Wills and inheritance planning

When is the right time to have an inheritance plan? How to begin? How crucial is it to have an inheritance plan in place? What happens if you fail to plan ahead?

Savvas Savvides and Eleni Drakou, lawyers and partners of the law firm Michael Kyprianou & Co. LLC, provide their guidance on aspects of Cyprus’ succession law, what needs to be considered and how to go about it.

How often do clients instruct you for advice on succession planning? How important is it to plan ahead when it comes to succession?

Savvas Savvides: The pandemic and global uncertainty have taught people that they need to be prepared and to keep one step ahead in order to have control of their estate and family affairs. Thus, in the last three years, much has changed in relation to succession and estate planning. In the past, people would often think about this but they would put the idea to one side until a more convenient time. These days, they actually give priority to this issue.

What are your clients’ main concerns?

Eleni Drakou: Cyprus succession law, as in many parts of the world, is not a straightforward area, especially when it involves cross-border matters or complicated personal situations. Moreover, succession is not an easy topic as it is associated with the emotional aspects of a person’s life. Very often, clients may be considering having a succession plan in place but they do not know how to do it. Drawing up an inheritance plan might not be the happiest subject but it will definitely go a long way towards helping our closest persons in the future, when we are no longer around to support them. Also, a succession plan can take the form of a roadmap giving instructions to our beneficiaries with regard to our wealth and assets, wherever these are located.

When is the right time to set up an inheritance plan? And what would be the first step?

S.S.: Certain events usually lead someone to establish an inheritance plan – when purchasing a property, after marriage, divorce or remarriage, at the birth of a child or grandchild. A particular stage of life is usually what sets the right time to set up an inheritance plan: people often start their families and their careers in their 30s; by the time you reach your 50s, you should be in a position to check and ensure that everything is where it needs to be and, by your 70s, usually (and statistically) the ‘perfect’ inheritance plan will be in place! So, no matter what your present stage of life happens to be, the time to draw up an inheritance plan is ‘right now.’ It is never too soon to be thinking about your loved ones, your business and assets and what will happen to them when you are gone. For an inheritance plan, the first step is to find a lawyer who understands your unique circumstances, and especially those related to your domicile, who will create a plan that reflects your goals, your current stage of life and legal circumstances. Each case is unique and needs to be examined according to the facts.

What happens if a person owns different assets in more than one country?

E.D.: Each case is examined according to its own particularities but there are usually two options. A person can either draw up a single will, containing all his/her assets from different jurisdictions, or more than one will, perhaps one for each jurisdiction. There are different factors to be taken into consideration before a decision is made in this regard; for example, the inheritance tax of each jurisdiction, the complications of the country’s succession regime, the variety of the assets per se, etc.

Is it necessary to make a will? What happens if a person dies without having made one?

S.S.: Probate and estate administration work is often a complex and difficult experience, especially for people who do not reside in Cyprus. Thus, it is very important to decide on your inheritance plan and leave a will which clearly includes provisions as to who will be dealing with the estate (also known as “Grant of Probate” or “Grant of Letters of Administration”), the administration of the estate, winding up the estate, settling applicable taxes and distributing the property to the beneficiaries. When a person dies without leaving a valid will, their property (the estate) must be shared out according to certain rules – the rules of intestacy. An intestate person is one who dies without leaving a will.

Should spouses share the same will?

E.D.: In cases where spouses share the exact same assets and beneficiaries, it might be considered wise to have a common will for both spouses together, or each spouse could draw up a separate will, which, in content, reflects the that of the other spouse.

A common will can be altered or revoked by each testator. However, a distinction should be made when it comes to mutual wills. Mutual wills are binding between the testators and can not be altered, even after the death of one of the testators, thus restricting the freedom of revocation, which is an essential principle of Cyprus’ succession law.

Who undertakes to implement the provisions of a will after the testator’s death?

S.S.: When a person dies with a will in place, the person nominated in it as administrator of the estate applies to the court for the issue of probate, whereby the administration of the estate of the deceased is granted to that person, who will be the executor. In cases where (a) no-one has been nominated as an executor in a will, (b) the executor appointed in the will has died, (c) the executor has been renounced, (d) the appointment of an executor was invalid, (e) the court exercises the discretion given to it under the relevant law, (f) the executor is incompetent because of their minority status, mental state or other disability or (g) the executor resides outside the jurisdiction, the court grants a ‘letter of administration to an individual’ (the administrator), to administer such an estate.

Are there any other inheritance planning tools besides making a will?

E.D.: Inheritance planning can include different options depending on the person’s circumstances and portfolio of assets. Creating a trust could be considered in certain cases and, in fact, a trust is a tool which is frequently used in succession planning. Moreover, other options include using joint bank accounts, insurance policies and gifts inter vivos. In practice, such options are often combined.

S.S.: A will or testament is a very important legal document. The main statute that involves it is Cap. 195. Cyprus Succession Law and wills. Every individual who owns assets in Cyprus, regardless of whether they reside in Cyprus or elsewhere, should refer to a lawyer for legal advice since their will has to meet specific criteria provided by local law in order to be valid and possible to execute when the time comes.

By Savvas Savvides and Eleni Drakou, lawyers and partners, Michael Kyprianou & Co. LLC

(This article was published in the Cyprus Journal of Wealth Management. To view it click here)