Successions beyond formalities

Sun 13 May 2018, Philippe Ropenga Estate management Will drafting EU Succession Regulation 650/2012

This blog promotes an approach to estates that considers them in their entirety. As you know from a recent post, seeing estates from this perspective helps solving thorny management issues such as allocation or value¹. It also allows to see estate difficulties more clearly at an earlier stage, that of will drafting. A testament is a formal deed. It can be seen as one of the succession formalities. Formalities are a burden in the globalisation context since they differ from one country to another. It prima facie seems that they could easily be standardised to draft wills that would have the same effect in any country. A recent case decided by the Court of Justice of the European Union shows that the standardisation of wills is not as easy as it may seem. The European area is standardised (1). Complete uniformity regarding successions can however not be achieved since a testament has to reflect a unique inner self (2).

1 A standardised area

The standardised area is structured on circulating formalities (1.1) and melting borders (1.2).

1.1 Circulating formalities

There are three main types of formalities :

• formalities related to the land register In France, operations related to rights in rem regarding an immoveable property have to be recorded in the land register. Notaries are public officers who have a monopoly on formalities registered in this register. Point 18 of the preamble of the European succession regulation (650/2012), hereafter mentioned as the Regulation, starts by excluding these operations from the scope of this Regulation. This seems strange since this stops valid operations recorded in one member State from being recorded in another. This is why the same point 18 states later i. a. that the certificate of succession introduced by the Regulation can be used to register an operation that has previously been registered in another member State. National law applies to registration matters but the certificate allows to cross over the internal law of one member State to have rights registered in another. Point 18 only promotes circulation since a member State can request additional documents or information prior to registration according to its internal law.

• formalities related to testaments Testaments written by notaries in a public officer deed are the most robust when it comes to formal validity and evidence. The Regulation calls public officer deeds "authentic instruments". This expression is similar to "actes authentiques" in French. Chapter V of the Regulation deals with them. Article 59, §1 of the Regulation states that "An authentic instrument established in a Member State shall have the same evidentiary effects in another Member State as it has in the Member State of origin, or the most comparable effects, provided that this is not manifestly contrary to public policy (ordre public) in the Member State concerned." The notary who issued the deed can fill a form that describes the evidentiary effect of the deed if the deed is to be produced aboard. It can also be enforced in another member State in a similar way according to article 60 of the Regulation.

• formalities related to people Chapter VI of the Regulation deals with the European succession certificate. It does not replace any national instrument even if it can have similar effects as seen above. The certificate is not a substitute to a will either. According to article 63, §1 of the Regulation, "The Certificate is for use by heirs, legatees having direct rights in the succession and executors of wills or administrators of the estate who, in another Member State, need to invoke their status or to exercise respectively their rights as heirs or legatees and/or their powers as executors of wills or administrators of the estate." Since it refers to rights held by people, it has been classified here among formalities related to people rather than to property. A will usually is invoked by someone. It therefore is good practice in an international context to think about the certificate when drafting a will. One can see that the European Union has made an effort to ascertain rights across Europe.

Circulation of formalities is rather fluid. When borders start to melt, the European area seems however somewhat psychedelic.

1.2 Melting borders

Formalities circulate without any difficulty in a perfectly uniform area because of the nonexistence of borders. The European Union is not a fully uniform area. Standardisation itself can lead to greater heterogeneity. If something has to be standardised, anyone taking part in the standardisation process has to agree not only on the result that has to be achieved, but also on the things that have to be standardised. The Regulation obviously deals with successions and excludes matrimonial property regimes². Unfortunately, there is no clear border between matrimonial property regimes and successions since a matrimonial property regime may produce some of its effects on death³. Mr and Mrs Mahnkopf are both German nationals and live in Berlin. They did not enter into any marriage contract, and Mr. Mahnkopf has died without will⁴. At first glance, the case looks quite simple because of a strong connection to German law. The only element of extraneity is an immoveable property located in Sweden. According to German law, the estate has to be divided in two equal shares between the surviving spouse and the son of Mr. and Mrs. Mahnkopf. A local German court indeed issued a European certificate of succession stating that a surviving spouse is entitled to a quarter of the estate and that this quarter is increased by a quarter when a certain type of property regime is applicable⁵. The widow went to a notary to get a European certificate of succession regarding her and her's son co-ownership of a half the property located in Sweden. Her intention was to use the certificate to have the ownership right registered in Sweden. The notary filed the request to a German court that rejected it. According to the judgement, the quarter of the surviving spouse is not allocated on the basis of succession law but on the ground of matrimonial property regime law. The certificate could not be issued because of the exclusion of matrimonial property regime from the scope of the Regulation⁶. Mrs Mahnkopf challenged this decision. The upper court favoured the approach of the lower court regarding German law and considered however that this could be seen as a matter of succession under the Regulation and referred the case to the EUCJ⁷. « By its first question, the referring court asks, in essence, whether Article 1(1) of Regulation No 650/2012 must be interpreted as meaning that a national provision, such as that at issue in the main proceedings, which prescribes, on the death of one of the spouses, a fixed allocation of the accrued gains by increasing the surviving spouse’s share of the estate falls within the scope of that regulation.»⁸. Following i. a. the observations of the German Government and the opinion of the Advocate General⁹, the answer of the EUCJ to this question is positive.

As one may see, simple cases may become quite complex in an international context since they require to interpret not only national law but also an international instrument that in turn sees domestic law from its own perspective. One may think that these difficulties are inevitable since standardisation is not fully achieved. The fact that a domestic law requires the lawyer to interpret an international instrument that it obliges him to consider a law that he may not be familiar with is a source of difficulty. It only is the visible part of the iceberg. The reasoning based on European regulations is as direct as the regulations it relies on. Unlike European directives, European regulations do not need to be transposed in domestic law. There is no adaptation of, let's say German or French law to the EU regulations. These regulations do not ask the lawyer to see a specific provision from an international point of view; they directly ask him a question that he may not have considered before in a purely domestic context. Law has grown within the borders of a land and, until recently, has rarely had a direct effect in a foreign land. Perceptions of a given question may vary from one country to another. Circulation of people, goods, and ideas has undoubtedly increased. A great effort has been made regarding the hassle of formalities. The influence of borders on the making of the law has however not disappeared despite the direct effect of European regulations. Borders have not disappeared yet. They have just melted and continue to imperceptibly stick to the shoes of those who cross them. It may be seen as disruptive and one may think that it could be overcome with deeper standardisation. Nevertheless, standardising technical trade details is much easier than preserving the testator's inner self when drafting a will.

Standardised formalities related to a succession will inevitably bump into a unique inner self as they circulate.

2 A unique inner self

Taking the testator's inner self into account requires to pay attention to the background (2.1). It helps to realise that the wording of a will that is supposed to have effect in an international context could be different to that of a testament drafted in a purely domestic one (2.2).

2.1 The background

Institutions of the European Union have spared no effort to reduce bumps that could disrupt circulation in an open area. This explains why the predominant connecting factor within the scope of the Regulation is the habitual residence. "In view of the increasing mobility of citizens and in order to ensure the proper administration of justice within the Union and to ensure that a genuine connecting factor exists between the succession and the Member State in which jurisdiction is exercised, this Regulation should provide that the general connecting factor for the purposes of determining both jurisdiction and the applicable law should be the habitual residence of the deceased at the time of death."¹⁰ Some practitioners are not happy about this connecting factor since they consider that the habitual residence is not easy to determine in some cases. The Regulation mentions these difficulties and suggests possible solutions¹¹. Life is not a predictable phenomenon and uncertainty is a core element in estate planning. Hence, choosing another connecting factor would displace the uncertainty without removing it. Any connecting factor relies on facts that trigger the application of a legal provision. If a factual situation cannot be predicted, uncertainty will always remain. Nationality is a subsidiary connecting factor that is relatively certain. According to article 22 of the Regulation, the law of the nationality can be chosen to govern the succession. A testator may have the nationality of a country, regularly move from one country to another for professional reasons and feel bound to another country by a link that is tighter than the one that binds him to his country of nationality. This can happen in practice since people who travel a lot may be bound by looser tights to their country of nationality than people who rarely leave their country of nationality. People who are extremely mobile should be able to draft a testament that is as reliable as the one written by someone who has never left his country of birth. It would not be wise to give any general indication regarding will drafting because practical solutions depend on the testator's personal circumstances. It thus is interesting to consider the testator's background to spot elements that may strengthen the connection to a country.

The inner self is not an etheric notion; it is solidified by the testator's background and revealed by the wording of the testament.

2.2 The wording

As one can see from this post, the fact that a testament is a formal deed does not mean that it can only be made of uniform formalities. The opposite view would reduce the will to a document that determines how assets have to circulate on death. Support for this view could be derived from point 7 of the Regulation's preamble. It states that: "The proper functioning of the internal market should be facilitated by removing the obstacles to the free movement of persons who currently face difficulties in asserting their rights in the context of a succession having cross-border implications." Should this view prevail, the testament would be shapeless since it would not reflect the will of a person but only record an intention to transfer property rights on death. Market integration tends to standardise anything that is on the market. The inner self however is unique. It is entrenched in reality unlike the psychedelic conception of a testament that is only related to circulation and does not help to formulate any answer to these two simple questions : "What matters to me?" and "How can I foster it ?"

The formulation of the testator's wishes is essential and raise two difficulties in an international context:

• Practitioners have a legal and cultural background and thus are inclined to perceive and formulate things in a specific way. It an international context, a practitioner, e. g., a judge who will have to interpret the will may have a background that is different from that of the will drafter. One therefore has to make sure that the will does not seem exotic in a jurisdiction the testator has some connection to. Exoticism is great during weekends and holidays not so much at work.

• Practitioners are used to answer specific questions and unfortunately tend to use stereotyped answers that have been tested with case law. As seen above, a court may ask a totally different question. It therefore is good practice to make sure that the answer to the basic questions stated above appears clearly in the will. A foreign practitioner who may have to interpret the will should be able to use them as a starting point.

It has been seen that the inner self of the testator plays an important part during will drafting and that its expression cannot be standardised.

In brief, formalities related to successions are important. Nevertheless, their efficiency in a cross-border context largely depends on the practitioner's ability to use them in to secure the manifestation of the testator's inner self during will drafting.

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