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Choice of law clause

Last week I wrote about how your place of residence decides applicable law. I also mentioned that when it comes to certain specific legal issues like your succession, marital assets etc. you might want to consider the possibility to choose applicable law. Even if the choices are limited, you still have a choice. An express governing law clause offers certainty.

Since August 2015 EU has an inheritance regulation in force, that covers every habitually resident individuals' inheritance within the EU. The United Kingdom, Denmark and Ireland along with Switzerland and other third countries are not directly bound by it, but they are indirectly affected also. The regulation ensures that a cross-border succession is treated coherently, under a single law and by one single authority. In principle, the courts of the Member State in which citizens had their last habitual residence will have jurisdiction to deal with the succession and the law of this Member State will apply.

Therefore, if a Finnish citizen dies while being habitually resident in for example Spain, Spain will automatically have jurisdiction and Spanish law will apply. However, this Finnish citizen can draw up a will and include a "choice of law clause". A Finnish citizen can chose the laws of Finland, a Swedish citizen can chose the laws of Sweden etc. i.e. the laws of your country of nationality. This also means that a person with more than one nationality have more than one possibility to choose from.

Notable is that the inheritance regulation merely is a tool used in order to decided jurisdiction and applicable law. Every State have their own laws on succession, and therefore it is important to make sure one understands the differences between the legal systems before making the choice. Criteria for selecting the applicable law would be for example:

1. With which law are you most familiar?

2. Which law offers most certainty in relation to key aspects to your situation?

3. What kind of property do you have and where is it located?

When choosing applicable law it is important to also look at the situation from the heirs' point of view. If you live in Spain and all the heirs are back in Finland, they might have a difficult time trying to sort out the estate in another country in a different culture. There are also fundamental differences when it comes to who has the right to inherit, and how property is divided between the deceased's spouse and children for example.

There have been cases where the heirs have washed their hands of the estate due to the bureaucracy they've encountered. Cross-border estates can be difficult to sort out, but some planning and good legal advice - IN ADVANCE can make all the difference.

More about inheritance planning next week in my next blog.

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