By Dr. Ioan-Luca Vlad, Lawyer and Private Advisor at Royal House of Romania
European Regulation 650/2012 means that anyone dying while resident in Romania after August 2015 is subject to Romanian law and jurisdiction for their estate. Here is what to do so you don’t get caught out.
WHAT IS EU REGULATION 650?
Regulation 650/2012, also known as the Succession Regulation, is a legal document applicable throughout the EU (with the exception of the UK, Ireland and Danemark, further EU-3), which unifies the law and jurisdiction applicable to estates. In other words, if before August 17th, 2015, someone dying had to have their estate dealt with in all the countries where they had assets, today there is only one law and one court competent, throughout the EU-3.
WHO IS COVERED BY THE REGULATION?
The main tenets of the Regulation apply to anyone who has their “last habitual residence” in an EU-3 country. In other words, expats in Romania are covered by it. Normally, diplomatic and consular staff, military on duty, and their families, are not considered to have their “last habitual residence” in the country of posting, for the duration of their official service. However, anyone else is covered, even if they are not citizens of the EU-3. In fact, every possible nationality is covered, regardless of what your own national laws say.
WHAT IS THE “LAST HABITUAL RESIDENCE”?
The notion of “last habitual residence” is not defined by law, but in general it means the last place where the person had the “center of their life”. For example, a British manager posted to Romania, keeping family, friends and a house in Britain, and dying in Romania, would likely have their “last habitual residence” in Britain. However, a long-term employee posted in Romania, who brings the spouse and children over here, where they go to school, and buys a home as well, would likely fit the bill and be covered by Romanian law, regardless of where the death took place. It is all about meaningful and longer-term connections to a certain country, and is determined retrospectively after death.
WHAT HAPPENS AFTER DEATH?
Any person who has their “last habitual residence” in Romania has, under the Regulation, their estate governed by Romanian law, and by Romanian courts (specifically, the “Judecatorie” of their last place of residence in Romania). The Romanian law and courts will deal with the entire estate located inside EU-3. For example, a French citizen who inherited a farm in France, but lives and works in Romania, and has a house in Bucharest, would have both the farm and the house split between his French relatives according to Romanian law, by Romanian courts.
Non-EU-3 assets (for example, those located in the UK or the US) are normally excluded, because the EU courts respect the jurisdiction of other courts, particularly for immovable property. Still, complications may arise because the non-EU courts are likely to apply another law to the assets in their jurisdiction (for example, Scots law for a house in Edinburgh). Because inheritance laws vary enormously between countries, there can be situations when the heirs and their shares are quite different from one place to the next.
WHAT CAN BE DONE?
During your lifetime, you can easily do something about this. Specifically, you can by Will express your wish that your entire estate should be governed by the law of your citizenship (nationality). If you have more than one, you can chose any nationality, regardless of whether you actually exercise it, or if it is just for convenience. The most simple Will for this purpose can, under Romanian law, be done at home, if it is written, signed and dated by you, by hand. Of course, ideally you would do it at a notary public (where it is registered and is automatically communicated upon death), cannot be destroyed, and after taking legal advice, particularly if you have assets outside the EU-3, or if you wish to make other dispositions and want to make sure they are in keeping with the relevant laws. For example, even if English law applies according to your Will, you cannot institute a Trust for Romanian land, because the Trust is still not recognized as a legal institution in land law in Romania. If your country has several systems of laws applying within it (like the UK, US or Spain), its internal law governs which one of these applies, and whether you can chose it specifically or not.
After death, the heirs can agree to the jurisdiction of another court (but not to another applicable law). If everyone agrees, then a court may not be necessary at all, keeping in mind that, for Romanian assets, notaries public can deal with the estate much faster and in a professional manner. This applies wherever you have the last habitual residence, because in Romania notaries’ jurisdiction is optional, and by definition there is no dispute.
SOME SALIENT POINTS OF ROMANIAN LAW
Most expats coming from Common-law countries (like the UK and the US) are not accustomed to Civil-law estate provisions. While the first legal (intestate) heirs are usually the same (i.e., children and spouse), going further (to siblings, parents etc.) provisions drift apart and there can be major differences.
One important aspect of Romanian law is that there is a provision called rezerva succesorala, variously known in English as the “legitim” or the “legitimate share”. This means that, whatever you do, you cannot exclude the “legitimate heirs” (which in Romanian law are the children, the surviving spouse and, if there are no children, the parents) from their rightful share of your estate (which is calculated to include donations made throughout your lifetime, with no cutoff date). This can affect your calculations, particularly if you wish to leave most of your assets to a legal entity, including a family trust, because the legitimate heirs have a right to the assets in kind; or if you wish to donate a lot of your assets to charity (because the legitimate heirs can claw it back).
Furthermore, while we have trust-like legal institutions in Romania (like the fiducia, or the substitutiune fideicomisara), these have different ways of operating, and there is no pure and simple trust like in Common Law. In this context, chosing the law of your citizenship can be a good way to ensure that what you wish happens to your estate.
WHAT ABOUT INHERITANCE TAX?
Inheritance tax is not directly affected by the Succession Regulation. Old provisions continue to apply, in that each country involved (i.e., those where you have assets and those where the heirs live) may tax the estate, or parts of it, even if it would mean effective double taxation. One advantage of leaving a large estate in Romania is that here the inheritance tax is only 1% of immovable assets located in Romania, and only if the estate has not been distributed legally (through the receipt of an inheritance certificate or a definitive court ruling) within 2 years of death.
About the author:
Dr Ioan-Luca Vlad is an attorney specialized in private international law, vital records and citizenship by descent. He is a Honorary Private adviser to the Romanian Royal Family and author of the Romania: Family and Succession Law monograph, as part of the International Encyclopaedia of Laws, 2017. His latest Romanian book is “Succesiuni internationale. Regulamentul 650/2012”, Universul Juridic, Bucuresti, 2016.