Jersey & Guernsey Law Review – June 2009

Forced heirship – trusts and other problems

This article considers forced heirship in the Bailiwick^[1] of Jersey and examines its significance as regards Jersey trusts, and the extent to which such rules provide a means of attacking a trust.

A “forced heir” is defined as “a person whom the testator or donor cannot disinherit because the law reserves part of the estate for that person”.^[2] Legal rules therefore either prevent or at least restrict the ability of a testator or donor to deprive an heir of such estate. Accordingly, this article concentrates upon the legal position where the deceased has left a will.^[3]

Forced heirship laws are most prevalent amongst civil law jurisdictions (for example France) and in Islamic countries (for example Saudi Arabia.) However, there are also various “mixed jurisdictions”^[4] where such laws are commonly found. Aside from Jersey and its sister Bailiwick of Guernsey, for example, Louisiana in the US enjoys various forced heirship provisions.

A brief guide to Jersey’s forced heirship laws

Classification and immovable estate

1  In Jersey, property is classified as either an immovable (immeuble) or a movable (meuble) and different rules apply according to this classification.

2  Historically, Jersey was firmly wedded to the principle of preserving family assets as is summed up in the maxim la conservation des biens dans la famille. A consequence of this principle was that, in order to ensure that property remained within the same family, women (who on marriage in effect joined another family) were given very few rights to property.

3  However, by 1926 and commencing with the Loi (1851) sur les Testaments d’Immeubles, various statutes gradually increased testamentary freedom in respect of immovable property. Since such time, a testator or testatrix has been free to dispose of immovable property to whomever s/he wished but subject to two restrictions that had long existed under Jersey customary law, namely, the widow’s right to Jersey^[5] dower (douaire) and the widower’s right of viduité (now altered and replaced by statute in an intestate succession by arts 5 and 6(3) of the Wills and Successions (Jersey) Law 1993 whereby a statutory usufruit may arise).

4  Dower and viduité are forms of usufruit and as such carry with them the right of enjoyment of the relevant land. They are not interests in land but rather burdens upon it. In respect of dower, the generally accepted view^[6] is that a widow has a right to the enjoyment, for life, of one third of all of the immovable property of her deceased husband held at the date of death, although authority exists that enlarges such claim to immovable property that he would have inherited in the direct line had he survived his ascendants^[7] and also to such property already inherited by the husband and alienated in his lifetime.^[8] In the latter case, the widow is compelled to accept a monetary equivalent only (franc douaire.)^[9] Whatever the merits of such authority, the generally accepted view would no doubt represent an evolution of Jersey’s customary law and now be enforceable as such.^[10]

5  In contrast, provided there is a child born of the marriage, the right of viduité confers on a widower the right to a life interest in all of his wife’s immovable estate until his remarriage.

6  There are a number of other aspects and limitations to all these customary law rights and for further explanation the reader is referred to two particular texts: Le Gros, Traité Du Droit Coutumier de L’Ile de Jersey, 2007 Jersey & Guernsey Law Review, pp 40–51, 52–57, 124–44 and corresponding endnotes;^[11] Matthews & Nicolle, The Jersey Law of Property, Key Haven Publications Plc (1991), at 8.86–8.96.

Movable estate

7  In Jersey, regardless of what is provided for in a will,^[12] the testator’s surviving spouse and his children can claim part of the movable estate provided they do so within a year and a day of death,^[13] and this entitlement is known as légitime. Article 7(2) of the Wills and Successions (Jersey) Law 1993 now sets out the current position in respect of this right^[14] (i.e. where there is a will):

·             Where a testator dies leaving a surviving spouse, but no children, the surviving spouse can claim as légitime:

○             the household effects, and

○             two thirds of the rest of the net movable estate.

·             Where a testator leaves a spouse and children:

○             the spouse can claim the household effects and one third of the rest of the net movable estate, and

○             the children can claim one third of the net movable estate (not including the household effects).

·             Where a testator leaves children but no spouse, the children can claim two thirds of the net movable estate.

8  It will be seen from these provisions that, irrespective of the existence of a spouse or a child, the testator has the ability to dispose of one third of the movable estate to whom he wishes.^[15] This is known as the partie disponible.

9  When children inherit, the estate is divided between them par souche. This means that the property is shared equally between the children who inherit. It also means that if any of the testator’s children pre-decease the testator, after having children themselves, those children (the testator’s grandchildren) inherit their parent’s share, and that is divided equally between them.

10  The 1993 Law^[16] defines “household effects” as being articles of household or personal use or ornament normally situate in or around the matrimonial home. It does however not include:

·             motor vehicles;

·             anything used wholly or mainly for business purposes;

·             money or securities for money;

·             any single article or any single group of similar or related articles forming a set having a value over £10,000; and

·             any article of personal use or ornament specifically bequeathed under the will.

11  For the purpose of the 1993 Law, monies received under an insurance policy taken out on the testator’s life solely in order to repay or reduce indebtedness secured against immovable property owned by him (whether alone or with others) does not form part of the net movable estate, as long as the monies are used for their intended purpose.^[17]

12  However, a surviving spouse cannot benefit under the légitime provisions if at the date of death:

·             s/he was not living with the testator, and

·             either:

○             s/he had deserted the testator without cause, or

○             a decree of judicial separation had been granted to the testator.

13  In these circumstances, any property to which the surviving spouse would have been entitled, will devolve as if s/he had died immediately before the testator.^[18]

14  Where a person is unmarried, or no longer married, and does not have any legitimate children, then there can be no légitime and consequently there is no corresponding testamentary restriction.

15  Where a person has not been left movable property in a will sufficient to satisfy his or her légitime then a claim can be made to reduce the will ad legitimum modum. When this is done, those entitled to légitime receive their entitlements.

Jurisdiction

16  Movable estate will be dealt with by the Jersey courts in accordance with the law of domicile of the testator or testatrix.^[19]

17  In respect of any immovable estate, the provisions of the Wills and Successions (Jersey) Law 1993 expressly apply to immovable estate situate in Jersey and such a provision is consistent with the general rule that the lex situs prevails.^[20] When combined with the non-discrimination provision of art 19 of the 1993 Law (whereby “nationality” is rendered irrelevant to the devolution of an estate) it would appear likely that the customary law concepts of dower and viduité similarly apply to immovable property situate in Jersey and notwithstanding the foreign domicile of the testator or testatrix.^[21]

Trying to get around the rules

Inter vivos gifts—what happens if a testator defeats the légitime rules?

18  If a testator’s conduct is such as to defeat another’s légitime, for instance, by giving property to certain of his children (or grandchildren)^[22] during his lifetime, or paying off their debts,^[23] and so that they end up with more than the others (and that such additional share cannot be said to form part of the partie disponible), the property in question might be returned to the estate as being an avancement de succession. Under Jersey customary law this process of bringing back such gifts is known as rapport à la masse, and since 1960,^[24] only applies to movable successions.

19  Interestingly, it is clear from various customary law commentators that not all such gifts (dons) are capable of being brought back, and for instance, the provision of food, clothing and education (and basically other aspects of meeting a parental obligation) are exempted.^[25] Le Geyt^[26] for instance states in his chapter “des Meubles & des Partages qu’on en fait”—

“les avantages faits pour depense de bouche, education, métier, livres non excessifs, noces, habits ordinaires, usufruits d’heritages durant la vie du propriétaire, ne se rapportent point.” [sic]

[the benefits given for the cost food, education, profession, books that are not excessive, weddings, everyday clothes, usufruits of properties during the lifetime of the owner, are not brought back at all.]

20  Basnage^[27] states the position as follows—and includes in his discussion the similar approach taken in areas outside that of Normandy—

“La dépense faite par le père pour l’éducation de ses enfans, soit en le faisant instruire aux belles lettres ou aux exercices convenables a sa qualité, n’est point sujette à raport; quelques-uns en exceptent encore les frais faits pour le faire recevoir en quelque profession ou métier. C’est le sentiment de Ricard, sur l’art. 304. de la Coûtume de Paris, que les frais ordinaires que sont les peres & meres pour advancer leurs enfans à quelque condition, ne se raportent point, non pas même ceux qui sont faits pour passer un Docteur en Medecine a Paris, quoi que la dépense en soit tres-considerable. Par l’article 159. de la Coûtume de Blois, les frais de maîtrise de Métier & Doctorat ne se raportent point. Par la disposition du Droit Civil, ce que le pere avoit déboursé pour son fils pour l’élever à quelque Dignité, comme de Préteur, ou de Consul, n’étoit point sujet a raport …”

[The expense borne by the father for the education of his children, either in having them instructed in literature or in matters appropriate to their standing, is not subject to rapport at all; a few still make an exception for the expenses made to have him received into some profession or trade. This is the feeling of Ricard, on art 304 of the Custom of Paris that the normal expenses that fathers and mothers make in order to advance their children to some station in life, are not brought back at all, not even those which are incurred to become a Doctor in Medicine in Paris, although the expense is very considerable. By art 159 of the Custom of Blois, the expenses of training for maîtrise de Métier and Doctorate are not brought back at all. By the provisions of Civil Law, that which the father had paid out for his son in order to elevate him to some rank like Préteur or Consul are not subject to rapport at all.]

21  Basnage goes on to refer to the ways in which Norman customary law evolved certain exceptions so that gifts of wedding clothes can be brought back into account but not the cost of the wedding festivities or other clothing—

“Les habits nuptiaux se raportent, mais non les habits ordinaires étant compris sous les alimens …On ne peut aussi demander le raport des frais du festin des nôces …”

[Wedding clothes are brought back but not the everyday clothes being included under alimentation. The rapport of the expenses of the wedding feast also cannot be requested.]

22  Certain commentators further suggest that the bona fide reward for services performed by a child to the parent might also fall into an exempted class of a donation remunératoire, although it is clear that they would still be viewed by a court with much suspicion and that they would have to be commensurate in value (i.e.at a juste prix).^[28] Basnage states the position as follows—

“On a cherché divers moiens pour éluder la disposition de cet article, mais pour peu que l’enfant que l’on veut favoriser en tire de profit, nonobstant toutes les précautions dont on se sert, ces sortes de frauds & ces déguisemens ont rarement le succés que l’on espere. J’en proposerai quelques exemples; le premier sera pour les contrats de vente que le pere fait de son bien à son fils. On a mû plusieurs fois la question, si ces contrats pouvoient subsister au préjudice des autres enfans & des creanciers du pere? Ces actes sont toûjours fort suspects, & c’est pourquoi du Moulin en ses Notes sur l’art. 124. de l’ancienne Coûtume de Paris, a écrit…Pour donner force à ces contrats, & éfacer les présomptions d’un avantage indirect qui en naissent naturellement, il faut justifier d’un veritable emploi qui ait été fait des deniers, soit en paiement de dettes legitimes ou en achat d’autres heritages; il est encore necessaire que la chose soit venduë a son juste prix, & quand ces circonstances s’y rencontrent, ces contrats peuvent valoir comme s’ils avoient été faits avec un étranger. Un fils ayant pris de son père un heritage à fief ou bail à rente sur le contredit qui lui fut formé par ses autres frères, la Cour ordonna qu’avant de faire droit l’héritage seroit estimé et étant demeuré constant qu’il n’y avait point de fraude, le contrat fut confirmé. Si néanmoins le père par une telle vente avoit diminué la valeur du reste de son bien ou qu’elle ne pût subsister sans faire préjudice et incommoder les partages qu’il faudroit faire du surplus en ce cas ce dessein frauduleux ne pourroit être approuvé.”

[People have sought in a variety of ways to avoid the ambit of this article but to little avail for the child whom they wished to favour. Notwithstanding all the care taken these sorts of fraud and these disguises rarely have the success that one hopes for. I give some examples of them: the first will be for contracts of sale that the father makes of his property to his son. One has encountered several times the question, should these contracts subsist to the prejudice of the other children and creditors of the father? Such transactions are always exceedingly suspect and this is why du Moulin in his Notes on art 124 has written on the ancienne Coûtume de Paris … to give force to these contracts and overcome the presumption of indirect advantage which arise naturally from them one must justify the bona fide employment of money or in purchase of other land; it remains necessary that the thing be sold at its fair price but when these circumstances come together such contracts may be regarded as valid as if they had been made between strangers. In a case where a son had purchased land from his father, on the claim made against him by his other brothers, the Court ordered that before making its decision the land would be valued and having ascertained that there had been no fraud at all the contract was confirmed. If however, the father by such a consideration had diminished the value of the rest of his estate or that the transaction could not be sustained without prejudice to the partages to be made of the surplus; in such a case the fraudulent plan could not be approved.]

23  Modern authority on rapport à la masse is scarce but the principle was considered in Amy v Amy^[29] where the plaintiff requested that shares which had been given to her brother during their father’s lifetime be returned to the estate in order for a redistribution to be effected upon the father’s death. The main argument was not whether the shares should be brought back into the estate, which was accepted, but rather, at what time should the value of the shares be ascertained. The court followed the customary law as stated by Le Gros and ordered that the shares be accounted for at the value at the time of transfer.

24  The decision in Amy is also important because it appears to suggest that the fruits of a gift are not amenable to being brought back and this would presumably include any interest received (or unpaid) on monies gifted, or dividends received subsequent to a gift of shares. In this respect, there is a certain amount of support from Basnage, who discusses the position and cites d’Argentré on the Coûtume de Bretagne before observing “Les fruits donc ne sont point sujets a raport …”^[30] However, the position (and the principles underlying such a contention) appear not to be clear cut as his discourse continues.

25  The principle was also considered in Channing v Harrison^[31]where a husband’s interest in a joint bank account, which his widow received by right of survivorship was, it was suggested by the Royal Court, a voidable gift, if contested by the husband’s children.

26  In general, however, the principle does not operate if the heir who has received the avance renounces his right otherwise to participate in the succession, but there are certain limits to the exercise of such a right: see Le Cornu v Falle.^[32]

Putting property into trust & the Trusts (Jersey) Law 1984

27  So much for gifts direct to a child. What if property, rather than given directly, is instead put into a trust in order to benefit one child, or children and not the others? In Robertson v Lazard Trust^[33] the point was raised but unfortunately not further addressed because the action was struck out as being outside the year and a day prescription period. Nevertheless, the claim clearly appeared arguable and was there described as potentially constituting a “testamentary disposition cloaked as a gift.”

28  More recently, in Best v Caprea Trustees Ltd,^[34]a similar argument was advanced and sought to impugn inter vivos transfers into trusts established for the benefit of certain of the testator’s children but that did not include the plaintiff as a beneficiary. At the discovery stage of this case (where we find the last reported decision) the Royal Court clearly found the plaintiff’s case to be arguable as it directed the trustees to give disclosure of documents showing both the gifts of the testator into the trusts concerned and also distributions out for the benefit of the testator’s children (and also their own offspring.) The Royal Court confirmed the plaintiff’s argument that both payments in and out of the trusts were potentially relevant to the issues raised in that case and in establishing the design and effect of the trusts which avoided the plaintiff’s légitime.

29  Given the desire to bolster Jersey trusts from attack, the Trusts (Jersey) Law 1984 was amended in 2006 (albeit taking effect in 2007). Article 9(3) now provides that the Jersey law relating to légitime and “conflicts of law” shall not apply to any question concerning the trust unless the settlor is domiciled in Jersey. Taken together with art 9(2)(b) (which protects trusts inter alia from being attacked by virtue of foreign heirship laws) settlors from outside Jersey now enjoy far greater security in carrying out their wishes than hitherto was the case. Nevertheless, the légitime rules still apply to settlors domiciled in Jersey.

Changing to immovable property

30  As already has been stated, there are no restrictions on the succession of immovable property in Jersey (subject to the rights of the surviving spouse) so this can be left by will as the testator wishes. In addition, if a testator wishes to avoid the légitime rules, he can always, prior to death, ensure that his wealth is held in immovable property rather than movable. It is difficult to see how there could be any legitimate objection to this course of action given that the property has not been alienated in any way. However, it should be noted that it is not possible to have a trust of immoveable property situated in Jersey^[35] so if it is desired to place immoveable property into trust, this needs to be done by transferring ownership of the property to a company, with the shares being held by the trust.^[36]

How do the forced heirship provisions in Jersey differ from the statutory provisions in England?

31  In England, if following a death it appears that inadequate financial provision has been made for a spouse or a dependant of the deceased, whether by way of will or on intestacy, it is open to that person to apply under the Inheritance Act^[37] for periodical payments, a lump sum, a transfer of property, a settlement or variation of a settlement from the estate of the deceased. In England claims can be made not only by a spouse of the deceased, but also by a former spouse or civil partner, a child of the deceased, including a child of the family, a partner living with the deceased as husband and wife during the two years prior to the death, and any other person being maintained, either fully or partially, by the deceased immediately before death.^[38]

32  As can be seen, this group of potential claimants is significantly larger than in Jersey. In addition, all the deceased’s property is taken into account in respect of any claim, both immovable and movable property, or real or personal property. As well as the pool of potential claimants being larger than in Jersey, under the English law there is also specific provision to prevent a testator alienating property up to six years before death, in order to defeat a claim.^[39]

Conclusion and potential reform

33  The significance of forced heirship to Jersey trusts is perhaps of less concern now, since the 2006 amendments to the Trusts (Jersey) Law 1984^[40] were effected. Nevertheless, the recent case of Best^[41] demonstrates that there are still issues that remain to be resolved in respect of dispositions into a Jersey trust and where these thwart rights of légitime.

34  More generally, a comparison of forced heirship provisions in Jersey with the English position reveals that the Jersey provisions are actually not nearly so restrictive as might first appear and are not impossible to avoid. In fact, in certain respects the rules in Jersey are less restrictive than those created for the protection of families under the Inheritance Act.

35  At the time of writing, however, it should be noted that there is potential change lurking on the horizon in Jersey and that later this year the States of Jersey are expected to debate the Inheritance (Legitimacy and Provision for Family and Dependants) (Jersey) Law 200–. If passed, this Law will abolish existing légitime rules.^[42] In addition, and allied to this draft Law, a consultation paper has recently been issued that will further consider various reforms to Jersey’s Trusts Law. In a jurisdiction where the customary law principle of forced inheritance has prevailed for centuries, the potential abolition of légitime is bound to generate mixed feelings as the old French and Norman texts drift further into obscurity and Jersey’s law moves ever closer to English legal thinking.

Timothy Hanson is a barrister, Jersey advocate and partner in Hanson Renouf. Barbara Corbett is an English solicitor and Hanson Renouf’s head of family law. (www.hansonrenouf.com)