refer the matter back (‘renvoi’) to the law of the forum where the case is being heard or on to another jurisdiction.
Where Irish courts have jurisdiction e.g. the deceased died domiciled in Ireland or there are Irish immoveable assets, the Irish courts as the forum court will apply Irish PIL in determining whether Irish law or foreign law should apply. When, following the application of the Irish PIL rules it is decided that a foreign law governs the matter, the decision is made by the Irish court as to whether to apply the law of the foreign country and send the matter to that jurisdiction. However where the Irish court applies the whole of the law of the foreign country, it also should apply that country’s PIL. In such a case the foreign country’s rules of conflict of laws may refer the matter back (renvoi) to the law of Ireland. If so, the Irish courts must decide whether to accept the renvoi and so apply Irish internal law.
Under the Regulation renvoi is abolished between participating member states. If the applicable law is that of a ‘third state’ the PIL rules of that third state are included insofar as they make a renvoi to the law of a participating member state or to the law of another third state. Unfortunately it is not clear if Ireland, the UK and Denmark are considered to be a third state under this part of the Regulation. This leads to uncertainty in relation to the impact of the Regulation on Ireland, the UK and Denmark.
Examples of the possible effects on Irish PIL by the Regulation are set out in the table.
When dealing with cross border estates care will need to be taken to account for the Succession Regulation even though Ireland is not a party to it as it will affect Irish practitioners in succession planning. With careful planning and the consideration of the use of the choice of law based on nationality there may be opportunities to minimise complications later. A valid choice of law now will be effective in 2015.
© Aileen Keogan Solicitor and Tax Consultant 2013
LOOK IT UP
Regulation (EU) No 650/2012 of the European Parliament and of the Council of 4
July 2012 on jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of Succession.
Sections 111, 117, 121 Succession Act 1965.
Deceased dies habitually resident in Ireland holding a French domicile and nationality
holding French assets both moveable and immoveable. No choice of law. Ireland applies Irish PIL so that the lex domicilii (French) applies to the moveables and the lex situs (French) to the immoveables. French law however applies Irish law to all assets under the habitual residence rules. If Ireland is a third state under the Regulation, France would accept the renvoi to it under Irish PIL and French succession law would apply to all the assets. If Ireland is not a third state under the
Regulation, the internal (not PIL) laws of Ireland should apply so that Irish law would apply to all the assets. This doubt should be reduced if the deceased elected to apply the internal law of his nationality where France would then apply its law to the whole estate.
Deceased dies an Irish national, habitually resident and domiciled in Germany. Irish
law will apply to immoveables situate in Ireland as Ireland is not a party to the Regulation. However Germany will account for that division in determining the administration of the assets worldwide under German law, i.e. the assets will be taken into account in dividing up the remaining estate under German law.
Deceased dies domiciled and habitually resident in Ireland, an Irish national holding
Spanish immoveable property. Without a choice of law under Irish PIL rules the Irish courts would apply the lex situs and seek for Spanish law to apply. Assuming Ireland is a third state Spain must accept the PIL of Ireland as the deceased was habitually resident there but this is not without doubt. Prior to the Regulation applying, Ireland would have considered accepting the renvoi from Spain and so the Regulation appears to provide an opposite outcome than before. A choice of Irish law would be helpful here whereby the choice would be for the Irish internal law to apply to allow Ireland accept jurisdiction over Spanish immoveables.