Buying property in a foreign country often requires considering who will inherit the property. The issues can be very complex. The Global Property Guide provides a basic outline for each country, relying on advice from leading local law firms.
A brief general summary of possible inheritance issues:
The reserved portion
Anglo-Saxon buyers are often not fully prepared for the fact that continental legal systems usually have a 'reserved portion'. A substantial portion of property left under such legal systems must go to ‘necessary heirs,' who are designated by law. These ‘necessary heirs' are usually the deceased's sons and daughters, and wife. The division of the estate between them will usually be rather simple (though Islamic law has elaborated a ‘necessary heir' system of considerable complexity). Often the wife is given the right to remain in the property for life, but does not retain ownership.
Only the ‘non-reserved' portion of the estate can, in such systems, be freely left by will.
Which inheritance law applies?
The question of which law applies to the property of a foreigner, especially a non-resident foreign can, in many countries, be complex.
The two systems of law (that of the property-owner and the country where the property is) may not mesh well.
The country where the property is may deem the applicable law to be either:
- its own law;
- the law of the country where the owner is resident; or,
- the owner's national law.
The most typical case is that it applies its own law, or the owner's national law. But in the second case the property owner's national law may (e.g.) say that the relevant law is the law of the country where property is located – i.e., his law will send the matter back to the country of location.
Here is an obvious conflict. One country's law says one thing, the other says another. They are both sovereign states. This kind of conflict gives rise to the specialized legal discipline of ‘conflict of laws'.
In most cases where this particular conflict occurs, the local courts will accept that they have jurisdiction, and will also accept the court of nationality's determination that the applicable law is that where the property is - i.e., they will ‘accept the renvoi', and apply their own law to the inheritance of the property.
But this is not always the case, and there may actually be no simple solution – a classic ‘conflict of laws' situation, which may be costly and time-consuming to unravel.
Who owns the property?
In Anglo-Saxon countries the concept of beneficial ownership can complicate ownership issues. It is very common for a property to be owned jointly by a couple even though only one person's name is on the title deed. But in continental law countries, the question is more simply answered. The name on the title deeds, fraud aside, is that of the owner.
Can the property be gifted during the lifetime of the owner?
Gifts in vivo are usually possible, but are often subject to limits, and can sometimes be clawed back.
Is it advisable to make a will?
Making a local will in many cases will speed the probate process. In such cases, lawyers who have prepared the Global Property Guide's articles, will make clear whether making a local will is advantageous, and what the requirements are for it to be recognized by the country's courts.