Estate planning and marital regime

This month our article is quite different. Instead of treating a specific area of Notarial law, we have provided our readers with a practical case.

Mr. and Mrs. English are British, they got married in England in October 1992, without having preceded their union with a marriage contract, and lived in England until they moved to France in August 2007. Mr. English has 2 children (one son, one daughter) from a previous marriage, Mrs. English does not have any children and only a brother as her sole relative. They own their property in France, purchased in 2000 and have different movable assets in France, England and Italy. No other immovable elsewhere.

Mr. English has a very difficult relationship with his son and consulted his English solicitor to make a standard English Will in 2010, bequeathing his estate to his wife and then to his daughter. At the time their English solicitor did not take into consideration their new residence in France and did not distinguish any of their assets, located in France, UK and Italy.

Mrs. English also made a standard English Will at the same time, bequeathing her estate to her husband, and to various charities in England, should he predecease her.

They recently read several articles regarding French inheritance law, European succession law and are confused as to whether their wills can apply in France, now that they are French residents.

They heard so many conflicting stories such as:

- their wills are not valid in France because
they were made before the European succession law came into force in France in August 2015,
- their wills are valid and because they are English wills they do not need to do anything and it will automatically apply without any restriction or taking into consideration French Law.

Mr. English also intends to buy another property with the funds coming from his pension but did not want his wife to be on the title deed. He wonders whether the property would belong to him only or to his wife as well, again as they are now French residents.

This is a typical scenario that, as a lawyer, I meet every day. The two main questions asked by Mr. and Mrs. English are the validity of their Wills and the purchase of a new property by Mr. English only.

1.Validity and appliance of the English Wills.

English Wills have always been valid and accepted in France to settle a French Estate. However, until 17th August 2015, Notaires would only apply English wills to an extent to preserve the children's reserve right (reserve hereditaire). Mr. English would have died before the 17th August 2015, his will would have been valid but he would not have been able to transfer all his assets to his wife only and ignore the reserved heir. His son, which whom he has had a difficult relationship would have had a claim over his father's estate. Since 17th August 2015, we do not need to worry anymore and it is fairly easy to overcome French
Napoleonic law and the reserve thanks to the European succession regulation.

As a reminder, since 17th August 2015, any succession across the E.U. (except for England, Denmark and Ireland) will be governed by the European succession regulations voted on 4th July 2012. These new uniform rules of Regulation (EU) n°650/2012 lay down rules to determine which Law will apply to the succession.

Under article 21.1 of the Regulation, a given succession is treated coherently under a single law and by one single authority; the law of the deceased's habitual residence. However, article 22 of the regulations permits a citizen to choose the law of his nationality (at the time of the choice or at the time of death) to settle his estate (Professio juris). The choice shall be made expressly in a declaration in the form of a provision, i.e. a will, a conjugal will, or an inheritance agreement "

In our scenario, Mr. and Mrs. English are French residents. Looking back to article 21, their estate should be governed by the law of their residence, i.e. the French law. In theory, the civil code should apply, except that they each made a Will. Can we use both wills to settle their estate and most importantly can we use the stipulations of their wills to settle their estate? We would not be too preoccupied with Mrs. English because she does not have any children. Still, a review of her will may be sensible.

The main problem seems to be the relationship between Mr. English and his son. Mr. English would like to know whether the same will can still disinherit his son after his death? Since he read these conflicting stories, he is unsure. It was made before 2015 and even before the regulations were voted in 2012. The question is as to whether or not the Will provides a choice of law in any way, whether because it was drafted in English or has enough elements to coincide with the English law at the time it was drafted.

Guidance is given by article 83-4 of the regulation, which states that: " if a disposition made before August 17, 2015, is drafted in accordance with the law that the deceased could have chosen under this Regulation, that law shall be deemed to have been chosen as the law applicable to the estate. "

By reading article 83-4 of the regulation, we are deemed to validate our clients' wills to the settlement of their estate, despite them not being aware of the regulation. Then, would Mr. and Mrs. English have been made aware that they had a choice of law applicable to their estate? In England, the choice of law is not valid, unlike in some states of the United States, Germany or Switzerland.

It also seems prudent to remember that the British form of a will does not make it possible to apply the presumption of Article 83-4 of the Regulation. By analogy, the expression "or results of the terms of such a provision" used in Article 22 of the Regulation suggests that the choice of applicable law must result directly and only from the actual content of the provision (The Will). Any reference to any other elements must be rejected. The choice of English language or the dactylographic form are elements of the will that do not assume the deceased's intent to submit his estate to English law. Still, the setting-up of a trust or a
reference to “the definition of Trust or the standard provisions and all of the special provisions of the Society of Trust and Estate practitioners" also does not seem sufficient to induce the existence of a choice of law in favour of the English law. To date, there is no case law on the subject, but this analysis does not seem to be able to win the conviction of the practitioner.

In conclusion, Mr. English's Will could be challenged by his son on the basis that his father did not expressly elect English law as the law applicable to his estate and any elements of reference in the Will would not be sufficient to confirm the testator's intention to use English law only.

It will be strongly recommended to advise Mr. English to review his Will, to make a brand new one that will deal with his French, English and Italian assets and elect English law as the law applicable to his estate. As far as Mrs. English is concerned, we could also advise her to make a new Will for two reasons. The first one would be to confirm that English law should apply to her estate. It would be unlikely that her brother would have a claim as he is not a reserved heir under French law, but we cannot exclude any action. The second reason would be to try and advise her to name different charities in France rather than in England.

English charities would not necessarily benefit from inheritance tax exemption in France, unlike some French charities whose public utility is recognised (reconnue d'utilite publique). The French government seems to have also extended the exemption of inheritance tax too.


2. New purchase by Mr. English only.

This question raised by Mr. English is interesting and not unusual. You want to buy a property on your own with funds that you think are personal, i.e. your pension and do not wish to have your wife's name on the title deed for various reasons, tax, estate planning...

The purchase itself is extremely simple and does not raise any comments. What would raise a concern in the future is the nature of the property: is the property a personal asset to Mr. English or does not it belong automatically to the couple, despite having one name on the title deed.

To answer that question we have to look at the international private rules regulating the matrimonial regime in France. We know that Mr. and Mrs. English got married in October 1992, lived in England until 2007 when they permanently moved to France. Under French law, what is their matrimonial regime? Do they have more than one matrimonial regime that will govern their assets, should they divorce or after death?

Would you think about the unexpected results that could lead from moving from one country to another? The law governing a matrimonial regime is determined by the rules of the Hague Convention of 14th March 1978, which has been used in France since 1st September 1992. For couples married from 1 September 1992 until 28TH January 2019, who made no designation of applicable law, the regime was governed by the internal law of the Country in which they both established their first matrimonial residence after marriage. In our scenario, English law applies and the regime of separation of ownership deals with their assets. What was purchased by each spouse remains personal. The other spouse should not have any rights of administration or disposal over it. The assets would be part of the deceased's estate only.

However, Article 7 of the Convention could lead to an unexpected result, as habitual residence in a Country for ten years or more could cause an automatic change of regime, in the absence of express designation. However, the change of regime would only affect assets acquired in the future, leaving the regime applicable to assets prior to the change untouched.

What does that mean for our couple? Our couple, Mr. and Mrs. English, moved to France in 2007 and were married after 1st September 1992. In practice, from August 2017 their matrimonial regime will automatically change to the legal French matrimonial regime. As a result, their new assets from August 2017 onwards will have a different nature and what they thought would belong to one of them could, in fact, be common.

If I take the example of the new property that Mr. English wishes to purchase, I am convinced (from experience) that most Notaires who would complete the purchase would indicate in the title deed that Mr. English is married under the separation of ownership. That would be a mistake. As of August 2017, Mr. English is married under the French regime of community of property (regime de la communaute reduite aux acquets).

Considering that the purchase was financed from Mr. English's pension, the property is deemed to be common and owned 50/50. Indeed, if nobody takes the time to ask the relevant questions, the property would probably be purchased in one name, the incorrect matrimonial regime inserted in the deed and nobody would think of objecting to the transaction or the nature of the transaction. Except that do not forget that in this scenario there is a potential conflict with the Son. If he can find any breach in his father's assets I am sure that he would not hesitate to start legal proceedings.

This case is far from unusual in practice and I have seen many clients in a similar position. When you move to another country there are many legal topics that should not be neglected if you do not want to have any surprises in the future. Making a valid Will is one of them, looking at your matrimonial regime is another. I deliberately chose those dates to draw your attention to relevant matters that you may need to take into account when you do tax planning or write a Will.

This month our article is quite different. Instead of treating a specific area of Notarial law, we have provided our readers with a practical case.

Mr. and Mrs. English are British, they got married in England in October 1992, without having preceded their union with a marriage contract, and lived in England until they moved to France in August 2007. Mr. English has 2 children (one son, one daughter) from a previous marriage, Mrs. English does not have any children and only a brother as her sole relative. They own their property in France, purchased in 2000 and have different movable assets in France, England and Italy. No other immovable elsewhere.

Mr. English has a very difficult relationship with his son and consulted his English solicitor to make a standard English Will in 2010, bequeathing his estate to his wife and then to his daughter. At the time their English solicitor did not take into consideration their new residence in France and did not distinguish any of their assets, located in France, UK and Italy.

Mrs. English also made a standard English Will at the same time, bequeathing her estate to her husband, and to various charities in England, should he predecease her.

They recently read several articles regarding French inheritance law, European succession law and are confused as to whether their wills can apply in France, now that they are French residents.

They heard so many conflicting stories such as:

- their wills are not valid in France because
they were made before the European succession law came into force in France in August 2015,
- their wills are valid and because they are English wills they do not need to do anything and it will automatically apply without any restriction or taking into consideration French Law.

Mr. English also intends to buy another property with the funds coming from his pension but did not want his wife to be on the title deed. He wonders whether the property would belong to him only or to his wife as well, again as they are now French residents.

This is a typical scenario that, as a lawyer, I meet every day. The two main questions asked by Mr. and Mrs. English are the validity of their Wills and the purchase of a new property by Mr. English only.

1.Validity and appliance of the English Wills.

English Wills have always been valid and accepted in France to settle a French Estate. However, until 17th August 2015, Notaires would only apply English wills to an extent to preserve the children's reserve right (reserve hereditaire). Mr. English would have died before the 17th August 2015, his will would have been valid but he would not have been able to transfer all his assets to his wife only and ignore the reserved heir. His son, which whom he has had a difficult relationship would have had a claim over his father's estate. Since 17th August 2015, we do not need to worry anymore and it is fairly easy to overcome French
Napoleonic law and the reserve thanks to the European succession regulation.

As a reminder, since 17th August 2015, any succession across the E.U. (except for England, Denmark and Ireland) will be governed by the European succession regulations voted on 4th July 2012. These new uniform rules of Regulation (EU) n°650/2012 lay down rules to determine which Law will apply to the succession.

Under article 21.1 of the Regulation, a given succession is treated coherently under a single law and by one single authority; the law of the deceased's habitual residence. However, article 22 of the regulations permits a citizen to choose the law of his nationality (at the time of the choice or at the time of death) to settle his estate (Professio juris). The choice shall be made expressly in a declaration in the form of a provision, i.e. a will, a conjugal will, or an inheritance agreement "

In our scenario, Mr. and Mrs. English are French residents. Looking back to article 21, their estate should be governed by the law of their residence, i.e. the French law. In theory, the civil code should apply, except that they each made a Will. Can we use both wills to settle their estate and most importantly can we use the stipulations of their wills to settle their estate? We would not be too preoccupied with Mrs. English because she does not have any children. Still, a review of her will may be sensible.

The main problem seems to be the relationship between Mr. English and his son. Mr. English would like to know whether the same will can still disinherit his son after his death? Since he read these conflicting stories, he is unsure. It was made before 2015 and even before the regulations were voted in 2012. The question is as to whether or not the Will provides a choice of law in any way, whether because it was drafted in English or has enough elements to coincide with the English law at the time it was drafted.

Guidance is given by article 83-4 of the regulation, which states that: " if a disposition made before August 17, 2015, is drafted in accordance with the law that the deceased could have chosen under this Regulation, that law shall be deemed to have been chosen as the law applicable to the estate. "

By reading article 83-4 of the regulation, we are deemed to validate our clients' wills to the settlement of their estate, despite them not being aware of the regulation. Then, would Mr. and Mrs. English have been made aware that they had a choice of law applicable to their estate? In England, the choice of law is not valid, unlike in some states of the United States, Germany or Switzerland.

It also seems prudent to remember that the British form of a will does not make it possible to apply the presumption of Article 83-4 of the Regulation. By analogy, the expression "or results of the terms of such a provision" used in Article 22 of the Regulation suggests that the choice of applicable law must result directly and only from the actual content of the provision (The Will). Any reference to any other elements must be rejected. The choice of English language or the dactylographic form are elements of the will that do not assume the deceased's intent to submit his estate to English law. Still, the setting-up of a trust or a
reference to “the definition of Trust or the standard provisions and all of the special provisions of the Society of Trust and Estate practitioners" also does not seem sufficient to induce the existence of a choice of law in favour of the English law. To date, there is no case law on the subject, but this analysis does not seem to be able to win the conviction of the practitioner.

In conclusion, Mr. English's Will could be challenged by his son on the basis that his father did not expressly elect English law as the law applicable to his estate and any elements of reference in the Will would not be sufficient to confirm the testator's intention to use English law only.

It will be strongly recommended to advise Mr. English to review his Will, to make a brand new one that will deal with his French, English and Italian assets and elect English law as the law applicable to his estate. As far as Mrs. English is concerned, we could also advise her to make a new Will for two reasons. The first one would be to confirm that English law should apply to her estate. It would be unlikely that her brother would have a claim as he is not a reserved heir under French law, but we cannot exclude any action. The second reason would be to try and advise her to name different charities in France rather than in England.

English charities would not necessarily benefit from inheritance tax exemption in France, unlike some French charities whose public utility is recognised (reconnue d'utilite publique). The French government seems to have also extended the exemption of inheritance tax too.


2. New purchase by Mr. English only.

This question raised by Mr. English is interesting and not unusual. You want to buy a property on your own with funds that you think are personal, i.e. your pension and do not wish to have your wife's name on the title deed for various reasons, tax, estate planning...

The purchase itself is extremely simple and does not raise any comments. What would raise a concern in the future is the nature of the property: is the property a personal asset to Mr. English or does not it belong automatically to the couple, despite having one name on the title deed.

To answer that question we have to look at the international private rules regulating the matrimonial regime in France. We know that Mr. and Mrs. English got married in October 1992, lived in England until 2007 when they permanently moved to France. Under French law, what is their matrimonial regime? Do they have more than one matrimonial regime that will govern their assets, should they divorce or after death?

Would you think about the unexpected results that could lead from moving from one country to another? The law governing a matrimonial regime is determined by the rules of the Hague Convention of 14th March 1978, which has been used in France since 1st September 1992. For couples married from 1 September 1992 until 28TH January 2019, who made no designation of applicable law, the regime was governed by the internal law of the Country in which they both established their first matrimonial residence after marriage. In our scenario, English law applies and the regime of separation of ownership deals with their assets. What was purchased by each spouse remains personal. The other spouse should not have any rights of administration or disposal over it. The assets would be part of the deceased's estate only.

However, Article 7 of the Convention could lead to an unexpected result, as habitual residence in a Country for ten years or more could cause an automatic change of regime, in the absence of express designation. However, the change of regime would only affect assets acquired in the future, leaving the regime applicable to assets prior to the change untouched.

What does that mean for our couple? Our couple, Mr. and Mrs. English, moved to France in 2007 and were married after 1st September 1992. In practice, from August 2017 their matrimonial regime will automatically change to the legal French matrimonial regime. As a result, their new assets from August 2017 onwards will have a different nature and what they thought would belong to one of them could, in fact, be common.

If I take the example of the new property that Mr. English wishes to purchase, I am convinced (from experience) that most Notaires who would complete the purchase would indicate in the title deed that Mr. English is married under the separation of ownership. That would be a mistake. As of August 2017, Mr. English is married under the French regime of community of property (regime de la communaute reduite aux acquets).

Considering that the purchase was financed from Mr. English's pension, the property is deemed to be common and owned 50/50. Indeed, if nobody takes the time to ask the relevant questions, the property would probably be purchased in one name, the incorrect matrimonial regime inserted in the deed and nobody would think of objecting to the transaction or the nature of the transaction. Except that do not forget that in this scenario there is a potential conflict with the Son. If he can find any breach in his father's assets I am sure that he would not hesitate to start legal proceedings.

This case is far from unusual in practice and I have seen many clients in a similar position. When you move to another country there are many legal topics that should not be neglected if you do not want to have any surprises in the future. Making a valid Will is one of them, looking at your matrimonial regime is another. I deliberately chose those dates to draw your attention to relevant matters that you may need to take into account when you do tax planning or write a Will.