Wills, Estate & Tax Planning, Trusts in Monaco

 

Monaco is a Civil Law country. Its domestic laws in terms of winding up estates and making Wills would be familiar to French practitioners because the Monaco Civil Code is based on the French Code, but care must be taken since in terms of certain details the laws of both countries, Monaco and France, have evolved separately and there are marked differences.

One such difference is found in terms of Monaco’s Private International Law (“PIL”) in respect of Estates, and the Law Applicable to Successions.

It is also important to distinguish between Applicable Law and Tax in Monaco.

Applicable Law  

 

On the death of an individual the first question to ask is if the Courts of Monaco will have Jurisdiction. That Jurisdiction will flow if, inter alia, the individual was habitually resident (domicilié) in Monaco at the time of his death.

Once Jurisdiction has been established the Monaco Courts historically -that is until July 2017 when a new Private International Law Code (the Code) was introduced in Monaco- will have looked to that individual’s national Succession law to determine which law then applied to establish how the movable estate (personalty) devolved. The national law would have included that country’s own rules of Private International Law or Conflicts of Laws; if, say, the Succession law of the country of nationality effected a “renvoi” to the law of an individual’s last domicile (such as occurs in England & Wales), and that place was Monaco, Monaco would until July 2017 have accepted that renvoi and applied Monegasque Succession law to determine how the worldwide movable estate of the individual was to devolve.

But as a consequence of the Code, the laws of Succession work very differently now.

Once Monaco Jurisdiction is established, the Monaco Courts will now apply Monegasque Succession law to determine how an individual’s movable and immovable estate will pass. However, if an election is made in a valid Will, an individual can now choose that his national Succession law will apply over all his assets, movable and immovable. In making this national Succession law election a renvoi from national law (should a renvoi exist in that country under its own PIL rules, for example to the law of an individual’s last domicile, such as in England & Wales) will not operate.

The domestic national Succession law will apply.

This application of national Succession law extends also to the mechanisms and administrative powers over assets and how the estate is wound up. By electing the national Succession law (so replacing Monegasque Succession law, which is the default position) the panoply of administrative and winding up estate mechanisms is also imported into Monaco. For example, in domestic Monaco Succession law, Executors are unknown; by reaching into and selecting the national Succession law this will extend to naming Executors who will then enjoy all their powers as known under the national Succession law, if of course such a role is known to the national Succession law.

By way of example, an Englishman domiciled and habitually resident in Monaco can now make a Will, in one of a variety of forms set out in the Code (see infra), in which he elects that his national Succession law applies over all his worldwide movable and immovable estate, and also such that the people he names as Executors in his Will enjoy all the powers and duties of an Executor under English law.

Care should be taken though if the Will is to set up Trusts; it is recommended that to set up testamentary Trusts a person should resort to using Monaco’s Law 214 legislation which subjects the Will to specific formal requirements if it is to be valid.  This legislation dates from 1936 and is widely used by individuals seeking to set up testamentary Trusts in Monaco (see infra).

The Code has made very significant changes, not least it has opened up the possibility to individuals to make an election of national Succession law, not unlike the opportunity afforded by the European Succession Regulation.

 

Monaco Tax on death

References to Succession law above are not to be confused with circumstances which may give rise to Duty being due in Monaco.

Monaco does in certain circumstances levy a Gifts and Estate Duty at various rates but this is strictly limited to Monaco sited or deemed sited assets owned by an individual. This is a territorial tax that has nothing to do with nationality, residency or domicile of the individual. Situs/deemed situs is the Monaco taxing criterion. The rate of Duty is 0% where the beneficiary is a spouse or in the direct blood line of the deceased; various rates of Duty arise depending upon kinship, and ultimately the top rate of Duty is 16% (for unrelated parties) on Monaco sited/deemed sited assets.

Care should be taken when a beneficiary is to receive such assets through a Trust; Duty may then be levied in the hands of the Trustees.

The Hague Trusts Convention of 1985

In 2008 Monaco adhered to The Hague Convention on the Law Applicable to Trusts and on their Recognition. Whilst Trusts have been habitually recognised in Monaco for a great many years, adhering to this Convention helped confirm and reinforce the understanding that Trusts are recognised in Monaco. However, that is not to say Trusts will necessarily be effective and fully recognised and enforced in Monaco in every situation: this would be relevant where a Trust, say, attempts to defeat a person’s reserved property rights, especially where that individual’s national Succession law provides such rights to heirs.

The specific case of Monaco Law 214 of 1936

Exceptionally, where the national law of an individual comprehends Trusts (such as that of a British citizen) it is possible to make a Will Trust in Monaco, by strictly respecting certain formal obligations, the effect of which is to apply national Trust law and subsidiarily national Succession law over an estate, so that reserved property rights which might otherwise apply can be defeated (N.B. Monaco Law 214 was deliberately enacted in 1936 to allow certain individuals to overcome reserved property rights).

To some extent the Code has caused individuals to consider there is no need now to make a Law 214 Will Trust in order to appropriate their national Succession law to themselves. This is true; an election in a simple Will can now achieve this.

But if it is desired to set up testamentary Trusts it is still considered advisable to achieve this via Law 214.

Types of Wills in Monaco

A Monaco Will can take one of three forms in standard law:

  • “Authentic” (that is made before a Monaco notary, and four witnesses)
  • “Mystical” (that is the signed Will is placed in an envelope which is handed to a Monaco notary in the presence of 4 witnesses)
  • “Holographic” (that is a Will handwritten by the Testator/Testatrix, signed, and dated by him/her, without witnesses).

But the Code has added further forms which can now make for a valid Will:

  • Where it is made in the form of the place in which it is made
  • Where it is made in the form of the country of which the testator is a national
  • Where it is made in the country where the testator is domiciled
  • Where it is made in the form of the country in which the testator has his habitual residency
  • Where immovables are concerned, in the form of the country where it is situated

(August 2017)

 

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