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European Certificate of Succession from Spanish and Lithuanian perspectives

04 May 2016

Ingrida Steponavičienė (Juridicon, Vilnius)
Martin Pech (Bufete Mañá-Krier-Elvira, Barcelona)


European Certificate of Succession (ECS), a tool meant to simplify the inheritance-related issues for heirs, legatees, will executors and administrators, was introduced by Regulation (EU) 650/2012 of the European Parliament and of the Council of 4 July 2012 on matters of succession and on the creation of European Certificate of Succession (hereinafter – Regulation). And although the possibility to apply for it and to use it exists from the day the Regulation came into force (17 August 2015), it is still a rarely met stranger. Most probably, this situation is caused merely by lack of information and fear of novelty, rather than by insufficient national legal regulation.


Although the Regulation is to be applied directly in the EU Member States (except Denmark, Great Britain and Ireland which opted out), nevertheless, for smooth technical implementation of it some amendments to the national legal acts are necessary.


For example, in preparation for the entry of the Regulation into force, the Lithuanian Parliament adopted a law clearly establishing that Lithuanian authority competent to issue the ECS under Art. 64 of the Regulation is a Lithuanian notary of place of the opening of succession. Subject to Art. 5.4 of the Civil Code of Lithuania, the succession is opened at the place of the last domicile of the deceased. In case the deceased had no permanent place of residence, then such factors as place where the deceased lived most during the last six months before his death, the place of prevailing his economic or personal interests (place of location of main part of assets, place of living of his spouse and children, etc.), citizenship of the deceased, his registration, the place of registration of the vehicles belonging to him and other circumstances are taken into account.


In practice, Lithuanian notaries simplify the matter: they check the Register of Lithuanian Residents and open the inheritance file subject to the last place of residence declared by the deceased in the said Register without paying attention where he or his family factually lived before his death. In practice it may mean that, although the last habitual residence of the Lithuanian national was, for example, in Spain, but if the deceased failed to inform the Register of Lithuanian Residents of his migration to Spain, the succession for today would be opened in Lithuania, by the Lithuanian notary who would apply the Lithuanian law to the inheritance.


It should be noted that the Regulation uses namely the factual (but not legal) last habitual residence as connecting factor for establishing both jurisdiction and the law applicable to the succession as a whole. So the practical question arises, who, in case no dispute is present, should make an investigation and determine the last factual place of residence of the deceased, and consequently, the law applicable to the succession and the authority competent to issue ECS. If that obligation lies on the Lithuanian notaries, most of them neither realise this obligation nor fulfil it yet. It will obviously lead to the situation, when, in the above mentioned factual case, Lithuanian notary will apply Lithuanian law and will issue the ECS, when, according to the Regulation, Spanish laws should be applied and Spanish authorities should be competent to issue ECS.


Factual situation is not very much better with the Register of Immovable Property of Lithuania. The internal regulations of the Register nor restrict neither foresee the possibility to register the change of ownership basing on the ECS. Therefore a high risk to face a strong resistance of the clerks to accept the ECS alone and not to demand for the national Certificate on Inheritance still exists.


From the practical point, it should be mentioned that Register of Immovable Property of Lithuania requires presenting the originals of the documents on which the ownership right is based, together with their translations into the Lithuanian language (if the document itself is in foreign language). Therefore, when applying for the ECS, it is strongly advisable to ask in advance for a few copies of it.


From the Spanish point of view, Spanish notaries also have a competence to issue the ECS, especially as they have the competence to issue similar documents like the declaration of heirs in intestate proceedings.


Under this premise the notary carries out a function of legal evaluation which involves much more than the issuance of a certificate. The notary has to check the jurisdiction, the applicable law, the existence of a will or not, and if the deceased has given several wills, he has to examine if they are compatible or not. Finally, the notary has also to give statement of the specific persons who have rights to the succession and their limitations as well as who are and which powers have the executors or administrators of the estate.


Recently a reform of the Spanish Mortgage Law introduced in Art. 14 the possibility to use the ECS as an inheritance title which is inscribable in the Property Register. In fact, the requirements for the recording in a register of a property right is excluded from the scope of the European Regulation. The main problem for the Spanish Registry will be how to record rights which may exist in other European countries, but doesn’t exist or aren’t regulated by the Spanish Law.


In this sense, a Member State should not be required to recognise a right relating to property located if the right in question is not known in its law. However, the Regulation also says that in order to allow the beneficiaries to enjoy in another Member State the rights which have transferred to them by succession, an adaptation of an unknown right to the closest equivalent right must be done.
Therefore the European Regulation determines that the authority which issues the Certificate should have regard to the formalities required for the registration of immovable property in the Member State in which the register is kept. For this purpuse a better exchange of information between the Member States would be really useful.


The other potential issue is the time during which such ECS could factually be issued. The Regulation states the only rule: ECS must be issued without any delay after all elements which need to be certified are established. Therefore taking into consideration possible need for the notary to collect broad scope of information from other EU and non-EU States, it seems that the term of issue of ECS may far exceed the terms for issue of the national Certificate of Inheritance. For comparison, average term during which the Lithuanian national Certificate of Inheritance is issued equals to approximately 4-6 months from the death of deceased.


On the other hand, we have big expectations that the time for receiving the information from foreign national registers of wills will be significantly improved with the help of the European Network of Registers of Wills Association. This Association currently covers Registers of Wills of Austria, Belgium, Bulgaria, France, hungry, Italy, Portugal, Romania, Slovenia, Croatia, Latvia, Luxembourg, Netherlands, Poland, Spain, Russia (only the district of Saint Petersburg), Slovakia, Switzerland, Lithuania, Estonia, Greece, Germany, which are connected to an exchange platform allowing the exchange of information between national registers of wills.


In addition, whereas the ECSs will be registered in the issuing Member States, it is planned that the Association will also interconnect the national registers of ECSs to allow search of those issued in another Member State, and in such manner to avoid issue of duplicating ECS in different Member States. Currently the French and Luxembourg Register of ECSs are already interconnected and the Belgian register ought to join the network by the end of 2015.


To summarise, ECS is taking the very first (and very slow) steps and for this moment brings rather troubles and uncertainties than benefits promised by the Regulation.


Main points on national regulation on inheritance
a. Lithuania
Under the Lithuanian laws the inheritance must be accepted within 3 months from the death of deceased. This term may be prolonged by the court on the reasonable grounds (failure to know of the death of deceased in general is not considered as serious ground), or without applying to the court if all successors agree.
In case of intestate succession the following persons are entitled to inherit by the law:


1) first degree heirs: deceased’s children (including adopted children) and deceased’s children born after his death; - in equal shares;


2) second degree heirs: deceased’s parents (adoptive parents), grandchildren; - in equal shares;


3) third degree heirs: deceased’s grandparents both on the father’s and mother’s side, deceased’s great grandchildren; - in equal shares;


4) fourth degree heirs: deceased’s brothers and sisters, great grandparents both on the father’s and mother’s side; - in equal shares;


5) fifth degree heirs: children of the deceased’s brothers and sisters (nephews and nieces), likewise brothers and sisters of the deceased’s parents (uncles and aunts); - in equal shares;


6) sixth degree heirs: children of the deceased’s parents’ brothers and sisters (cousins); - in equal shares.
The second, third, fourth, fifth and sixth degree heirs inherit in the absence of heirs of superior degree or in the event of latter’s renunciation of succession or deprivation of the right to succession.


The surviving spouse of the deceased inherits alongside with the heirs (if any) of either the first or second degree. Together with the first degree heirs, the spouse inherits one fourth of the inheritance in case not more than three heirs exist, except the spouse. In the event more than three heirs of first degree exist, the spouse inherits in equal shares with those heirs. If no first degree heirs exist and therefore the spouse inherits with the second degree heirs, he/she is entitled to a half of the inheritance. In the event of absence of the first and second degree heirs, the spouse inherits whole inheritable estate.


b. Spain
In Spain different legal systems coexist so that the applicable law in succession will be determined by the residence of the deceased.
Therefore we distinguish between the regulation under common civil law which is set out in the Civil Code of 1889 and the regulation of those Autonomous Communities which have competency to regulate their own civil laws (Catalonia, the Basque Country, Galicia, Navarre, Aragon and the Balearic Islands).
We will center our exposition on the common civil law. Here we distinguish different phases in the succession:


a) Begin of the succession. The rights to a person’s succession are transferred from the time of his death. However, the transmission doesn’t go automatically and the acceptance or rejection is necessary to proceed the succession.


b) Rights to the inheritance. Anyone who has a right to inherence (by will or by the law) will be called for the succession (vocación). But only those who are directly legitimated in first place will be called to accept or repudiate the inherence (delación).


c) Acceptance or rejection. There isn’t any deadline to manifest the own will to accept or reject the inherence. However, any interested third party can demand in court that the heir shall accept or waive the inheritance. If he should fail to do so, the inheritance shall be deemed to have been accepted.


d) Partition. Unless there is one only heir so that a partition won’t be necessary, any co-heir may at any time request the partition of the estate. The partition legally performed confers upon each heir the exclusive ownership of the property adjudicated thereto.
In case of intestate succession or if the will is null and void or has become invalid, following persons are entitled to inherit by the law:


1. Descendants
Children and descendants succeed their parents and other ascendants by their own right, dividing the estate into equal shares.


2. Ascendants
In absence of children and descendants of the deceased, his ascendants shall inherit. At first place the father and/or the mother and in absence of both the ascendants nearest in degree.


3. Spouse
In absence of descendants or ascendants, the surviving spouse shall inherit all of the deceased’s property.


4. Collateral relatives
In fourth place, siblings and children of siblings shall succeed with preference to other collateral relatives. In absence of these, the remaining relatives in the collateral line up to the fourth degree shall inherit.


5. The State
In the absence of any persons entitled to inherit, the State shall inherit.


Main points of taxation of inheritance


a. Lithuania


Lithuania has attractive regime for taxation of inheritance.
Tax base. The inheritance of the Lithuanian residents is taxed on a worldwide basis. The taxation object of the non-residents is only inherited immovable property located in Lithuania (land, buildings, ships, aircrafts) and inherited movable property subject to registration in Lithuania (motorized vehicles, farm equipment, firearms, potentially dangerous equipment listed by the special law).
Tax is calculated on property value, established in the order prescribed by the law and decreased by 30 percent.
The tax rate is 5 % if the total taxable value of all inherited property is up to EUR 150,000.00 (inclusive) and 10 % if the total taxable value is over EUR 150,000.00


The following tax reliefs are applied notwithstanding the nationality of successor:


1) a part of taxable value not exceeding EUR 3,000.00 is exempt from tax;


2) a property inherited by the surviving spouse from the deceased spouse is exempt from tax;


3) a property inherited by children (adopted children), parents (adoptive parents), guardians, curators, their wards, grandparents, grandchildren, brothers or sisters of the deceased is exempt from tax.


Payment terms. General rule: the tax on inherited property must be paid before the national Certificate on Inheritance is issued by the notary (the notary is restricted to issue the Certificate until the tax is paid).


b. Spain

The Impuesto sobre Sucesiones y Donaciones is a tax on inheritance and gifts that is paid by the recipient. This tax is due only if the recipient is resident in Spain or the asset being inherited is located in Spanish territory which can be real estate or moveable property.
This tax is regulated by the Act 29/1987 which is generally applied in Spain. However, each Autonomous Community has the possibility to establish own reductions and deductions on this tax.


Recently the European Court of Justice considered illegal the discrimination between residents and non-residents on the application of this tax. Non-residents, who had to pay the tax for assets located in Spain, were governed by the state regulations without any possibility to apply the autonomous legislation in which the assets were located.


After the decision of the European Court of Justice, the inheritance tax law has been amended so that non-residents in Spain may apply the Autonomous Community regulation where the highest value property is located, equalizing their treatment with the Spanish residents.


Tax base.

The inheritance tax is calculated with the net value of the individual acquisition of each heir and reduced by any charges and debt that may be deductible.
Over this tax base reductions can be applied depending on the family relationship (descendants, ascendants, spouses or collaterals) or the type of property (family business, main residence, historical heritage).


Tax rate.

The state regulation applies progressive rates over the amount resulting from the tax base. Nevertheless, the Autonomous Communities have the possibility to apply their own tax rate.

For further details contact:

Martin Pech
mp@bmk.es 
www.bmk.es 

Tel +34 93 487 80 30

Ingrida Steponaviciene

ingrida.steponaviciene@juridicon.lt 

www.juridicon.lt 

 

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