The Ministry of Justice has issued a consultation paper in relation to the European Commission’s latest proposal regarding succession and wills. The closing date for submissions to the consultation is 2 December 2009.
Broadly, the main proposal is that where someone moves to another country and dies there, the law of succession in that country will apply to their estate (for this purpose, the separate jurisdictions of England, Wales, Northern Ireland and Scotland will be regarded by the European Commission as a single entity).
If the new Regulation is implemented, the principle of 'clawback' would for the first time become enforceable within the UK. This means that gifts, depending on their monetary value and any conditions made by the individual, may be brought back into the estate upon death for distribution amongst the heirs.
Under most 'clawback' regimes, compulsory inheritance rights depend on the applicable law at death (i.e. the law in the country where the individual lived and died) and not at the time the gift was made (i.e. the law in the UK). The UK does not at present operate such a system, as it would contradict the underlying philosophy of English law which places the importance of an individual’s freedom to make gifts during his or her lifetime.
Under English law, 'clawback' claims that are based on a foreign law of succession are not recognised or enforced, but the Regulation would force courts in the UK to recognise 'clawback' under the law of other member states in relation to cross-border successions.
The impact of 'clawback' could have a significant effect on charities. Heirs of a deceased person, who had made a ‘lifetime gift’ to charity, could insist that the gift or legacy made be 'clawed back' into the deceased’s estate.
The term ‘lifetime gift’ appears to be unclear, but it is understood that it could actually refer to All and any donations made during a person’s lifetime (such as donations through Payroll Giving, direct debits etc.). So, where a UK national dies in another Member State which operates a 'clawback' system, the 'clawback' provision could override previous valid lifetime gifts made by a deceased person.
In practice, this could mean that the beneficiaries would be able to collect the gifts made by the deceased during his or her lifetime in order to put them into 'the pot' prior to distribution. In the worst case scenario, the Regulation could see the removal of gifts made to charities by individuals during their lifetime or as part of a legacy, albeit that the individual exercised personal choice in making that gift and had done so some years before death.
The application of 'clawback' could have a substantial impact on charities’ income and has the potential, if introduced in the UK, to lead to a massive loss of revenue. We need to act now to stop this Regulation being introduced into UK law. The Institute will be submitting a response, but member organisations are asked also to respond to the consulation to illustrate the strength of our concerns to the Government.
View the consultation
Responses should be sent to:
Mrs Jean McMahon
Ministry of Justice
Private International Law Team, International Directorate
5.38, fifth floor
102 Petty France, London SW1H 9AH
Email: jean.mcmahon@justice.gsi.gov.uk
The Ministry of Justice will be holding a stakeholder forum in the New Year, and the Institute will be receiving an invitation to this event.
