Planning for the distribution of assets after passing is a crucial step in ensuring loved ones are taken care of and in avoiding situations potentially leading to disputes and complications for heirs. Therefore, understanding succession rules is essential for anyone considering residency in another country.
In Portugal, inheritance laws dictate that certain family members, known as “compulsory heirs”, are entitled to a minimum percentage of the deceased’s estate that may vary according to the number of heirs. Compulsory heirs include spouses, children, grandchildren, parents, and grandparents. In the absence of compulsory heirs, the estate goes to the deceased’s other legitime heirs (successors) following a predetermined order.
Under EU regulation, the law of the deceased’s last place of habitual residence will govern succession, unless a will has been drafted declaring that the testator wishes the country of origin’s law to apply. This means that without a Portuguese will stating these wishes, Portuguese law will apply to the deceased’s estate, regardless of nationality or former country of residence, leading to, for example, a surviving spouse not receiving the entirety of the estate if there are children involved.
Therefore, to ensure the division of the assets according to the testator’s wishes a Portuguese will must be drafted. This not only streamlines the estate administration process but also provides clarity and peace of mind to beneficiaries.
Furthermore, estate planning involves considerations beyond asset distribution. Portugal does not have a conventional ‘inheritance tax’, but it does impose a 10% stamp duty on assets located in Portugal and transferred upon death. While this tax does not apply to spouses, children and grandchildren, and parents, careful planning is necessary to minimize tax implications.
Individuals relocating to Portugal should additionally review their existing estate planning arrangements in their country of origin. For example, trusts and fiduciary structures are uncommon in Portugal and need thorough examination and consideration from a Portuguese tax and legal perspective to ensure compliance and effectiveness.
For further information or assistance, feel free to reach out to us at geral@sbpslegal.com.