A corner stone of common law is that a person may broadly speaking leave his or her assets to whomever he or she wishes. Monaco, however is a civil law jurisdiction that applies the rules of forced heirship.
These rules may extend to all assets of a deceased person who at the time of death was resident/domiciled in Monaco including any assets which the deceased may have given away or sold at an undervalue at any time during his or her lifetime. In addition a spouse is not automatically entitled to a part of the deceased’s estate. This principle does not extend to immovable assets owned directly elsewhere, because such an immovable will pass in accordance with the law of the country in which it is situated.
Monegasque low determines how movable estate is devolued
The rules of private international law in Monaco look to an individual’s law of origin when determining the devolution of a deceased person’s movable assets. However care must be taken where the individual’s law of origin provides for the law of domicile to govern succession. A “renvoi” thus arises and since Monaco will accept that “renvoi”, Monegasque law would apply to determine how the deceased’s movable estate will devolve. A simple example would be a British person domiciled in Monaco. Upon his death, Monaco would look to his law of origin (the law of England and Wales for an Englishman/Welshman). This jurisdiction provides for a “renvoi” to the law of last domicile which means that when such a person dies domiciled in the Principality of Monaco, Monegasque law will determine the disposition of the movable estate, wherever situated.
Trusts to deal with estates
In 1936, the Monegasque authorities enacted Law 214, introducing the possibility that certain individuals can use trusts to allow estates to be dealt with in accordance with common law principles. Under Law 214, an individual of Anglo Saxon extraction and a resident of Monaco can opt to transfer his or her assets to a trust, the provisions of which do not have to comply with the provisions of Monegasque forced heirship.
The trust must be created by an authentic instrument made before a Monegasque notary. A certificate of law which states that the instrument of trust complies with the law of the settlor or testator must be provided by a qualified lawyer whose name appears on a list held by the Court of Appeal of Monaco. A duly approved corporate trustee is appointed from a list of trustees kept by the Court of Appeal.
The law 214 will trust
It is possible to set up a 214 trust during the lifetime of an individual but usually people will opt for the Law 214 Will Trust which comes into effect only upon death. Whilst an inter vivos Law 214 Trust is valid it does not attract the national succession law into Monaco; conversely where a Law 214 Will Trust is executed this has the dual effect of invoking both the testator’s “national” succession law and trust law to overcome reserved property rights. It is vital that the formal requirements are met if a valid 214 trust or a 214 Will Trust is to come into existence.
Monaco is not a traditional trust jurisdiction, so there is much to be said for the Monaco resident to create an inter vivos trust during his or her lifetime in a common law jurisdiction into which can be settled the bulk of his or her movable assets to operate in tandem with a 214 Will Trust. This is a very flexible way to structure and preserve assets and, in certain circumstances, to maximise tax efficiency. In the unlikely event that the inter vivos trust should fail, the assets settled into the inter vivos trust would normally fall into the settlor’s estate on death and be dealt with by the 214 Will Trust provided it is drawn sufficiently wide.
