The new EU Succession Regulation, which has been in effect since August 2015, raises questions. Dr. Jürgen Reiß, a lawyer and author specializing in German and international succession law, provides answers.
DUB Unternehmer: Dr. Reiß, what changes does the new EU Succession Regulation bring?
Dr. Reiß: Until now, there was no uniform European regulation governing which national law applied in cross-border inheritance cases. In the future, inheritance cases will be governed by the law of the country in which the deceased had their habitual residence at the time of death. The deceased’s nationality or the location of their estate will no longer play any role.
Who is affected?
In principle, anyone who spends an extended period of time abroad is affected. In addition to families of emigrants or seniors who, for example, spend their retirement in Italy or Spain, German owner-managed companies and employees who are posted abroad may also be affected.
What does this mean?
An example: A property owner in France has additional assets in his hometown of Frankfurt. He lives in Milan for more than half the year. He dies there. His estate would be distributed according to Italian inheritance law.
What risks do you see?
It is possible that the estate will be distributed differently than the decedent planned or intended. The right to a compulsory share and the statutory inheritance quotas applicable under German inheritance law are structured differently in some other European countries. The spouse’s share of the estate may also be regulated differently.
Entrepreneurs may face difficulties in transferring their business. This is the case when German
corporate law intersects with foreign inheritance law. In Italy, unlike in Germany, there is a right of notary inheritance. There, beneficiaries entitled to a compulsory share could assert their share in the company rather than, as in Germany, merely receiving a monetary compensation claim.
Does the Succession Regulation also affect inheritance tax?
No, the regulation does not apply to tax matters. The previous legal framework continues to apply here.
How can one protect oneself from undesirable (inheritance) consequences?
Anyone who wishes to prevent their assets from being bequeathed under a law with which they are unfamiliar—and which may be disadvantageous—should choose the law of their home country. This choice must be made in the form of a will.
Existing wills should be reviewed for validity, particularly if they involve foreign elements. For shareholders, it makes sense to draft a will that is consistent with the succession provisions set forth in the articles of association. On the other hand, those who take no action may find that their last will and testament remains unfulfilled. Furthermore, heirs may end up at a disadvantage.
