European Succession Regulation: What Canadians with EU Connections Need to Know
The European Succession Regulation holds potential benefits for Canadian citizens who have connections in the European Union (EU) when it comes to estate planning. While it is an EU regulation, it can still provide valuable assistance to Canadians navigating the complexities of succession in the EU.
The primary goal of the Regulation is harmonization – the idea that only one law should govern succession upon death. Previously, succession to property in the EU was cumbersome, with conflicting rules across member states. The Regulation aims to bring simplicity, uniformity, and certainty to this process.
According to the Regulation, the law of the deceased’s last habitual residence should typically determine succession. However, if an individual holds a nationality different from their place of residence, they have the option to choose the law of their nationality for their estate’s succession.
This choice of law provision is particularly helpful for Canadian citizens who own property in an EU member state or reside there. They can use the Regulation to include a declaration in their will, choosing the Canadian jurisdiction’s law that has the closest connection to govern succession to their EU property.
The majority of EU member states are governed by civil law and have mandatory rules, such as forced heirship, which ensure a portion of the estate goes to the children. Testamentary freedom, the ability to leave assets solely to a surviving spouse, is not applicable in these cases. This can be problematic for many Canadians, as their intention is often to make the surviving spouse the primary beneficiary.
Since the Regulation came into effect on August 17, 2015, we have seen an increase in will plans involving EU member states, where the choice of law provision has been utilized to govern property succession. However, recent developments have raised uncertainty regarding the application of the Regulation and the effectiveness of the choice of law.
Under Article 35 of the Regulation, an EU member state can refuse to allow a choice of law if it contradicts its public policy. There has been ongoing discourse and some controversy surrounding the circumstances in which Article 35 might be invoked, and whether member states would respect or restrict the choice of law to safeguard forced heirship rules based on public policy grounds.
In a recent decision by the German Federal Court of Justice, a choice of English law made by a British citizen residing in Germany was deemed ineffective. The deceased had completely excluded his German citizen and resident son from inheriting under his will, which is legally permissible under English law due to testamentary freedom. However, the court ruled that it would go against public policy to deprive the son of his compulsory share of the estate under German law. The court also emphasized the deceased’s longstanding habitual residence in Germany, his son’s German citizenship and residence, and the location of the estate’s assets in Germany as factors informing its decision.
Another challenge to the Regulation arises from an amendment made to the French Civil Code in November 2021. This amendment may undermine a choice of law if it results in depriving a child of their compulsory share under French law. If a deceased or any of their children are citizens or residents of an EU member state, and the applicable succession law does not protect the child’s compulsory share under French law, the child can claim compensation from any property held in France.
While the French rules were initially intended to address inequality resulting from wills governed by Sharia law, the impact is wider-reaching. It remains to be seen whether an application will be made to the European Court of Justice to challenge these French amendments and the outcome of such a case.
Given these recent developments, it is crucial for Canadians and others with EU connections to seek professional advice when navigating the complexities of the Regulation and estate planning. The changing landscape requires careful consideration to ensure compliance and protect one’s estate planning intentions.
Disclaimer: The information provided in this article is general in nature, limited to the law of Ontario, Canada, and should not be considered legal or tax advice for individual situations. It is recommended to seek legal advice tailored to your specific circumstances before taking any action.
