The land that wills forgot - Russian succession law and practice

Monday, 01 October 2012

Russian succession law is part of a civil-law system. Civil-law practitioners will therefore find many concepts familiar, including universal succession and forced heirship. There is no separation between legal and beneficial title under Russian law. The practice of making wills is not widespread and current administration practice represents a major obstacle in cross-border succession matters.

The principles of succession law are outlined in Part Three of the Civil Code of the Russian Federation. Unless otherwise specified, references are to the Civil Code.

General principles

Universal succession

The general principle is universal succession. The heirs immediately and simultaneously step into the place of the deceased for all rights and obligations, and ownership of the assets as they exist at the time of death (article 1110(1)).

Transfer of the estate to the heirs

Although ownership passes to the heirs automatically on death, it is necessary for the heirs to ‘accept’ their shares to acquire the estate (article 1152). Acceptance has retrospective effect to the date of death (article 1154(4)) and must be unconditional.

Acceptance may be in writing to the notary. However, under article 1153(2) a rebuttable presumption of acceptance is inferred from conduct.

Time limits

An executor’s powers and duties endure as long as is necessary to distribute the estate. A notary’s duties (including safeguarding of property) generally last only six months from the date of death. All claimants to the estate must, as a general rule, come forward and accept or disclaim their shares within six months.

Liabilities of the deceased

The heirs are jointly and severally responsible for the deceased’s obligations (article 1175) up to the value of their accepted shares.

The relevant limitation periods for creditors’ claims are not suspended during the succession process (article 1175(2)). Creditors’ claims may be brought against the heirs, the executor or the estate. If they are brought against the estate, they are adjourned until the heirs have accepted their inheritance. A creditor’s claim does not prevent or delay the transfer of the estate to the heirs, subject to the discretion of the court to delay transfer of the estate.

The heirs may avoid liability by disclaiming the inheritance within the six-month period.

Inheritance by law

Division of property

Intestacy rules regulate how the property is divided among relatives of the deceased. The heirs by law include the children, spouse, parents and disabled dependants of the deceased, and are divided into eight levels of priority depending on the closeness of family and blood ties. The heirs of the higher priorities inherit compulsory minimum shares in the estate of the deceased preferentially to the heirs of the lower priorities.

Administration

A notary (usually instructed in connection with issuing a certificate of entitlement) will have powers to carry out certain steps in connection with the administration of the estate.

Inheritance under a will

Formalities

The original of any will must be certified by a notary (article 1124(1)) and registered in the Notarial Registry. The original will must be kept by the notary and a certified copy given to the testator. Special certification procedures apply to wills written as ‘closed wills’ or in the form of a ‘testamentary instruction’ (this is a testamentary instruction to the bank to transfer funds to a particular person (article 1128)). Various forms of wills may be used in combination or overridden by the latest will.

Forced heirship

Russian law rigidly protects the rights of disabled and dependent heirs (such as minor children). It includes forced heirship provisions that entitle them to compulsory minimum shares (at least 50 per cent of what they would have received on intestacy) in the estate, irrespective of the deceased’s wishes. Property left by will may be used in satisfaction of compulsory shares. The court has discretion to reduce compulsory shares in very limited cases (eg where otherwise an heir under a will would be deprived of their home).

Testamentary obligation

The testator may impose an obligation on an heir or heirs to transfer a specific item or property to a designated person, to allow that person the use of that item or property to perform a service for, or to make periodic payments to, that person within the value of the inherited property (article 1137).

The executor

An executor may be appointed in a will. Their duties and powers will depend on the provisions of the will (article 1135(1)). Article 1135(2) sets out the statutory executor’s duties in the absence of specific provisions in the will.

The executor can act in their own name (they may prosecute claims connected with the execution of the will), but they do not own the estate. The heirs are entitled to call the executor to account in relation to the administration of the estate.

Appointing executors is rare. Some commentators consider that heirs have a better negligence claim against a notary than an executor, since the notary’s duties are more explicitly defined in existing legislation.

Where no executor is appointed

An administrator or executor cannot be appointed after death.

The heirs are responsible for the administration of the estate, although in practice they will need to instruct a notary.

All the heirs acting together, or one under a power of attorney, may collect the assets of a deceased person from third parties using a notarial certificate of entitlement. They then share the assets among themselves on the principles of joint ownership. In cases where, for example, an heir was defrauded of their inheritance, they will have a claim against the other heirs.

“Making wills is not widespread and current administration practice represents a major obstacle”

Role of the notary

Certificate of entitlement

The heirs (whether by law or by will) may obtain a notarial certificate of their entitlement to (a share in) the estate. A notarial certificate of entitlement is not strictly compulsory from a legal point of view, but in practice it is required to access or re-register certain assets (bank accounts, real estate, shares, etc).

In comparison with common-law executors, notaries have a fairly limited scope of duties and limited liability. The notary acts only on the basis of documents presented to them.

However, in the process of issuing certificates of entitlement, the notary must, in effect, verify the validity of any will, interpret the will and take steps to establish the heirs (whether under a will or by law) and inform them of their potential entitlement (article 61 of the Principles of the Law on Notaries 1993 N 4462-I).

Russian law provides that the notary must take certain additional steps in connection with the administration of the estate. This applies whether or not there is a will or an executor.

Safeguarding property

Article 64 of the Principles of the Law on Notaries 1993 N 4462-I also establishes the duty to safeguard property where this is necessary to protect the interests of the heirs. This may also be done by the heirs or executor. Articles 1171-1172 set out measures that may be taken, including compiling an inventory and requesting information from banks and other parties. This is not a closed list.

Arranging for administration of certain assets

Assets that require administration, rather than simply safekeeping (e.g. shares) must be administered either by the executor (if any), or by a fiduciary. The fiduciary is appointed by contract with the notary or the executor to administer the assets for the benefit of the heirs.

The court

Where documents presented are insufficient for the notary to issue a certificate of entitlement, or there is any irregularity or dispute, the matter must be referred to court (court proceedings are common, particularly as few people make wills).

International issues

Under the Civil Code, the governing law of succession is that of the last place of permanent residence of the deceased. For real property, the law of the country where the real property is situated applies. The law that governs the validity of a will or the capacity of the testator is the law of the permanent place of residence of the testator at the time of making the will (article 1224).

Jurisdiction depends on the deceased’s last known place of residence (where this is in the Russian Federation) or, if the deceased had assets in Russia but was resident abroad, the location of such assets. If assets are located in various places, the location of real property or, if none, the major part of movable property in terms of value will determine jurisdiction (article 1115). In practical terms, only the notary local to the relevant area (either the deceased’s registered place of residence or, in some circumstances, the location of the assets) will be able to issue the certificate of entitlement and administer the succession process.

This summary was prepared with the help of Ayshat Gaydarova, a Russian-qualified lawyer, and Deliya Meylanova, a UK trainee solicitor.

Author block
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Olga Boltenko

Olga Boltenko TEP is a Partner of Withers LLP.

Section
STEP Journal
Country
Russia

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