For those of us who live and work in a civil law world (like Poland), it is hard to imagine how big is the divide between civil law and common law jurisdictions, especially in the area of inheritance law.
Most of the world is governed by a civil law regime. Continental Europe, Russia, China, Japan, South America, Mexico and most of Africa are governed by civil law based on the Roman legal tradition. The common law tradition is peculiarly English in origin, and most of its former colonies follow it, including the US, Canada, Australia, New Zealand and India.
Each legal culture and those who practice in it often know little about the other. But with increasing globalization and more need to know about each other, the situation is changing. Lawyers need to be aware of the challenges in this area.
When it comes to inheritance matters, the law is very different between common law and civil law jurisdictions. A few examples - the civil law provides for a "notarial will" which is executed before a notary public and the original kept and recorded by the notary. The common law has no such concept. There is no formal recording procedure which can lead to issues in finding and establishing what is the last will when a person dies.
As well, in a civil law jurisdiction there is no need for probate of a notarial will. If the will is drawn up in Poland, it can be easily approved by the notary public in Poland and then it can be used to administer an estate and to obtain access to assets. In common law jurisdictions, it is often necessary to probate a will, which involves a court application and often the payment of substantial probate fees.
Probably the biggest difference is in the role of the legal representative. Under the civil law (for instance under Polish law), on death there is an automatic vesting of ownership of the deceased's property in the heirs of the deceased, whereas under the common law, there is no such automatic vesting. Instead, the executor, administrator or estate trustee holds the property on trust for persons with a financial interest in the estate, who must account to the beneficiaries but who do not have direct ownership or control. Other common features of civil law jurisdictions are that (with few exceptions) they do not have trusts. Few recognize foreign trusts, which creates problems for a deceased person with a will that contains a trust if they own assets in a civil law jurisdiction.
In the simplest terms, a trust is an arrangement where certain assets are held by a trustee who is their formal legal owner, but for the interest and benefit of another person, the beneficiary of the trust. The trustee is required to handle the trust assets with due care and loyalty toward the beneficiary. This is why ownership of the assets in a trust is divided: “bare” title is held by the trustee, while the ownership of the ultimate benefits generated by the trust (beneficial ownership) is vested in the beneficiary. Continental legal tradition, like Poland, usually do not have any institution directly corresponding with a trust. Polish language does not even have a word for it. This has raised doubts over the years in Poland on the part of courts and lawyers when they need to determine the consequences exerted by a trust in a legal document to be approved by a Polish court.
How to handle the situation when a testator lives in the common law country but at the same time owns assets in a civil law country like Poland?
- First thing in preparing the will is to assess situation from the perspective of both jurisdictions with assistance of experienced lawyers from Poland and the UK or the US. A well-drafted will (or wills) is the foundation of a good estate plan. The inheritance law in each country has many nuances which need to be taken into account.
Second thing is to identify the assets: real properties, bank accounts, credit cards, investments, etc. It is hard to say whether it is better to go for the solution with one will encompassing all assets or two wills. It depends on the situation. Sometimes, it is worthwhile to consider other solutions such as a gift. If the Polish assets include real property located in Poland (land, house or an apartment), the beneficiary of the estate will require a decision of the Polish court. As I have mentioned above, the notion of trust is unknown in Poland and most Polish courts will have a problem with it. The outcome of the court proceedings will be uncertain. Transferring the real property as a gift to the beneficiary could solve the problem.
Third thing is to choose an executor or personal representative of the estate who will be charged with managing the estate and wrapping up the decedent’s affairs, which includes identifying and resolving all debts and filing tax returns.
- Because large group of Poles are living abroad and there are many mixed marriages concluded by Poles, it happens more and more frequently that foreigners inherit the property left in Poland. This is why the issue of foreign wills – their validity and their effectiveness in Poland - is of utmost importance.