MARK TILDEN PRESENTATION AT KAMARES CLUB RE LAWS OF
SUCCESSION IN THE EU & CYPRUS IN VIEW OF RECENT CHANGES IN LEGISLATION – 28
October 2015
After a brief introduction by Cathi Delaney, Mark Tilden
took the floor.
Mark is a UK qualified solicitor who worked in the South of
England. In 2007 he moved from the UK to
Cyprus and after 12 months realised that he needed some activity. He worked with a Cypriot law firm for some
six months in Limassol and decided that he would prefer to work for
himself. He has also produced articles
for Grapevine magazine and done various presentations like this to other
groups.
Until August 2015 those who are British or born in a
commonwealth country, or whose father was born in a commonwealth country, it
was simple. You could write your will
and leave your assets as you wished.
On 17 August 2015 Brussels moved the goalposts and it is no
longer possible to leave your assets as you wish – anyone who dies after the 17
August 2015 will find their will is interpreted under Cypriot law , ie forced
heirship. These laws are very
complex. So the previous system where
usually a husband and wife in their will left their estate to each other and
then to their kids will no longer happen.
Everything will not go to your spouse
on first death, but to your spouse and the children of any marriage.
Brussels says you have to go down the Cyprus route
regardless of where you come from in the world – your assets can however be
determined by your nationality. So
Forced Heirship will apply, but in your wills you can opt out of this and wish
them dealt in accordance with the rules of your nationality. For the majority, under the British rule of
inheritance you can leave whatever you want to whoever but you have to put this
opt out into your will.
Some will say that they will do the change by means of a
codicil. This is intended for a small
change to a will and sits alongside the will you have made. For a number of reasons I do not agree with
using a codicil in this case.
a] A codicil is intended for a small change, eg
leaving something for an extra grandchild
2 b] If you lose that codicil or it gets separated
from the will then you only have the will as you cannot staple the codicil to
the will
3
Having spoken to the Registrar at the Limassol
Court, I have been told that Cyprus does not recognise codicils. However, as we know the position can change
from one day to the next so the safest way of making sure everything is in
order would be to have your original will re-written and amended.
The Cypriot Government does not always follow the
rules. There is a possibility that
Cyprus will not follow the EU directive from Brussels. The EU directive is lengthy but clearly
states in the directive, which Cyprus has signed up to, ‘a person may choose
the law to apply regarding succession’.
If Cyprus ignores the directive and applies forced heirship,
Brussels will not be happy. On a
practical basis if you have a Cyprus will and a UK will to deal with assets in
the UK, if Cyprus ignores the directive then you will have a UK will and a
Cypriot will and if the administration is too difficult, then you can get
probate for your UK will, and once you have that probate that document has to
come to Cyprus, be re-sealed by the Court, and you can then get probate in
Cyprus to deal with your assets as you wish. Of course, Cyprus may change the
law dealing with re-sealing probates to bring them in line with Cyprus forced
heirship rules.
The law only changed on 17 August and is new and law is
based on what is passed by Parliament and Brussels but also common law, ie
judgements. As this is so new, nothing
has gone through the courts to determine how Cyprus will apply the new rules.
If you die with the update in your will, and Cyprus
challenges then you would have to appeal which would take around 6 years, and
eventually appeal to Strasbourg which would take another 6 years.
Recommend that you have a Cypriot will for Cypriot assets
and a UK will for UK assets. You then
cover as many options as you possibly can.
You are allowed to determine your assets according to your nationality.
Not every European country has signed up to this directive –
England, Wales, N Ireland, Scotland and Denmark have not. Some lawyers have said that England has not
signed up to it, England is not following the directive then as you are English
you are excluded from the provisions and have to go down the forced heirship
route. However, what it means is that
anyone from Cyprus or other European country living in England or Denmark
cannot say in their wills that they wish
the rules of their nationality to apply.
If you say in your Cypriot will that you wish everything
dealt with according to the laws of your nationality do you fall into the UK
inheritance tax trap? There is no
Inheritance tax between spouses, it only applies on the second death and for
assets over 650,000 sterling where 40% tax applies [possibly increasing to 1m
by 2020 with a main residence exclusion].
If you have lived in Cyprus for many years you are unlikely to be
affected by Inheritance tax, but it depends on domicile.
Domicile is complicated and open to interpretation by the
Inland Revenue. If you are regarded as
domiciled in Cyprus then the only assets where inheritance tax applies would be
those in the UK which exceed the threshold.
If, however, you are regarded as UK domiciled, then inheritance tax
applies based on your worldwide assets.
If you have a husband, wife and children, under Cyprus forced
heirship, on the death of the husband, the assets would be shared between the
wife and the children. If, say, the
wife then decided to go back to the UK, she would need to sell the house to
allow her to buy a property in the UK and one of the children may object to
this. Similarly, if one child gets
divorced or goes bankrupt, then their share of the assets may need to be sold
or cash realised – and this may be contrary to the wishes of the surviving wife
or prove problematic.
Please also check to ensure that if your financial adviser
is giving you advice or writing your will that they are qualified to do so as
it is common practice over here for someone who is not qualified to write wills.
So you need to upgrade your wills to include the nationality
clause.
Re domicile, Richard Burton was born in Wales. He left Wales and lived in Switzerland for
many, many years. In his will, he
stipulated that he be wrapped in the Welsh flag and have a volume of poems by
Dylan Thomas buried with him. He was
buried in Switzerland. However, the
Inland Revenue decided that in view of his stipulations he still regarded himself
as British and inheritance tax was applied.
There is no mention of time in the Brussels directive to say
that it depends on how long you have lived somewhere to denote domicile. Where do you pay your tax? If you do not pay tax in the UK, then it is
unlikely they will say you are domiciled in the UK. If you pay tax in the UK, then you are
probably domiciled in the UK. Each case
is looked at individually.
QUESTIONS FROM THE FLOOR:
Does forced heirship
go to your spouse and all your children or can you specify?
Re forced heirship – your spouse will get 50% and the remaining
50% will be shared equally between any children. If you have no children, then parents,
grandchildren, brothers, sisters, nephews, nieces, cousins etc can be
beneficiaries and would be entitled to a slice of the estate. And if you have no children, the percentages
can be different.
Do I need a
Cypriot as an executor of a will?
No – executors can be children even if they live in the
UK. The forms here are very
complicated, in Ancient Greek and professional help would be needed to deal
with the estate. Probate here is
different. They would simply get someone based here to deal with the paperwork.
What happens if I
have a UK will only?
Get probate in the UK first then that probate has to be sent
here, and resealed by the Courts.
However, this can be an expensive route as UK probate will not be
recognised here and court fees are high.
The probate can only be recognised once the document has been resealed
by the courts here.
What happens if I
have a joint bank account?
Ensure you have &/or in the account for this to be treat
as a joint account. Having an account
here in two names does not automatically mean it is a true joint account.
Re title deeds here, you are effectively tenants in common
and if the property is in joint names, you have a title deed each saying that
you have a 50% share. For a husband and
wife, therefore, the deceased party’s half does not automatically go to the
spouse under the Cyprus forced heirship rule.
If the UK leaves the
European Union, how will this affect matters?
No idea at this time.
What about including
a legacy clause? If you know that your
partner is close to death, then should the dying spouse donate her portion to a
husband or the children to make the sale of the property simpler?
This can be done
ADDITIONAL READING:
http://willsforexpatriates.com/european-regulation.html
Mark Tilden can be contacted if required:
Tel 96 549826
email: mark11cyprus@hotmail.com
Mark Tilden can be contacted if required:
Tel 96 549826
email: mark11cyprus@hotmail.com
