In order to harmonize the conflict of law rules on cross-border successions, the EU enacted the "EU Succession Regulation" ("the Regulation") in 2012. The Regulation will be applicable as of 17 August 2015. It has direct binding effect and will apply in all EU Member States except for the United Kingdom, Denmark and Ireland. Although Switzerland is not an EU Member State, the Regulation is relevant for Swiss residents and Swiss nationals under certain circumstances.
Relevance of the Regulation for Swiss Estate Planning?
The Regulation will be applicable to estates of persons deceasing on or after 17 August 2015 with either their "last habitual residence" in a Member State, leaving assets in a Member State, or, in case of a choice of law, in favor of the law of a Member State.
While Switzerland is not an EU Member State, the Regulation will affect estates of persons residing in Switzerland and Swiss nationals living in an EU Member State in the following cases:
- if the deceased person was a Swiss national and had his last habitual residence in an EU Member State;
- if the deceased person was an EU national who had his last habitual residence in Switzerland and who made a choice of law in favor of his EU national law; or
- if the deceased person was residing in Switzerland and leaves assets in an EU Member State.
Example: The estate of a deceased Swiss national who had his last habitual residence in Switzerland comprises a holiday home in the South of France and a bank account in Vienna. According to the Regulation, French courts have jurisdiction over the French holiday home and Austrian courts have jurisdiction over the bank account in Vienna, applying Swiss inheritance law as the law of the state of the last habitual residence of the deceased. If the deceased person was a French national (with his last habitual residence in Switzerland), French courts would be competent not only to rule on questions of succession regarding the French holiday home, but also regarding the worldwide estate, again applying Swiss succession law to the whole estate. As Switzerland in this example also has jurisdiction (due to the last domicile of the deceased in Switzerland), there exists a risk of contradicting judgments and additional costs.
Hence, the Regulation is also highly relevant for Swiss nationals with their last residence in the EU, Swiss residents with a passport of an EU Member State or assets in the EU or a resident in the EU with assets in Switzerland. The Regulation must therefore be considered in each individual case when planning for clients with EU ties.
Key Rules regarding Jurisdiction and Applicable Law
The "Last Habitual Residence" as the General Connecting Factor in EU Cross-border Succession
Under the Regulation, the courts of the Member State where the deceased had his last habitual residence have jurisdiction with regard to the entire estate, thereby applying the inheritance law of that state.
Example: A Greek citizen died intestate in Spain where he had his last habitual residence. Spanish courts and authorities have jurisdiction over the succession as a whole and the entire succession is subject to Spanish inheritance law, regardless of whether estate assets are located in Greece and/or elsewhere.
The Regulation does not contain a definition of the term "last habitual residence", but specifies that the life circumstances of the deceased person in the years before and at the time of his death must be considered, in particular the duration and regularity of the deceased's presence in the state concerned and the conditions and reasons for that presence. Under Swiss conflict of law rules, however, the "last residence" is the place where someone lived at the time of death with the intention to remain there permanently.
Example: A French national intends to relocate permanently from France to Switzerland and dies shortly after taking up residence in Switzerland. The Swiss authorities will consider that he had his last residence in Switzerland whereas French authorities, under the Regulation, will determine the last habitual residence of the deceased to be in France. As a result, both Switzerland and France would claim jurisdiction over the estate and apply their own national inheritance law, unless a valid choice of law in favor of French law was made, i.e. the law of the nationality of the testator as foreseen both under the Regulation and the Swiss conflict of law rules.
It is thus to be expected that the different definitions of "residence" under the Regulation and Swiss conflict of law rules will lead to conflicts if both Switzerland and a Member State claim jurisdiction.
Rules on Subsidiary Jurisdiction
In cases where the deceased had no residence in an EU Member State but left assets in such state, the respective EU Member State has jurisdiction to rule on the succession as a whole if (i) the deceased had the nationality of that Member State at the time of death; or, failing that, (ii) the deceased had his previous habitual residence in the respective Member State, provided that, at the time the court is seized, a period of not more than five years has elapsed since the habitual residence changed.
Example: A Portuguese national dies in Switzerland where he lived in the years preceding his death. He leaves no will, but assets in Portugal. Portuguese courts and authorities would accept jurisdiction over the succession as a whole if a respective action were submitted in Portugal. Likewise, Switzerland would assume jurisdiction over the worldwide estate. Consequently, contradicting decisions by the competent courts in Portugal and in Switzerland may result.
Further and importantly, an EU Member State also has jurisdiction in cases where the deceased was no EU citizen and did not have his last habitual residence in an EU Member State, but left assets in a Member State. In such case, the EU courts and authorities have limited jurisdiction: They are entitled to rule on the assets located in the respective EU Member State.
Example: The deceased was a Swiss national and died at his last domicile in Switzerland without a will. The estate of the deceased comprises a bank account in Luxemburg. Luxembourg courts would rule on succession law questions regarding this bank account (but not regarding other estate assets), if a respective claim was submitted in Luxembourg. The Luxemburg court would apply Swiss Succession Law.
Subsidiary Rules on the Applicable Law
Closer Connection with Another State
With respect to the general rule for the determination of the applicable law, the Regulation provides for an exception if the deceased, at the time of death, was manifestly closer connected with a state other than the state of his last habitual residence. In such cases, the law of that other state applies.
Example: If a German national moves to France and dies there shortly after, German law is likely to apply.
Choice of Law
The Regulation provides for a limited choice of law possibility: Testators may subject their estate to their national law (at the time of making the choice or at the time of death). The choice of law must be made expressly or implicitly by way of a testamentary disposition. Persons with dual or multiple nationalities may choose the law of any of the countries of which they are nationals at the time of making the choice or at the time of death and regardless of whether this is a Member State or not.
Example: An English national living in France is entitled to subject his entire estate to English inheritance law, which does not know forced heirship rules.
Nevertheless, it is not yet clear whether all EU Member States will accept a choice of a law, which does not provide for forced heirship rights, e.g. if the testator died with last habitual residence in a Member State with forced heirship rights as in the example above where French forced heirship law is replaced by English succession law (which does not provide for such rights).
Jurisdiction in Case of a Choice of Law
In the event that the deceased has made a choice of law in favor of a Member State, the regulation allows the parties (heirs, legatees) to agree that a court or the courts of that Member State shall have exclusive jurisdiction to rule on any succession matter. There will, however, be no such option when Swiss law has been chosen.
Certificate of Succession
A new European certificate of succession should facilitate the recognition of the heirs. For NonMember States such as Switzerland, the European certificate will need to be recognized following the relevant Swiss conflict of law rules. Likewise, Swiss certificate of heirs will need to be recognized in a given Member State.
Need for Succession Planning?
Everyone who has ties to the EU by reasons of EU nationality, habitual residence or simply by owning assets in an EU Member State should be aware of the impact of the new Regulation and consider them in his/her estate planning. Existing and future last wills and inheritance contracts need to be reviewed with regard to their current as well as to their future effectiveness within the EU. If a person falls or could fall within the scope of the Regulation, a choice of law in favor of that testator's national law may be considered: First, uncertainties entailed with the term "last habitual residence" can be avoided and second, a choice of law prevents a change of the applicable law following a change of habitual residence e.g. within the EU. Alternatively, e.g. in the absence such choice of law, it may be advisable that a testator documents the factual elements of his or her habitual residence in the will.
By providing uniform rules on jurisdiction and the applicable inheritance law, the Regulation will facilitate EU cross-border successions and brings significant improvement for the heirs of an EU crossborder estate. In relation to third States, however, the Regulation also contains ambiguities and uncertainties (in particular regarding jurisdiction, but also regarding the applicable law), at least until sufficient case law has evolved. It is therefore advisable that persons with connections to any EU Member State review their estate planning and make sure that it also works after 16 August 2015.