Law of Inheritance

Rules of succession of the property upon the death of a person become of importance mainly when calculating the inheritance tax. With precautious and aware asset planning the dues to be paid to the state may be reduced. In addition, the existence of a well worded last will and testament may help the smooth transition in a company when the main shareholder or founder of the enterprise passes away. Situations that we avoid to speak of, but it is worthwhile to face with professional assistance.

Breaking news for Hungarians living outside of Hungary, (and for ex-pats living in Hungary)

Since 17 August, 2015 a new Succession Regulation has been applicable for all nationals of the EU member states, except for Danish and UK, Northern Ireland citizens. The new rules dramatically change inheritance laws for all other EU people who live or work in another EU member state, and the contents of the new regulation should be broadly know for those who actually are living or plan to live abroad within the EU.

Inheritance laws are significantly different in each member state: the order of succession may vary, spouse is either allowed to inherit with children or not, the testator may draw up a last will and testament freely or with certain restrictions (i.e. legitimate portion applies or unknown in jurisdiction). Previously, and generally speaking, citizenship defined the applicable laws. In case of the death of Hungarian citizen nothing else but the Hungarian civil code prescribed for his or her inheritance, regardless if such person lived outside of Hungary throughout his life and/or left real estate and movables abroad. Likewise, if a German citizen lived in Budapest and passed away, his heirs were decided by the laws of Germany. If the deceased ex-pat owned an apartment in Budapest, for example, the ownership registration to his heirs required the participation of a Hungarian notary, who had to apply the German law, which resulted in a quite long and burdensome procedure.

Inheritance became complicated and legal fees went up if international elements had to be taken into consideration in the case. EU member states decided to help citizens with this and by means of Regulation (EU) No 650/2012 international succession is planned to become easier and more understandable. But this regulation changes a lot, and it is important to know (UK and Northern Ireland opted out from the common regulation, so their citizens or those who live there are not affected by the new rules).

The greatest news is that the EU person who lives and works abroad (legally speaking whose habitual residence is in another member state) will automatically be subject to this state’s inheritance laws, and authorities. In case of the death of a Hungarian citizen residing in Germany the inheritance will be governed by the laws of Germany, and the procedure will be conducted by the German courts. And you, my Hungarian fellow, do you know the inheritance laws of Germany? Do you know who is getting your car in Berlin and the small flat that you left in Budapest if anything happens to you? Your children, your wife or your parents? And in what proportion? You, who moved to France, do you know that in case you leave no children your wife has to share your assets even with your brothers and sisters? And you, Hungarian parent, whose son is working in the Netherlands, do you know that by Dutch law your son may leave everything that he has to his partner even without marriage and written last will and testament? In a procedure which is conducted in Dutch language, by a court which is thousands of miles away?

Of course, if you do not care, it does not matter at all. But if you bear any interest or liability towards your kith and kin please consider this. If your habitual residence is different from your citizenship then by virtue of this new Regulation you have the right to choose. You can always choose the laws of your own citizen country, but you have to choose it. Specifically, in writing, like drawing up a last will and testament. Otherwise, the laws of your living/working country’s laws will have to be applied, which might be completely foreign to you and your beloved family. Please be conscious and make inquiries in time.