Which state's law decides the fate of an estate mixed with foreign assets?

Author: DR. MARTINAS ROXANA VIVIEN

In recent decades, the value of individual estates has increased significantly due to the importance of private property, not to mention the growing number of estates containing foreign assets. Today, it is not surprising to find a German bank account or a holiday home on the French Riviera in inheritance proceedings. However, the ‘internationalization’ of inheritance proceedings raises a number of questions of which heirs are usually unaware, since in many cases they are not even aware that the testator had movable or immovable property abroad, let alone which country's inheritance law rules will apply to them.

Unified rules since 2015: the EU Succession Regulation

Thanks to our membership of the European Union, the EU Succession Regulation has also been applicable in Hungary since 2015, which helps to resolve cross-border succession issues. With the application of the Regulation, all inheritance proceedings practically become ‘international’, since it also depends on the will of the testator and the persons involved in the succession which member state has jurisdiction over the succession and which member state's substantive law of succession will govern it. This is important because the law applicable to the succession will determine the detailed rules, including who will inherit from the testator under the statutory succession regime.

The unity of the estate

With regard to cross-border successions, the principle of unity of succession means that the succession proceedings are conducted on the basis of a single procedure and are governed by the law of a single state, thus avoiding the undesirable situation of having several succession proceedings pending at the same time. It is therefore not possible to split the estate, i.e. to transfer movable and immovable property in the succession procedure under the succession laws of different states, as this would lead to serious complications because of the different legal systems. 

The testator can choose the applicable law

Of course, the principle of testamentary freedom and the primacy of testamentary disposition also applies in international succession matters, thus the Regulation allows the testator to choose the law applicable to his succession in advance, while he is still alive. This must be expressly provided for by the testator in the form of a testamentary disposition (e.g. a will) or otherwise ascertainable from the testator's testamentary disposition. It is important to emphasize, however, that the testator cannot choose any law in respect of his succession, but can only choose the law of the State of which he is a national at the time of making the choice or at the time of death. However, this state does not necessarily have to be a member state of the European Union, as a dual Hungarian-Swiss citizen living in Switzerland can easily choose that his hears should inherit under Swiss succession law.

Law applicable in the absence of choice of law

If the testator did not have the foresight to decide during his lifetime on the law applicable to his succession, the law applicable to successions with an international element is, as a general rule, the law of the state in where the testator had his habitual residence at the time of his death. What does habitual residence mean? Although there is no uniform definition, the general interpretation is that the place where the deceased had his center of main residence immediately before death is considered to be the place where he had his habitual residence.

How can we find out about foreign assets in the estates?

It is not sure that heirs will know about foreign assets at the start of the inheritance proceeding, but how can they find out about foreign assets that they do not know about? Is the notary obliged to carry out an ex officio search for foreign assets? The answer to this question is clearly no, it is not the notary's task or duty to search for the quantity and location of the assets to be inherited. It is in the heirs' interest, first and foremost, to seek out information about the foreign assets and to bring it to the attention of the notary as soon as possible, but this does not mean that the notary cannot intervene and take action ex officio to obtain documents proving the existence of the foreign assets and their belonging to the estate. In particular, because under the rules governing the Hungarian inheritance proceeding, foreign property must be included in the inventory of the estate only if its existence and its belonging to the estate have been proven, and only the property proven to exist and belong to the estate may be handed over from the foreign estate, there is an important interest in identifying the testator's entire estate.

European Certificate of Succession

In order to facilitate the enforcement of claims abroad (e.g. to locate and secure foreign estate assets), the Regulation introduced a new legal instrument which is the certification of succession. This document can help those interested in the succession who wish to prove the existence of a foreign asset and its belonging to the estate, but in order to obtain information and clarification from a foreign financial institution, for example, they must have some proof that proceedings are pending in relation to the deceased's estate and that they are involved in these proceedings. This is the purpose of the so-called European Certificate of Succession, which is issued specifically for use in another member state.

Don't leave the fate of your foreign assets to chance

For many people, applying the law of their nationality can ensure that their estate is passed on to their heirs according to the law they prefer and know best. In addition, the choice of law provided by the Regulation can reduce any uncertainty that the existence of foreign assets may create in the inheritance proceeding. Therefore, it is definitely worth organizing the succession in advance, as this is the best way to ensure that the testator's intentions prevail to the fullest extent possible after death and that his estate is passed on to his heirs on the basis of the law of his choice.