Succession planning: the common law/civil law divide

The difference, and the difference it makes

For those of us who live and work in a common law world, it is hard to imagine that we are by far the minority. Most of the world is governed by a civil law regime, customary law, or religious law. Continental Europe, Russia, China, Japan, South America, Mexico, and some of Africa are governed by civil law. The common law tradition is peculiarly English in origin, and most of its former colonies follow it, including in the U.S. (except Louisiana), Canada (except Quebec), Australia, New Zealand, and India.

Each legal culture and those who practice in it often know little about the other – there are two divides. But with increasing globalization and more need to know about each other, some of the divide is slowly starting to be bridged. In the common law, judges rule! Although there are statutes, caselaw made by judges is primary, and judges follow precedents developed through prior decisions to ensure consistency. In contrast, civil law is driven by codified law and statutes that judges apply.

When it comes to succession 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, 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. It can be used immediately 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. Confirming the authority of an executor so a bank or other third party will release assets comes with the price tag of about 1.5% in Ontario, and legal fees and the need to file an information return to the Ontario government.

The role of the legal representative is also far different. Under the civil 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.

There is also lack of testamentary freedom in most civil law jurisdictions (Quebec is one exception). A testator cannot disinherit certain family members, including children, and only a small percentage of the estate, the “free estate,” is not subject to forced heirship. See our prior blogs on this topic: Forced Heirship vs Mandatory Succession Rights - It's All in Your Perspective and Testamentary Freedom: The Right to Disinherit a Beneficiary.

There are also fewer uses of will substitutes under civil law. For example, there is no joint ownership with right of survivorship.

Where there are differences in legal regimes, however, new opportunities can arise. One example is that for those with assets in a civil law country with no probate fees applicable, the use of carefully drawn multiple wills can assist in lowering the worldwide probate bill and legal fees too. See our advisory on multiple will planning: Multijurisdictional and Separate Situs Will Planning.

Each legal culture can learn much from each other in their different approaches. The movement to better harmonization and understanding is on its way and a continuing challenge we face, in particular with the increasing globalization of people and their assets.

Margaret O’Sullivan is the principal of the Toronto-based trusts and estates law firm O’Sullivan Estate Lawyers. She practices exclusively in the areas of estate planning, estate litigation, advising executors, trustees and beneficiaries, and administration of trusts and estates. This article originally appeared in the O’Sullivan Estate Lawyers blog. Reprinted with permission.

Notes and Disclaimer

The foregoing is for general information purposes only and is the opinion of the writer. It is not intended to provide specific personalized advice on any individual situation, including, without limitation, investment, financial, legal, accounting or tax advice. Before taking any action involving your individual situation, you should seek legal advice to ensure it is appropriate to your particular circumstances.