Inheritance law: nationality or habitual residence
Since August 17, particular attention has been needed in relation to the law applicable to successions where the deceased resided permanently in a different place to the country of their nationality, because the entry into force of European Regulation No 650/12 brought a change to the rule determining the governing law in an inheritance or succession with cross-border elements.
Up until that point, the rule in Spain had been that the law applicable to any succession was the law of the country of the deceased’s nationality, meaning, for example, that the succession of a German citizen who habitually resided in Spain was governed by German law, whereas the succession of a Spanish national with habitual residence in Germany was governed by Spanish law.
This rule disappeared on August 17 and “nationality” has been replaced with “habitual residence” at the time of death. Thus, in the example of a German national with habitual residence in Spain, succession would now be governed by Spanish law, and, in the case of the Spanish national with residence in Germany, succession wowuld now be governed by German law; only an express choice of the law of their nationality at the time of their choice or at the time of death would override the requirement to apply the law of the place of their habitual residence.
The biggest practical implication that may be inferred from this change in the law is that succession planning is an absolute necessity in these cases, for one reason, because we are faced with a choice of laws governing the succession according to the specific circumstances at any given time (between the law of nationality or the law of residence) and, for another reason, because an absence of planning and unfamiliarity with the legislation that will ultimately apply to the succession could cause unwanted effects on the distribution of the estate when the time comes, such as, for example, the rights held by the widowed spouse or the rights restricting testamentary freedom, such as forced heirship rights, which in some legal systems may limit up to two-thirds of the estate, as happens under the Spanish Civil Code currently in force.
Pilar Pérez Valenzuela
Garrigues Tax Department
