Do you own assets in Europe — even mere joint ownership in an apartment? Are you likely to be transferred there by your employer for a few years? In either case, a new European Union Regulation could have sweeping impact on your estate, triggering the need to amend your will.
The EU Succession Regulation (also known as Brussels IV), which came into force on August 17, 2015, in all EU member states (except for Denmark, the UK and Ireland, which did not “opt in”), marks a major upheaval in international estate planning. It would be sheer folly to consider the EU Succession Regulation as simply an “EU thing”, confined to the participating member states. It will have worldwide repercussions due to the increased mobility of people with widespread cross-border connections, whether they be family members or assets.
What is the new rule?
The general rule under the EU Succession Regulation is that the person’s last habitual residence will determine what jurisdiction’s law will be applicable to the deceased’s succession [art 21(1)].
The habitual residence rule is subject to two exceptions:
- The law of the last habitual residence of the deceased will not apply where it is clear that the deceased was “manifestly more closely connected” with some other state at the time of death [art 21(2)]. In that case, the law of the more closely connected state will apply to the succession of the deceased. The “manifestly more closely connected” concept includes factors like personal presence, family, business and economic interests [Preliminary comments, par 23–24]. This exception can arise where, for instance, the deceased had moved to the state of his habitual residence fairly recently before his death, but was still more closely connected to another state given all the circumstances.
- There is also the “choice of law” exception to the habitual residence rule: a person may choose the law of a state whose nationality he possesses to govern his succession [art 22]. Note that the choice will apply to the succession as a whole; it is not possible to choose different laws for different assets [art. 23(1)].
The EU Succession Regulation may therefore apply to Canadians in the following situations:
- Canadian citizen habitually residing in a EU member state that opted in the EU Succession Regulation;
- Canadian citizen with assets in such a EU member state.
What could be the concrete consequences of the rule?
Consider the scenario where a Canadian citizen domiciled in Quebec owns a villa located in Tuscany. Prior to August 17, 2015, Italian law would have applied to the Italian immovable. Italy’s internal laws recognize “forced heirship”: rules, known in a number of EU member states which are civil law jurisdictions, which impose a mandatory scheme of distribution among spouse and children. The Quebec resident may wish to elude these rules with respect to her Italian property. Under the EU Succession Regulation, she can now designate in her will that Quebec law is to apply to her entire succession: Quebec rules will apply to the Italian immovable on her death.
Consider also the scenario where a Canadian citizen domiciled in Quebec works and habitually resides in France at the time of his death, and has not designated Quebec as the governing law of his succession. French law will apply to his worldwide assets, including assets outside of France. If he owns an immovable in Quebec, under our private international law, the succession to the immovable is governed by the law of its situation [art 3098 of the Civil Code of Quebec]. However, the applicable law determined by habitual residence brings into play France’s forced heirship rules, which may be an unintended or unanticipated result and may give rise to litigation. To set aside those consequences, under the EU Succession Regulation, the testator could choose the law of his nationality or domicile prior to death, which would be Quebec’s internal law.
These new EU rules are a welcome development in international estate planning, especially for those Canadians who are dual citizens or have connections such as assets or beneficiaries situated in more than one jurisdiction.
Commission Regulation (EC) 650/2012 of the European Parliament and of the Council of 4 July 2012 on jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of Succession, <eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32012R0650>
