The future of forced heirship

Wednesday, 01 October 2014
How do England and Wales compare to other European jurisdictions when it comes to forced heirship, and what impact will the EU Succession Regulation have? Rachel Jones investigates and uses the Bernard Matthews case as an example.

In England and Wales, there is testamentary freedom: you have the right to leave your estate to whomever you choose. In theory, testators can leave their entire estate to their cleaner or cat, if that is what they wish. In practice, however, that right is perhaps not as clear-cut as one might think.

While there aren’t any forced heirship laws in England and Wales, the Inheritance (Provision for Family and Dependants) Act 1975 (the 1975 Act), by its very nature, acts against testamentary freedom. Given the increase in claims being brought under the 1975 Act, there certainly now seems to be less testamentary freedom, with more decisions being made by the courts as to how assets should be divided fairly between the eligible applicants listed under the 1975 Act. Indeed, it could be argued that England and Wales is moving towards something akin to forced heirship.

Given the increase in claims under the Inheritance (Provision for Family and Dependants) Act 1975, there certainly now seems to be less testamentary freedom in England and Wales

With this in mind, the way in which English and Welsh law contrasts with that of a few other jurisdictions operating a strict forced heirship regime will now be explored.

Other forced heirship regimes

Let us start with Scotland. It may be a surprise to learn that Scotland has certain forced heirship requirements. A spouse or child can claim what are known as ‘legal rights’ – rights that can differ from the provisions made for them in a will. As legal rights are paid out from a proportion of the movable estate, it is virtually impossible to disinherit a child or spouse in Scotland. Incidentally, Ireland does not operate any forced heirship rules.

Spanish nationals must also leave certain portions of their estates 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 spouse’s estate but rather a life interest. For those who 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.

In Switzerland, there are forced heirship requirements for Swiss nationals. However, if you are UK domiciled but have assets in Switzerland, you may elect for the law of the state in which you are a citizen. The election will be void if you are no longer a citizen of the chosen state or if you acquire Swiss citizenship.

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 for protecting spouses against the forced heirship rights of the children.

Recent case law

A 2012 case involving Bernard Matthews’ estate demonstrates the conflicts and complexities that can quickly arise when forced heirship issues affect a will.1 Although there were numerous cross-border issues, I will focus on only one of the issues raised at trial.

By way of a brief background, Bernard Matthews, the famous turkey farmer, died in 2010 at the age of 80. Shortly after his death, a dispute arose in relation to his estate. Bernard Matthews died owning substantial assets. He was estranged from his wife for a period of about 35 years before his death but they had never divorced. Despite husband and wife continuing to live apart, they had adopted and raised three children together. During the 1970s, when Bernard Matthews was still living with his wife, he had a long-term affair with a woman who gave birth to his only biological child, George.

Until he died in 2010, Bernard Matthews spent 20 years living with his partner, Odile Marteyn. They lived together in England and then in a villa in the south of France near Saint-Tropez, worth EUR15 million at the date of death. Bernard Matthews had left three wills: two French wills and one English will and codicil.

Under the English will, Bernard Matthews left his GBP40 million residuary estate, most of it in company shares, in trust to George, now 29. The English will included a tax-free bequest of GBP1 million to Odile. The first French will left all movable property in France to Odile, and the other French will bequeathed the villa outright to her.

In leaving the villa to Odile, Bernard Matthews had been aware that, under French laws of forced heirship, he could not cut his adopted children out of his French estate, and that his three children were entitled to 75 per cent of the villa, which would leave only 25 per cent of it to Odile. However, he had hoped that his adopted children, who already owned substantial assets of their own, would not exercise their rights, and he had left a letter of wishes to this effect. Instead, upon his death, his adopted children ignored his wishes and chose to claim their share of the villa under French inheritance law.

As an aside, it is interesting to note that French forced heirship can often be avoided either by buying French property through an SCI (société civile immobilière) 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, a French marriage contract may be appropriate.

We are increasingly seeing cases concerning inheritance disputes, often involving multiple jurisdictions. The types of issues arising are only going to increase as people continue to move around the world more freely and to own assets in more than one jurisdiction. According to recent research,2 one succession in ten in the EU has an international element, and this proportion is increasing all the time. Around 13 million EU citizens live in a member state other than their own and roughly 21 million citizens from outside the EU live in an EU member state.

Is your will compliant with other jurisdictions’ law?

Your will may be fully compliant with English and Welsh law, but a conflict with the laws of another country may result in your assets being passed in an unexpected direction. While the English and Welsh courts will apply English and Welsh succession law to your movable 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 Europe (where forced heirship rules operate) but make one will in England, leaving all of their worldwide assets to various individuals. This is not desirable; advice from foreign attorneys should really be taken to ensure the will does not conflict with their country’s specific succession laws.

Changes on the horizon

Issues that arose in the Bernard Matthews case could have been partly addressed by Regulation (EU) No.650/201, also known as Brussels IV or the Succession Regulation, which was passed in 2012 but will only come into force on 17 August 2015.

The Succession Regulation provides a framework for people who have assets in at least two countries. It attempts to provide certainty for EU citizens as to which law will apply in governing a succession by applying a single national law of succession to a person’s estate. Generally, the EU regulation provides that the laws of the state in which the deceased died habitually resident will govern how the estate passes. Although the EU regulation in no way alters the substantive national rules on succession, it does give each person the chance to choose the legislation they wish to be applied on death. All EU member states except Ireland, the UK and Denmark will apply the regulation.

Conclusion

It is possible to make an election in a will now in preparation for the entry into force of the Succession Regulation. Those looking to draft a new will should seek legal advice on this issue. If the election is not made, the estate will not benefit from the new regulation, which in turn could mean that an individual’s foreign property may not pass to their loved ones, regardless of what their will says.

The Succession Regulation may result in many EU residents with a connection to England and Wales selecting English and Welsh law as their law of choice (similar to the situation with commercial contracts). It is possible, therefore, that English and Welsh law will govern not only the administration of the estates, but also the disputes surrounding them. This could prove an interesting development for our practices.

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Rachel Jones

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

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