Does Your Will Cross Borders?

Choice of Law, Trusts and the Challenges of International Estate Planning 

Thinking today about what will happen to our assets tomorrow is an increasingly important concern for those seeking to make considered plans for their succession. 

Against a backdrop of growing international mobility, foreign nationals who live in Portugal or own assets here increasingly have Wills already made in their home countries. Others wish to make a Will during their stay in Portugal. 

Legal advice is particularly important in this context: it helps identify potential incompatibilities between legal systems in advance and ensure that succession arrangements achieve the intended results. 

We therefore highlight some of the key issues to consider. 

The first step is to establish which law governs the succession. Under the general rule in the EU Succession Regulation, the applicable law is that of the State in which the deceased was habitually resident at the time of death. A foreign national that resides in Portugal may therefore, in principle, have their succession governed by Portuguese law. In many cases, this may conflict with their interests and limit their ability to give effect to their succession wishes. 

2To allow greater freedom in succession planning, the law provides for foreign nationals to choose the law of their nationality to rule their succession. That choice may extend to the succession as a whole, including assets situated in Portugal or limit it to these specific assets in the Portuguese Will. 
A separate issue arises when foreign nationals seek to use legal arrangements familiar in their home countries in Portugal. A trust is a prime example. 

A trust, a characteristic feature of common law systems, is an arrangement under which assets are entrusted to a trustee to administer in accordance with the terms laid down by the settlor, for the benefit of specified persons or for specified purposes. 

Foreign nationals wishing to provide for a trust in their wills will therefore find no direct equivalent in Portuguese succession law. 

This lack of a direct equivalent does not, however, mean that trusts are irrelevant to, or disregarded by, the Portuguese legal system. On the contrary, a trust may raise significant succession, property and tax issues in Portugal. Each case therefore requires an assessment of how the effects envisaged under foreign law interact with the applicable Portuguese rules. 

Similarly, where a Will appoints executors—another typical feature of common law systems—or incorporates other mechanisms specific to the relevant legal system, the focus should not be on reproducing or translating its provisions literally. Instead, it should be on understanding the testator’s intended outcome and determining how it can be given legal effect in relation to assets situated in Portugal. 

The existence of different legal systems should not discourage succession planning. Rather, it underlines the need to plan ahead and coordinate the relevant arrangements. 

Before making a Will, several essential questions need to be answered: Where is the testator habitually resident? What is their nationality? Which law do they wish to govern their succession? Are there existing wills or trusts in other countries? Which assets do they intend the Portuguese Will to cover? Are the various succession planning instruments compatible with one another? 

The aim should not be merely to translate an existing Will, but to ensure that the testator’s wishes can be given effect in Portugal and achieve the intended results. 

In international estate planning, coordination matters more than simply transposing arrangements from one legal system to another. 
 
Diana Magalhães Lopes & Sofia Vicente - MATLAW 
Contact us: 
geral@matlaw.pt  | (+351) 210 434 150