Variations in property laws can cause problems when it comes to distributing an estate in more than one jurisdiction. Brendan Harper, technical services manager at Friends Provident International, explains
It is becoming increasingly com-mon for individuals to own property in one or more countries other than their country of residence. Whether it is an investment, a dream holiday home or retirement property, it is important to understand succession laws vary greatly from country to country. The laws of certain countries vary so greatly from others that sometimes the distribution of an estate that involves one or more jurisdictions can result in a direct conflict of laws. When this happens, generally international law will dictate that real estate and land will be distributed in accordance with the succession laws of the country in which the property is situated.
Perhaps the biggest conflict comes between countries where there is total testamentary freedom, and those where there is not. The former allow individuals owning land or property there to dispose of it in any way they see fit. So, for example, you could leave everything to your spouse or partner and nothing to your children if you wished. Apart from certain provisions for those who were financially dependent on the deceased, if a person's will is properly constructed, it cannot be set aside. Jurisdictions with testamentary freedom include most common law countries, for example, England (not Scotland), Ireland, Australia and Hong Kong.
Other jurisdictions, mostly in the EU and Middle East, have succession laws that protect certain "reserved beneficiaries". These laws, commonly known as "forced heirship" laws, have provisions that override a testator's wishes should he wish to leave his estate to someone other than the reserved beneficiaries. Generally, the reserved beneficiaries will be the deceased's children, but can sometimes also include parents and siblings, especially if there are no children.
For example, French forced heirship laws reserve one half of the estate for the child if there is only one, two-thirds for two children, and three-quarters for three or more children.
A problem would arise, therefore, if a British national included his French holiday home in his English will which leaves everything to his wife. If he has children, and they contest the will, the French court will order that the French property is disposed of in accordance with French succession law.
One way to protect against this issue arising is to own properties in such countries through a company. Then, on death it is not the property that passes, but shares in the company. Generally, moveable property, such as shares in a company, will be allowed to pass under the succession laws of the deceased's domicile. Care needs to be taken as certain jurisdictions, such as France, Spain and Portugal, levy substantial annual taxes on the value of properties situated in their jurisdiction that are owned by foreign companies.
Another common piece of advice given is to make a separate will subject to the law of the particular jurisdiction in which the property is situated. For example, a Hong Kong national who owns a property in London may make a Hong Kong will dealing with his Hong Kong estate, and an English will to deal with his London property. The big advantage with this is that an English lawyer will be familiar with the formalities for obtaining probate and ensuring the property is transferred correctly to the heirs.
If you are going to make separate wills in this way, it is vital you give specific instructions to the draftsman that the will is intended to only deal with the property in that jurisdiction. This is because most wills contain a standard statement revoking all previous wills and that it is intended the will in question is the "last will and testament".
This is a practical precaution to ensure there will be no dispute on death if more than one will exists. However, it can have the unintended effect that a will made in one country can revoke a will made in another. If this happens, it can cause havoc with the distribution of an estate, and end up in court.
This was the subject of an English court decision, Lamothe v Lamothe (2002), where the deceased, a citizen of Dominica had made one will governing the devolution of a property she owned in London, and then later made another will in Dominica intended to deal with her property there. On her death, the executors of the Dominican will applied to the English High Court to have the English will set aside as the Dominican will contained a revocation clause. The court upheld their claim and the London property was distributed in accordance with the provisions of the Dominican will. With an increasing amount of individuals owning properties in various countries, they would be well advised to have wills drafted very precisely as to the property over which they are intended to operate. n
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