Caught in a web

Multijurisdictional inheritance disputes have recently risen at a rapid pace. As people continue to move around the world and purchase assets in more than one jurisdiction, cases brought to resolve these disputes are only going to increase. According to some recent research, one succession case in every ten opened in the European Union has an international element, and this proportion is only likely to continue increasing. Thirteen million EU citizens live in a member state which is not their own, and over 40m citizens from the
rest of the world live in the union.
It is worth considering then, inheritance laws at home and abroad and analysing how conflicts arise and how they can
be avoided.

In England and Wales, testamentary freedom means you have the right to leave your estate to whomever you choose. In theory, the testator is able
to leave their entire estate to their cleaner or to their cat but, in practice, the position is a little less clear-cut, and the right to leave your estate to whomever you choose is perhaps not
as straightforward as you might think.

While there aren't any 'forced heirship' laws in England and Wales, which essentially require a person to pass a fixed portion of their estate to close relatives, we do have the Inheritance (Provision for Family and Dependants) Act 1975, which by its very nature acts against testamentary freedom. With the increase of claims being brought under the 1975 Act, there is certainly less testamentary freedom. More decisions are being made by the courts as to how assets should be divided fairly between the eligible classes of applicants listed under the Act. Given the increase of case law in this area, it could be argued that we are moving towards something akin to forced heirship.

When it comes to international clients who have property and/or assets located worldwide, the issue becomes even thornier. Your will may be fully compliant with English law, but a conflict with the laws of another country may result in your assets being passed in an unexpected direction. While the English courts apply English succession law to your moveable assets, the courts will generally follow the succession law of the country where your immovable assets are situated.

As is so often the case, an English-domiciled person may own a property elsewhere in the UK (where forced heirship rules operate) but will only make one will in England leaving all of his international assets to various individuals. This is not desirable, given that advice from foreign lawyers should really be taken to ensure that the will does not conflict with their country's specific succession laws.

Some examples of jurisdictions with forced heirship legislation will shed some light on the scale of the issue.

Jurisdictional differences

It is always a surprise to learn that Scotland has certain forced heirship requirements, called legal rights. A spouse or child can claim 'legal rights', which are rights that may differ from those made for them in a will. As legal rights are paid out from a proportion of the moveable estate, it is virtually impossible to disinherit a child or spouse in Scotland.

Spanish nationals also have to leave certain portions of their estate to their children and other relatives. Descendants are given a share of two thirds of the estate and, if no descendants exist, ascendants will be given a forced share of half the estate. Widows and widowers are not entitled to the property of the estate's assets, but rather a life interest in the spouse's estate. If you are UK domiciled but have assets in Spain,
it is the law of the individual's last habitual residence that will apply to their property.

In Italy, a portion of the estate must be transferred to forced heirs. Under certain conditions, Italian forced heirship may be avoided by opting for a foreign succession law.

There are also forced heirship requirements for Swiss nationals. However, provided your will contains wording that specifically selects the succession law of England and Wales as a law of choice, then it will be effective in leaving everything in Switzerland to your surviving spouse.

In Belgium, children, ascendants and the surviving spouse are entitled to a reserved portion of the deceased's estate, although the amount of the entitlement depends on the number of children and whether the spouse has survived. Interestingly, marital contracts are popular to protect spouses against forced heirship rights of the children.

In the case of Bernard

The 2012 case of Bernard Matthews' estate is a good illustrator of the conflicts and complexities that can quickly arise from forced heirship issues affecting multinational wills. Although there were numerous international dimensions, we'll only focus on one
of the issues raised at the trial for
our purposes.

Bernard Matthews was a prominent turkey farmer who died 2010, owning substantial assets. He was estranged (but not divorced) from his wife for a period of about 35 years before his death. Despite husband and wife continuing to live apart, they had adopted and raised three children together. During the 1970s when Matthews was still living with his wife, he had a long-term affair with a woman who had given birth to his only biological child, George.

He spent the last 20 years of his life living with his partner, Odile Marteyn. They had lived together in England and then in a villa in the south of France near Saint Tropez, which was worth €15m at the time of his death.

Bernard Matthews had left three wills; two of them were French and the third was an English will and codicil. Under the English will, he left his £40m residuary estate - most of it in company shares - on trust to George, now 29. The English will included a tax-free bequest of £1m to his partner Odile. The first French will also left all moveable property in France to Odile, and the second French will bequeathed the villa to her outright.

According to French laws on forced heirship, his three children were entitled to 75 per cent of the villa, which would leave only 25 per cent of it to Odile, but he had expressed a wish that his adopted children (who owned substantial assets of their own) would not exercise this right. His adopted children ignored his wish and chose to claim their share instead.

It is interesting to note that French forced heirship can often be avoided either by buying French property through an société civile immobilière (an incorporated company with a registered office in France, which can be the property itself) or by owning the property en tontine (i.e. in a similar way to joint tenants in the UK). In certain circumstances, such as when there are no children from a previous relationship involved, a French marriage contract may be appropriate.

Brussels IV

The issue could also have been partly addressed by the forthcoming EU regulation known as Brussels IV, which was passed in 2012 and comes into force on 17 August 2015, and will apply to the estate of those who die on or after that date. It provides a framework for people who have assets in at least two countries. The regulation attempts to provide peace of mind to EU citizens by applying a single national law of succession to a person's estate upon death.

Although the EU regulation in no way alters the substantive national rules on succession, it does give each person the possibility to choose the legislation they wish to be applied following their death. All EU member states except Ireland, the UK and Denmark will apply the regulation.

It is possible to take the appropriate action now with legal advice and elect a jurisdiction for the will in preparation for the 2015 changes. If the election is not made, the estate will not benefit from the new regulations, which in
turn could mean that an individual's foreign property may not pass to their loved ones, regardless of what it says in their will.

This regulation may also result in many EU residents with a connection to England selecting English law as their law of choice, in a similar way to commercial contracts. It is possible therefore that English law will govern not only the administration of the estates, but also the disputes surrounding them. This could be an interesting development for British practices.

Rachel Jones is an associate in the contentious probate team at Druces

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