Cross-Border Estates and the EU Succession Regulation

Cross border estates and the EU Succession Regulation

Cross border estates, where the deceased lived in one country, held assets in others or had a foreign nationality, raise three questions: which courts and authorities are competent, which country's succession law applies, and how heirs prove their rights abroad.

Within the EU, Regulation (EU) No 650/2012, the EU Succession Regulation, answers these questions for the succession of persons who die on or after 17 August 2015. As a rule, the law of the state of the deceased's last habitual residence governs the entire succession, but the deceased can choose the law of his or her nationality. The European Certificate of Succession (ECS) allows heirs, legatees, executors and administrators to prove their status in other member states without special procedures. Denmark and Ireland do not participate in the Regulation, and inheritance tax is excluded from its scope.

For families with homes, companies or bank accounts in several countries, the Regulation creates welcome simplification, but it also produces surprises: a German national who retires to Spain may have his estate governed by Spanish law, including different rules on compulsory portions and joint wills. Planning for cross border estates therefore starts with the question of applicable law and continues with tax, which remains national.

Habitual residence as the connecting factor

According to the EU's e-Justice Portal, the courts of the member state in which the deceased had the last habitual residence generally have jurisdiction, and the law of that state generally applies to the succession as a whole. The principle of unity means that one law governs movable and immovable assets wherever located, subject to limited exceptions. The concept of habitual residence is not defined in detail in the Regulation; it requires an overall assessment of the deceased's life circumstances in the years before death and at the time of death, including the duration and regularity of presence, family and social ties and the centre of interests.

Habitual residence can be difficult to determine for people who split their time between countries, such as retirees who spend winters abroad, executives on long secondments or entrepreneurs with homes in several places. Disputes about habitual residence can lead to conflicting decisions and costly litigation among heirs. A clear choice of law avoids much of this uncertainty, and documenting the facts that support a particular habitual residence, such as registrations, tax residence and the location of family life, helps heirs later.

Choice of law for cross border estates

A person can choose the law of the state whose nationality he or she possesses at the time of making the choice or at the time of death to govern the succession as a whole. Persons with multiple nationalities can choose any of them, which gives international families real flexibility in their planning. The choice must be made expressly in a disposition of property upon death, such as a will, or be clearly demonstrated by its terms. A German national living in Italy can thus choose German law, ensuring that German rules on compulsory portions, joint wills and inheritance contracts apply. A non-EU national living in Germany can choose the law of his or her home country.

The choice of law has limits. It covers succession matters, not matrimonial property, which is governed by separate EU regulations and national rules. It does not change inheritance tax liability. And where the chosen law is that of a non-EU state, recognition of the choice by that state's authorities is a separate question. Wills made before 17 August 2015 can contain implied choices, and the Regulation contains transitional rules to preserve the validity of earlier dispositions.

The European Certificate of Succession

The European Certificate of Succession is issued by the authority handling the succession, in Germany the probate court (Nachlassgericht) at the local court, with procedural rules set out in the German International Succession Procedure Act (IntErbRVG). According to the e-Justice Portal, once issued, the ECS is recognised in all participating member states without any special procedure. Heirs, legatees with direct rights, executors and administrators can use it to prove their status and powers, for example to banks, land registries and companies in other member states.

The ECS is optional and exists alongside national certificates such as the German certificate of inheritance (Erbschein). Certified copies are valid only for a limited period stated on the copy, and their validity can be extended on application. For estates with assets in several member states, applying for an ECS can save the cost and time of separate national procedures. For assets in non-participating countries such as Denmark, Ireland, Switzerland, the United Kingdom or the United States, local procedures remain necessary.

Matrimonial property and cross border estates

The Succession Regulation does not determine matrimonial property rights. In the EU, the Matrimonial Property Regulation (EU) 2016/1103 governs the law applicable to the property regime of spouses who married or chose their applicable law on or after 29 January 2019, while earlier marriages are subject to national conflict rules.

In Germany, the matrimonial property regime has a direct effect on succession: under the statutory regime of community of accrued gains, the surviving spouse's share of the estate is increased by a quarter as a lump-sum equalisation, so the interplay between matrimonial property law and succession law determines the spouse's share. Where a foreign matrimonial property regime meets German succession law, or vice versa, results can be difficult to predict. Couples with international backgrounds should therefore review their marital agreements together with their wills; see our article on marital agreements for entrepreneurs.

Practical steps after a death

For heirs and executors dealing with cross border estates, a structured approach saves time. The first step is to identify the deceased's habitual residence and any choice of law in a will, and to locate all wills, including those deposited abroad; many countries maintain central will registers that can be searched on request. The second step is to determine which authority is competent to issue certificates and whether a European Certificate of Succession or national certificates are needed for each asset.

The third step is to clarify tax filing obligations in each country, which often have short deadlines; in Germany, heirs must notify the inheritance tax office within three months of learning of their inheritance. Finally, banks, land registries and company registers in each country must be served with the required documents, often with certified translations. Early coordination among advisers in the relevant countries reduces delays and avoids inconsistent positions on facts such as habitual residence. Executors should also secure access to digital assets, company records and online accounts, which are often overlooked in international estates and can be difficult to access without the right documents.

Interaction with German law and company shares

Where German succession law applies, German rules on compulsory portions, community of heirs, executorship and the forms of wills and inheritance contracts govern; see our article on wills and inheritance contracts under German law. Where foreign law applies to the estate of a person with assets in Germany, German courts and authorities apply that foreign law, subject to public policy and to German rules on the registration of rights in rem. Land registries and commercial registers may require translations, apostilles and additional evidence.

For company shares, the articles of association continue to apply regardless of the succession law: succession clauses, redemption rights and transfer restrictions in a German GmbH or partnership determine whether the heirs can become shareholders. Conversely, foreign companies held by German residents are governed by their own corporate law. Entrepreneurs with cross border estates must therefore align three layers: succession law, corporate law of each company, and tax.

Coordination with inheritance tax

The EU Succession Regulation does not cover tax. German inheritance tax applies if the deceased or an heir is resident in Germany, and German nationals remain subject to unlimited tax liability for five years after moving abroad. Where neither is resident, limited tax liability covers specific German assets such as real estate and business assets. Germany has inheritance tax treaties with only a small number of countries, so double taxation is common and is mitigated mainly by the credit of foreign tax under § 21 ErbStG, which has significant limitations.

Illustration: a German entrepreneur with a holiday home in France and shares in a German GmbH retires to Portugal and dies there five years later without a will. Portuguese law applies to the entire succession as the law of the last habitual residence, including the French property and the German shares.

German inheritance tax still applies to the heirs if they are resident in Germany, and France may tax the property. An express choice of German law in a will, combined with tax planning for all three countries, would have avoided unexpected results. Our pages on succession planning and international tax describe our cross-border work, and our article on exit taxation covers the income tax consequences of moving abroad with company shares.

How TRW & Co helps with cross border estates

We advise families and entrepreneurs on cross border estates: determining habitual residence and applicable law, drafting choices of law and wills for international families, coordinating with articles of association and foreign advisers, and planning inheritance tax across several countries. After a death, we assist heirs and executors with European Certificates of Succession, German certificates of inheritance, registrations and disputes before German probate and civil courts. We work with the notary of the client's choice for notarial documents and do not act as notaries ourselves. To discuss your situation, contact us. This article provides general information and is not legal advice.