hereditary reserve

The Reform of the French Hereditary Reserve in International Successions: a Problem; Not a Solution

On 24 August 2021, Law No. 2021-1109 reinforcing the respect of the principles of the Republic (hereinafter “the law against separatism”) was adopted. With this law, the Government intended to respond to the phenomenon of “separatism”, which France is facing. Its provisions aim, in various fields (such as the protection of civil servants, the organisation of public services, or the control of religious associations) to reinforce certain essential principles of the Republic, including secularism, the neutrality of public services, and equality between citizens.

Directed against religious fundamentalism, this law nevertheless has very unfortunate consequences for expats living in France. Derogating to the general consistency of the law against separatism, its Article 24 (inserted under Chapter III “Provisions relating to the rights of persons and equality between women and men” of Title I) applies to international successions.

It is an understatement to say that the provisions of this article are likely to cause prejudicial legal uncertainty for people who are perfectly respectful of republican principles…

1. What is the hereditary reserve exactly ?

The French hereditary reserve can be defined as :

the “portion of the estate reserved by law for certain heirs in that, as opposed to the available portion, it cannot be reduced by donations which the deceased would have granted to their detriment “.

Free translation of Vocabulaire juridique, G. Cornu, Association Henri Capitant, Puf, 9ème édition Quadrige 2011, p. 903

It therefore consists of a fraction of the estate, the devolution of which is organised by law, for the benefit of the heirs, who are the beneficiaries, without any possibility for the deceased to dispose of it otherwise. The hereditary reserve thus constitutes a constraining limit to the freedom of disposition of the de cujus.

Under French law, the transferable estate is therefore made up of: on the one hand, the available portion (which the deceased can freely organise to pass on); and, on the other hand, the hereditary reserve (which the law obligatorily allocates to certain beneficiaries):

The hereditary reserve is the share of the succession which the law devolves free of charges to certain heirs, known as reservataires, provided that they are called to the succession and accept it.

The available portion is the share of the succession which is not reserved by law and which the deceased is therefore able to dispose of freely by way of donation“.

Free translation of Code civil, art. 912

In concrete terms, Articles 913 and 914 of the Civil Code specify the extent of the hereditary reserve:

  • Half of the property when the de cujus leaves only one child (or descendant) at his/her death;
  • Two thirds when he/she leaves two ; and
  • Three quarters when he/she leaves three or more.
  • Thus, the disposable portion of the deceased, when he has children or descendants, is in principle between one half and one quarter of his/her estate.

Hence, the disposable portion, when the de cujus has children or descendants, represents between one half and one quarter of his estate. Conversely, under these circumstances, the de cujus will never be entitled to dispose freely of more than half of his property.

If the deceased leaves no children or descendants, but a spouse, the donations granted to third-parties may not exceed three quarters of the estate. The spouse’s inheritance reserve indeed amounts to one quarter of the estate.

The hereditary reserve is based both on the very nature of property, which is to be passed on, and on a certain moral protection of family cohesion. In the French spirit, the deceased’s patrimony is not solely private: it is also familial. As a consequence, it cannot be entirely distributed in disregard of the needs of the surviving family.

2. The hereditary reserve: a Franco-French concept?

Is the hereditary reserve a French exception? Is France the only country to protect heirs this way, from the will of their parents to disinherit them?

Not at all. On the contrary, many countries with a civil law tradition apply a comparable system. This is the case, for example, in Belgium, Germany and Spain.

This is even the case in Scotland (although part of the United Kingdom)!

This mechanism nonetheless contrasts sharply with the Anglo-Saxon conception of inheritance. In most of these countries (United States, United Kingdom, Australia, etc.), inheritance is viewed from a more individualistic and pragmatic angle. Contrary to the French revolutionnary thinker Mirabeau, these countries do not attribute to death such an influence on the right to dispose of one’s property: on the contrary, it is the principle of “freedom of disposition” that reigns.

In the Anglo-Saxon mindset, it is normal to organise one’s estate for the benefit of the child who has been most diligent and attentive in the last years before death. Reciprocally, it is not shocking to disinherit the one who has cut the family ties. Generally speaking, it is recognised that a person has the right to anticipate and organise his/her succession as he/she sees fit, with regard to the objectives he/she sets.

Under certain circumstances a minimum share of the estate may still be awarded by the courts of these countries to deprived children.

3. The freedom to chose the law applicable to one’s succesion enshrined in the European Regulation of 4 July 2012

On 17 August 2015, Regulation (EU) No 650/2012 of the European Parliament and of the Council of 4 July 2012 on jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of Succession (hereinafter “the European Regulation”) entered into force.

An effective harmonisation tool, this Regulation is one of the Union’s great successes in the field of private international law.

To sum up, this Regulation :

  • Secures the legal situation of the beneficiaries of an international succession (by avoiding contradictory decisions between the Member States);
  • Settles the conflicts of law and jurisdiction that may arise in connection with international successions (by introducing the concept of a single law applicable to the whole of the succession, in particular by abolishing the division between movable and immovable property in that regard);
  • Introduces the European Certificate of Succession (a single instrument, recognised in each Member State, to assert one’s rights or powers as heir, legatee, executor or administrator of the estate); and
  • Applies in all Member States, with the exception of Ireland and Denmark (two countries which generally choose, mainly for reasons of compatibility with their domestic rules, not to have the private international law regulations apply to them).

Aware of the diversity of national conceptions regarding the disposition of the succession’s assets, the European legislator has established a freedom of choice in this matter. Thus, under Article 22:

A person may choose as the law governing his succession as a whole the law of the State whose nationality he possesses at the time of making the choice or at the time of death“.

In the event that the de cujus makes such decision, the law governs almost the entire succession, and inter alia:

  • The causes, time and place of the opening of the succession;
  • The determination of the beneficiaries, of their respective shares and of the obligations which may be imposed on them by the deceased, and the determination of other succession rights, including the succession rights of the surviving spouse or partner;
  • The capacity to inherit;
  • Disinheritance and disqualification by conduct;
  • The transfer to the heirs and, as the case may be, to the legatees of the assets, rights and obligations forming part of the estate, including the conditions and effects of the acceptance or waiver of the succession or of a legacy;
  • The powers of the heirs, the executors of wills and other administrators of the estate, in particular as regards the sale of property and the payment of creditors, without prejudice to the powers referred to in Article 29(2) and (3);
  • Liability for the debts under the succession;
  • The disposable part of the estate, the reserved shares and other restrictions on the disposal of property upon death as well as claims which persons close to the deceased may have against the estate of the heirs;
  • Any obligation to restore or account for gifts, advancements or legacies when determining the shares of the different beneficiaries; and
  • The sharing out of the estate“.

Thanks to this Regulation and on the advice of their notary or lawyer, many British expatriates had chosen English law to govern their will. Although they were living at the foot of a Dordogne castle, they were assured that their estate would be governed by Westminster law.

Farewell, hereditary reserve ?

4. The reform of the hereditary reserve: a major source of legal uncertainty for Anglo-Saxon expatriates

It is this hereditary reserve that is dealt with in Article 24 of the law against separatism. This provision aims to ensure that the reserve applies in international situations, notwithstanding the choice or de jure applicability of a foreign law to the succession.

This is achieved through a sui generis compensatory levy:

A new paragraph is added to Article 913 [of the Civil Code], worded as follows :

Where the deceased or at least one of his children is, at the time of death, a national of a Member State of the European Union or habitually resides there and where the foreign law applicable to the succession does not allow any mechanism for reserving rights to protect the children, each child or his heirs or successors may exercise a compensatory levy from the existing property situated in France on the day of the death, so as to be reinstated in the reservatory rights granted to them under French law, within the limit of those rights

Free translation of law against separatism, art. 24

That is why we said at the begining that this provision is an exception to the overall coherence of the separatism law.

If it is undeniable that polygamy, or “virginity certificates” brutally undermine republican values, the choice of a foreign succession law, authorising the de cujus to freely organise his/her international succession (for example, English law), is certainly not such an affront!

Citizen Avocats’s opinion

This was not the type of situation that the legislator had in mind when adopting Article 24. It seems that the reserve was protected in order to solve the dire situation of women who were being deprived under Islamic rules.

Notwithstanding, many international successions will be affected by the reform, beyond the sole situations contemplated by the Ministre de l’Intérieur. This is what happens when substential reforms are adopted in a rush, under the legislative accelerated procedure…

In any event, it should be noted that a comparable right of levy previously existed. Yet, it had been invalidated by a decision of the Constitutional Council of 5 August 2011, on the grounds that this mechanism was contrary to the principle of equality before the law. According to the Council, it led to discrimination between French and foreign heirs.

What a turnaround, barely 10 years later (although the mechanism introduced by the new Article 24 is not exactly the same)!

5. The concrete consequences of the law against separatism for expats

5.1. Scope ratione temporis

The new mechanism set forth in Article 24 applies to all successions opened as from 1 November 2021. The date of the will has no bearing: only the date of death matters.

Let us thus take the example of a will signed in 2016 in which English law was chosen. If the death of its signatory occurs after 1 November 2021, the provisions of the new paragraph of Article 913 of the Civil Code will apply to the will (retroactively, thus!).

5.2. Scope ratione materiae

The reform applies to estates where:

  • The deceased or one of his/her children is a national of a Member State of the European Union – or habitually resides there – at the time of death; and
  • The foreign law applicable to the succession ignores the hereditary reserve of the children.

When these two cumulative conditions are met, the children of the deceased, his/her heirs or successors, can exercise a levy on the property located in France at the time of death, to reconstitute the reserve to which they would be entitled under French law. Consequently, only assets located in France on the date of death may be subject to a levy.

On the other hand, if the deceased or one of the children resides in France (or another EU country) but there is no property in France, the right of levy cannot be exercised.

5.3. Modalities of application

If an international succession falls within the scope described above, the notary in charge of the succession must comply with the obligation imposed on him by the new paragraph of Article 921 of the Civil Code:

When the notary finds, at the time of the settlement of the succession, that the reserved rights of an heir are likely to be affected by the donations or bequests made by the deceased, he shall inform each heir concerned and known, individually and, where appropriate, before any distribution, of their right to request the reduction of the donations or bequests which exceed the available share“.

Free translation of the new Par. 2 of Code civil art. 921

This will necessarily lead to additional delays. The notary will have to look for heirs who may have cut ties with their parents and who were not designating in the will. Additional genealogical research may even have to be carried out, (which can be costly).

5.4. Examples of application

Let us imagine a British national whose main residence is located in the Dordogne, France. He is the happy owner of properties both in France and the UK. He drafted a will in 2018, whereby he freely chose English law to govern his succession and designated his wife (from a second union) as the sole beneficiary of his entire estate. His children, from the first marriage, all have their main residence in the UK. They have not spoken to their father for over twenty years. This is why he intended to disinherite them (in accordance with the freedom of disposition defined above). This British national died on 15 November 2021. Thanks to the provisions of Article 24 of the law against separatism, the disinherited children will be entitled to exercise a levy on all the property situated in France, in order to reconstitute the share of the inheritance which would have been reserved under French law.

Let us now imagine the situation of a British national, whose main residence is located in England. He has a second home in the Dordogne, where he visits several times a year. All his children live, work and reside in England. In this case, the disinherited children will not be able to claim any right to a levy. Indeed, neither the deceased nor the heirs are nationals or residents of a Member State of the European Union.

5.5. Implementation difficulties and unresolved issues

On reading the text, many questions remain unanswered:

  • On what basis exactly will the value of the levy be calculated? On the basis of the value of the property located in France only, or all property, wherever located?
  • For the calculation of the reserve and the available portion, should donations made by the deceased during his lifetime of property located in France be reincorporated? Indeed, the text only refers to “property existing on the day of death”, yet this goes against the normal rules for calculating the reserve.
  • As regards intangible assets (e.g. company shares), how will its geographical location be determined? If we take the example of a company, whose registered office is abroad, but owns French real estate: where are the shares “located”?

Practitioners are impatiently awaiting clarification as to the concrete implementation of the new provisions. In the meantime, legal uncertainty is high!

6. The reform of the hereditary reserve: a possible violation of EU Regulation No. 650/2012

As indicated above, the European Regulation had established the freedom to choose a single law to govern one’s succession.

By virtue of the principles of direct effect and the primacy of European law, Member States are obliged to apply the European regulations to which they adhere. They are therefore prohibited from adopting national rules that would undermine or defeat these EU rules.

Concerning the free choice of law in international successions, the European Regulation already provided for an exception: that of public policy:

The application of a provision of the law of any State specified by this Regulation may be refused only if such application is manifestly incompatible with the public policy (ordre public) of the forum“.

European Regulation No. 650/2012, Art. 35

Should we conclude that, in the mind of the French legislator, the hereditary reserve is part of French international public policy?

The title of the law against separatism (“reinforcing the respect for the principles of the Republic‘), its stated objectives, as well as the nature of its provisions, could lead one to think so.

However, on reading Article 24, it seems that the legislator has enshrined a kind of “public order of proximity”. Indeed, the protective mechanism implemented only applies to situations for which there are sufficient elements of proximity with France or the European Union. Other situations escape it.

Such “public policy of proximity” does not, in our opinion, correspond to the notion protected in Article 35 of the European Regulation. It should be remembered that, in its first draft, the proposal for a Regulation on international successions specified, in what was then its Article 27, that :

In particular, the application of a provision of the law designated by this Regulation may not be considered to be contrary to the public policy of the forum on the sole ground that its provisions concerning the reserve portion of the estate are different from those in force in the forum“.

Precisely, this paragraph was deleted in the final version of the text and Article 35, which provides for the public policy exception, no longer makes any reference to the hereditary reserve.

Finally, the reform of the inheritance reserve risks creating new splits in the applicable law. This is because it is not the choice of law in itself that is being impeded, but the effect that this choice may have on the children’s reserved portion of the estate. Thus, the choice of English law per se made by a British person living in France (or any other EU country) and owning property there will remain valid. However, its practical implementation will be undermined by the application of the new Article 913 of the Civil Code. Assets located in France and included in the hereditary reserve will be governed by French law; the others by English law…

In short, the reform makes more complex… what the European Regulation had unified!

Article 24 of the law against separatism therefore seems, in more than one respect, incompatible with the European Regulation. Successions opened since November 1st 2021 could be jeopardized.

General conclusions on the reform of the hereditary reserve

For those who have drawn up an international will within the framework of the European Regulation of 4 July 2012, it seems urgent to consult a lawyer competent in Private International Law in order to adapt the will to the new legislation.

At the very least, it will probably be advisable to ensure, for property situated in France, that the surviving spouse is protected and, if the testator so wishes, that one or more children are favoured, within the limits of the available portion. All of this should be done in such a way as to “limit the damage” and not end up with a will which would no longer produce the desired effect.

The notion of habitual residence and geographical location of the assets (particularly intangible assets) should also be examined. As international situations are diverse, it is at this stage difficult to give a definitive solution, as long as the questions mentioned above remain unresolved.

This article was written in collaboration with Maître Marie-Claude Bessout, former Notary, Holder of a univeristy degree in Notarial Private International Law, and Treasurer of the Franco British Network.

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