The VIII St. Petersburg International Legal Forum hosted a discussion on evolution of succession law in Russia from two succession lines to inheritance agreements, joint wills, and estates.
The discussion was moderated by Pavel Krasheninnikov, Chairman of the Committee of the State Duma of the Federal Assembly of the Russian Federation for State Construction and Legislation. The session featured Denis Arkhipov, Partner, Egorov Puginsky Afanasiev & Partners Law Offices, David-Juan Viader Agusti, Manager Director, Lawyer, Viader Abogados, Bronislav Gongalo, Head of Civil Rights Department, Ural State Law University, Aleksandra Ignatenko, Member of the Board, Federal Notary Chamber, Diana Kalyaeva, Director, Head of Private Wealth Services, PwC Legal, Lidia Mikheeva, Vice Chairman, Serghey Alekseev Presidential Research Centre for Private Law.
To launch the discussion Pavel Krasheninnikov, the Moderator, reminded the participants of amendments to succession law adopted by the Federation Council of the RF and said that this sector still faces a set of challenges. New forms of an inheritance agreement and a joint will became a key topic for discussion.
Lidia Mihkeeva pointed out the inheritance agreement regulation emphasizing that experts have not agreed upon the choice of conceptions in succession law. “I would like to draw your attention to the issue of will. This turning point makes us consider and compare what is more important for our agenda, the will of a sound in mind person or a hypothetical public interest which we traditionally call the implied will and which is enshrined into legal succession regulation. What is more important for us—an arrangement made by a testator or an arrangement that is believed to be good for them in terms of our law? Over recent years these concepts have been in conflict,” the expert noted.
Lidia Mikheeva emphasized that an agreement can be made only if a testator has a desire to do it and in for their benefit. When we first started the development of amendments to the Civil Code, there was no doubt that if the will of an individual does not contradict common sense and interests of disabled or dependent members of a household, the legal system and ethical values it deserves respect. Often this will is not actually the will of a single person it is formed with regard to the views and opinion, wishes, and promises of the other family members. We believe that families that live in harmony and love are able to resolve the succession issue peacefully through a discussion or the succession order is implied. The inheritance agreement gives certain possibilities to express good will. The freedo, of expression is confirmed by notarization. We proposed not only notarization for the inheritance agreement and the joint will. The draft prohibits sealed joint wills and joint wills in emergency situations. Moreover, we proposed to use video recording for joint wills in order to prevent a will contest,” the expert said.
Aleksandra Ignatenko talked about challenges that the draft has brought up for notaries. One of the challenges is the time frame for modification of the Unified Information Notary System for the purpose of the draft. “We believe that there are issues that require further discussion and addressing, for example assignment under such agreements. Besides, speakers mentioned the Unified Information Notary System which allows us to address various issues, in particular public issues. The draft charges notaries with certain responsibilities that will be related to the modification of our information system. We need to understand that the modification requires certain time and funding. What we read today in the draft, for example about the time frame, makes us doubt that we will be able to meet the requirements prescribed by the instrument. This needs to be further discussed,” Aleksandra Ignatenko explained. Furthermore, the expert said that the draft would require adjustment related to validity of data in the Unified State Real Estate Register and the regulation identifying legal owners in the inheritance process.
Bronislav Gongalov did not agree with the point of view of the previous speaker. He believes that first we need to formulate the general structure of the draft bill and only after that go into details. “I think that in case of joint ownership of property by a couple the Register data on that property does not really matter. I know that legally it is deemed as joint ownership. The issue is being widely discussed now, and soon the Register will bear data about both spouses. Surely, we have to take into account these issues, but before doing that we need to look at the situation from a broader perspective. We need to define the concept first,” the expert argued.
Denis Arkhipov noted that current regulation splits up businesses. It creates situations with several owners who might potentially enter into conflict, or might lead to possible illegal takeovers and loss of business. The expert emphasized that a testator might have several children from different marriages, and the current inheritance process could lead to different groups of estate. There is another challenge for business when successors have unlimited access to estate, and it can make them lose their mind. This is the reason why business community members prefer foreign trusts and foundations. These succession tools help to minimize potential damage for business even after the owner’s death, and their successors do not have full access to a huge wealth. However, we need to protect not only rights of main successors, but also rights of deceased creditors. “Law matters, but in order to successfully transfer wealth we have to invest into a social infrastructure. A business man needs efficient tools available during their lifetime so that their successors would not find themselves broken. We fully support the idea of a joint will. Once my clients expressed a wish to make such a will. However, a question arises: do we propose to make a joint will equal to a marriage contract if the joint stipulates non-heritable transfer of a spouse’s property share. But what will happen with creditors’ rights? If a marriage agreement binds spouses with responsibility to notify their personal creditors about the existence of this agreement, they will take it into account. This hidden tool of a joint will might become a surprise for them. The draft bill protects rights of creditors and successors upon the beginning of the inheritance process. If they believe that it is a violation of their rights, they may challenge it. The question arises whether it is an efficient tool to protect creditors or not,” the lawyer explained.
According to Diana Kalyaeva, studies show that business community around the world considers inheritance planning a common issue. We expect that over the next five years about 2.5 trillion will be inherited. In the near future business transfer process will be transformed. The expert believes that the draft bill on inheritance trusts for succession planning has been thoroughly designed but it generates certain issues. “A trust shall be established after the death of a testator, so they will not be able to see it. There is a risk that the will of the testator expressed in their testament or in draft documents approved by them might be contested or disrespected. It is a grave issue, and it is essential to provide for the second model. The testator should have the possibility to establish a trust while being alive. They shall have the possibility to see how it works, to identify drawbacks and engage their successors who will be able to get experience through this tool. It will help to generate law enforcement practices,” the expert emphasized.