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cyprus estate planning

As of 17 August 2015, Cyprus laws will be subject to the provisions of the new European Succession Regulation 650/2012 (the “European Succession Regulation”). The purpose of this European Succession Regulation  is to simplify the settlement of cross-border estates within Europe.

As a result of increasing mobility there are currently around 12.3 million Europeans living in other EU countries, 450 000 cross-border successions occur every year in the EU representing approximately 23 billion euros assets. The current amount of conflicting rules on succession across the 28 nations of the EU was seen as hindering the free movement of people across its boundaries and weakening the cohesion of the EU as a single market. The European Succession Regulation  standardises the procedure governing successions by harmonizing private international rules applying to individuals owning assets in more than one European nation, or being resident in or a national of one EU nation but owning assets in another.

The European Succession Regulation will be relevant to anyone with assets in a European Succession Regulation state, as well as to those who are habitually resident in such a state at the time of their death (or, in certain circumstances, within five years of their death), regardless of the location of their assets. The European Succession Regulation only harmonises the conflict of different laws with regard to successions. EU Member States’ national laws remain applicable on the heirs entitlements, property rights and matrimonial property law and tax issues. The European Succession Regulation  has direct binding legal force and will apply in all EU Member States, except in the United Kingdom, Denmark and Ireland, as these countries have opted out of this European Succession Regulation . The European Succession Regulation  determines which country’s court shall have jurisdiction and what laws are to apply to an estate. The idea behind this is that the courts can apply a single law to the entire estate. This question has traditionally been difficult to answer because different countries apply different tests when deciding which state has jurisdiction over the estate of the deceased and what law shall be applicable. 

As of 17 August 2015 there will be only two tests, and the choice between them is controlled by the testator. Either his Will remains silent (or testamentary disposition) and the ‘habitual residence’ rule applies automatically or he makes a ‘choice of law’ in his will and the law of the country chosen by him is applicable:  as a general rule, the law applicable to the succession as a whole shall be the law of the state in which the deceased person is habitually resident at the time of death.  In order to determine the habitual residence, the authority dealing with the succession should make an overall assessment of the circumstances of the life of the deceased person during the years preceding his death and at the time of his death, taking account of all relevant factual elements, in particular the duration and regularity of the deceased’s presence in the state concerned and the conditions and reasons for that presence. Where, by way of exception, it is clear from all the circumstances of the case that, at the time of death, the deceased person was manifestly more closely connected with a state other than the state in which the deceased person had his last habitual residence, the law applicable to the succession shall be the law of that other state.

The European Succession Regulation  does not define what constitutes ‘close connection’. A testator may choose the law of any state whose nationality he possesses at the time of making the choice or at the time of death as the applicable law on his estate. Where a choice of national law has been made generally no renvoi will apply; however if there is no choice of law, a renvoi could still apply and this can create difficult issues of interpretation. The European Succession Regulation  also creates a European Certificate of  Succession. It is a standard form certificate designed to enable heirs, legatees, executors or administrators to prove their legal status and/or rights in any or all of the ESR states. Such certificate will be recognized throughout the European Succession Regulation  states. The same principle of automatic recognition among the European Succession Regulation  states applies to decisions in matters of succession.

As a rule, decisions of an European Succession Regulation state will automatically be recognized in all other European Succession Regulation states without any special procedure. The European Succession Regulation affects anyone who owns property in an ESR state or chooses to live in such a state. Accordingly, individuals with cross-border interests must be aware of the issues arising in order to determine how they might apply and whether, for example, a choice of national law should be made. Such a choice can be validly made now by testamentary disposition and should be made as soon as possible in order to ensure that it is in place before the new rules begin to apply to deceased's estates in 2015. Cyprus law on wills and estate planning is a legal framework which can well be utilised for the purpose of ensuring proper allocation of assets through a will or other estate planning instrument.

If Cyprus becomes the preferred or otherwise applicable choice of law, then the laws regulating succession in Cyprus will apply, namely the Wills and Succession Law (Cap.195), the Administration of Estates Law (Cap.189) and the Probates (Re-Sealing) Law (Cap.192) (the “Cyprus Succession Laws”). Under Cyprus Succession Laws, a will has certain limitations, because they divide the estate into a disposable segment and a statutory segment. The disposable segment is that part of the estate which an individual is freely allowed to dispose through his/her will. The statutory segment is that part of the estate which is distributed in accordance with the Cyprus Succession Laws (in many cases, regardless of any testamentary wishes) and is reserved for the distribution of assets to close relatives.

These rules aim to protect from circumstances where people aim to for their property to be left to non relatives and fail to cater for their immediate family. In certain occassions, these rules can be avoided through the establishment of a Cyprus international trust. Given the provisions of the Succession European Succession Regulation  and the Cyprus Succession Law, especially the rules of forced heirship which may prevail over a will, it is important for individuals to seek comprehensive legal advice in order to ensure that their testamentary intentions are implemented.

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