Death and Taxes: How to Overcome Certain Uncertainties in Cross-Border Succession with a Well-Drafted Will

If one’s property is dispersed between various jurisdictions, they should look after their property not only when they are alive, but also should prepare a solution for the time when they are gone. Otherwise, their family may face not only grief, but also legal and fiscal problems, even if there is no debt left behind.

J.R.R. Tolkien, to protect his family from such troubles, sold film, staging and merchandising rights to his best-selling novels:Hobbit and The Lord of the Rings. Thus, his heirs may have lost an opportunity to gain the fortune which was brought by these rights recently, but for sure they avoided huge taxation imposed by the law at that time.

It is wise to draft a plan of property division between heirs while taking into account legal matters and taxation. The two famous Franklin’s certainties meet again, and may cause much uncertainty if they arrive unexpected. A prudent person may, however, plan beforehand and decide on the future of his property.

Under Polish law, the only solution to express testator’s plan is to create a testament. The testator may appoint any chosen person to be a heir (or to deprive someone of that title). The testament may be revoked at any time by the testator, as a whole or just partially.Under EU Regulation 650/2012, Polish law is applicable in cases where Poland was the last place of habitual residence of the testator or was chosen by a Polish testator. The EU law also establishes common standards for recognition and enforcement of court’s decisions regarding succession.

Any part of ainheritance may be taxed, including material possessions and rights,no matter where they are located, as long as the heir lives in Poland. As most of double tax treaties do not provide rules on succession, there is a risk of double tax on some parts of the inheritance. Depending on the degree of relationship between testators and heirs various tax rates and tax-free allowances are applicable. Unrelated persons would face the largest costs. Therefore, cautious drafting of testament may bring lower costs and less trouble especially for the non-family members.

The real advantage of testament is putting testator’s will into effect with a much clearer legal situationof the inheritance, shortening the time of judicial proceedings and mitigating trouble for the relatives,which is particularly crucial.