Angelos G Paphitis Christos Kastanias September 19 2019 Recent changes to inheritance and succession law A G Paphitis & Co | Private Client & Offshore Services - Cyprus Angelos G Paphitis, Christos Kastanias Private Client & Offshore Services IntroductionBasic aspects of succession lawAdministration of estatesReal estate and other assets owned by foreign nationalsImmovable propertyMovable propertyLaws of intestacy – absence of a willCommentIntroductionThe recent revocation of Section 42 of the Wills and Succession Law Cap 195 has resulted in major changes to Cyprus's succession law regime. Cyprus has a complicated system of forced heirship in which a portion of a deceased's estate must be effectively passed to surviving family members according to a set system of inheritance. Natural children of deceased persons are entitled to an equal share of their parent's property (along with their parents' spouses).This forced heirship regime means that even if a deceased writes a will leaving a certain portion of their estate as a gift to their spouse, their wishes will be deemed invalid if there are natural children who are entitled to a fixed minimum percentage of the estate.The basic principles of this regulation and how it applies to people who live and own estates in Cyprus are as follows:the succession law applies to the succession of an estate; andthe Cypriot courts have jurisdiction to decide on the succession of an estate (in the case of immovable property in Cyprus owned by anyone not domiciled in the country).Basic aspects of succession lawThe two most significant aspects of Cyprus's succession law regime are:the Wills and Succession Law; andthe Administration of Estates Law.The Wills and Succession Law relates to both wills and intestacy. Under this law, a deceased person's net estate will be divided into statutory and disposable sections. The statutory portion is reserved for the deceased's closest living relatives, who can include:a surviving spouse; ornatural children or their descendants (where the natural children have died during the deceased's lifetime).According to the intestacy rules, under the Wills and Succession Law Cap 195, a deceased's living children or their descendants will receive 75% of the statutory portion of the estate's net value, while their spouse will receive 50%. These percentages may vary depending on the surviving close relatives at the time of the deceased's death. Where a deceased has no surviving spouse, children, grandchildren or parents, the statutory portion of the estate can be disposed of by will.With regard to the disposable portion of a deceased's estate, a will that distributes more than the disposable portion of the testator's estate will be considered invalid. The disposable section can be between 25% and 50% of the total estate, depending on which relatives are still alive.Administration of estatesIf a deceased person dies intestate, the Cypriot courts may authorise an individual or group of individuals to administrate the deceased person's estate. In order to do so, an individual must file an application with a court registry asking it to grant them the letters of administration.A deceased person can also appoint executors of their will in their lifetime. In such a case, the appointed person must submit a letter of application, with the will annexed. The application must be filed in the district court registry where the deceased had permanent residence at the time of death. Along with the application, the individual must submit an affidavit swearing the deceased's date of death and the estimated value of the property that they will be administering.Real estate and other assets owned by foreign nationalsUnder Article 22 (Choice of law) of the EU Succession Regulation (650/2010), foreign nationals can choose whether the law of their country of nationality applies to the succession of their estate. This applies to all EU states.For instance, British nationals with property in Cyprus can opt for UK law for the administration of their estate in the event of their death and avoid the forced heirship regime altogether. The decision to apply UK law should be mentioned clearly in the will, as failing to do so will make the Cypriot law of succession applicable by default. However, there are complications regarding whether a deceased has left movable or immovable property in Cyprus.Immovable propertyFor immovable property, the restrictions imposed by Cypriot law on the distribution of the statutory portion of an estate will apply regardless of the testator's domicile country at the time of death.Movable propertyFor movable property, if the deceased has mentioned in their will the decision to opt for the law of their domicile country, the law of that country will prevail over the distribution of movable property even if the deceased was a Cypriot national. If not, the Wills and Succession Law will apply.Although estate duty was abolished in Cyprus in 2001, domiciles of foreign jurisdictions may still have to pay inheritance tax in Cyprus. The laws of forced heirship apply to anyone who dies in domicile in Cyprus, irrespective of nationality and in the absence of any other instructions in the testator's will.Laws of intestacy – absence of a willThe laws of intestacy apply when a person dies without leaving a valid will (and to any part of the estate not mentioned in the will). In such cases, the parties entitled to receive portions of the estate (movable and immovable property) are divided into the following categories:First class – this includes:the deceased's legitimate children; andthe living descendants of legitimate children who died during the deceased's lifetime.Second class – this includes:the deceased's living parents;in the absence of parents, brothers and sisters alive at the time of the deceased's death; orin the absence of both of the above, the descendants of the deceased's siblings who died during the deceased's lifetime.Third class – this includes:grandparents and distant relatives; andclosest living descendants.Fourth class – this includes the deceased's closest relatives at the time of their death up to the sixth degree (eg, aunts, uncles, cousins or siblings of grandparents).The portion of an estate given to spouses is calculated before the rest of the estate is disposed of according to the degree of kinship.A will can be challenged in court on the basis of sound allegations (eg, the testator's mental capacity at the time of drafting the will).CommentThe laws of inheritance and succession can be overwhelming for people dealing with the death of a loved one. Matters can be even more complicated for foreign nationals, which is why expert advice should be sought from a qualified lawyer.For further information on this topic please contact Angelos Paphitis or Christos Kastanias AGP Law | A G Paphitis & Co LLC by telephone (+357 25 73 10 00) or by email ([email protected]). The A G Paphitis & Co website can be accessed at www.agplaw.com.