The following article provides an overview of the principles of forced heirship rules.
What is forced heirship?
In England, Wales and Northern Ireland clients can leave assets to whomever they choose. In most European countries, including Scotland, this is not the case. The laws of succession define specific rights for certain persons (the protected heirs). Whatever a will might say, it can easily be overturned by the protected heirs. This is known as forced heirship.
Forced heirship rules restrict the ability of a testator to decide how his assets should be distributed after his death. The exact rules differ from country to country. Whilst some countries may insist that upon death all the property of an individual domiciled in that country must, in every circumstance, pass to their forced heirs, other countries may permit a testator to give away a proportion of his estate, provided the balance passes to forced heirs.
It could be argued that forced heirship also includes intestate succession; however, this is not considered for the purposes of this document.
Why is forced heirship used?
In some jurisdictions it is considered perfectly proper for testators to be required to make adequate provision for their dependants.
Why is forced heirship not used everywhere?
Critics of forced heirship suggest that testators should be allowed to distribute their estate or a proportion of their estate as they wish, and that prohibiting them from doing this cannot be any more valid on death than during lifetime.
Also most countries in the world permit wills to be varied where they do not give adequate financial provision for dependants.
Where are forced heirship rules most prevalent?
Forced heirship is most prevalent amongst civil law jurisdictions and Islamic countries.
How are the rules applied?
Each country decides how their forced heirship rules are applied.
Broadly, there are two types of forced heirship – the first type adopted by countries such as Belgium, Cyprus, France, Germany, Italy, the Netherlands, Portugal, Spain and Sweden is where there are a number of categories of forced heirs. With a few exceptions, existence of heirs in a superior category means no inheritance for those in a lower category.
In countries such as England, Wales and Northern Ireland, there are no set portions or monetary values which forced heirs are entitled to. Instead dependants may be able to apply for financial provision out of the deceased’s estate. In England and Wales dependants could claim under the Inheritance (provision for family and dependants) Act 1975 where they have not received proper provision for their maintenance, education or advancement in life under a will. This could be considered as the other type of forced heirship.
Why do different rules apply?
The first type of forced heirship rules (which apply in countries such as Belgium) provide certainty, and so may avoid unnecessary legal costs in their application. This rigidity takes no account of personal situations; as such they result in either a fixed percentage of the estate or a set value always being allocated despite what a Will might provide.
Whereas the other type of forced heirship rules (which apply in countries such as England) lack certainty, as their application depends on the facts of the particular case. This could result in legal costs, and, no change to provisions made by the will or drastic change.
What techniques can be used to help mitigate the forced heirship rules?
It depends on the forced heirship rules in the country concerned. The following examples provide an overview of some of the techniques which may mitigate forced heirship rules. Advice should always be taken before any technique is implemented.
Use of trusts
It is possible in some jurisdictions that, by using a trust, the forced heirship rules can be mitigated. For example, in Cyprus it is possible to use a trust and nominate beneficiaries. As the property is gifted to different legal owners, the forced heirship rules will not apply to this property.
However, in other jurisdictions such as Belgium, the law states that a trust cannot be used to avoid the forced heirship rules.
It may be possible to make lifetime transfers and for these not to be taken into account for forced heirship purposes. For example, in Germany gifts to third parties are not generally taken into consideration on death, if 10 years have elapsed since the gift was made.
However, in other jurisdictions such as France, the law allows lifetime gifts to be challenged by the forced heir.