Forced heirship or freedom of disposition: which is the better system?

Those who advocate for forced heirship acknowledged the position to be largely cultural. They believe that it is right for testators to be required to provide to some extent for their dependants and especially children, and that the idea that other systems could leave them unprovided for as morally and ethically unsound. 

Two main issues were addressed:

1. Clawback – the uncertainty of the validity of a gift until the donor.
2. The risk of the fragmentation of an estate, and the perceived risk to family businesses.

It was noted that in Forced Heirship countries there are systems in place to protect businesses, such as the Italian "Patto di Famiglia", or the french ability to derogate. It was acknowledged that most of the advice given  around these systems is how to get around them – such as with the Swiss system, where one can choose the law of the state in which one is a citizen, or in Italy where one may opt for a foreign succession law. 

However, the emphasis lies with the fact that it is often underestimated how strongly culture affects feeling towards forced heirship as a system. It was argued that the system can protect the individual, but in a way that also holds intergenerational and family ties as sacrosanct, reducing competition between parties and ensuring fairness while freedom of disposition can lead to opportunistic behaviour. 

It was argued that forced heirship is a social policy which works to preserve these family ties, remind parents as to their social responsibility, and protect those most vulnerable so that they may be sufficiently protected.

When it comes to spouses, it acknowledges the weaker spouse regardless of separation – in a common law system, a spouse can be at risk of being without economic support. It also protects the children in the case of divorce or blended families – we need only look to the UK and its spouse exemption of inheritance tax, which can lead to the children of a first marriage being left with nothing.

The conversation then turned to the fact that forced heirship 'has a bad reputation'. In many jurisdictions forced heirship is not automatic, but must be triggered by an heir. If the settlor had a discretionary trust, there may not even be an incentive to trigger it in the first place. In some instances too, forced heirs can renounce their future rights for compensation through a succession agreement. 

Contentious:

It has to be admitted that, from a litigation perspective, forced heirship was seen as a great thing – for self-interest and creating lots of work!

It was also noted that often in the Anglosaxon view, many forced heirship ideas are lumped together rather than analyzed in isolation. Around the world, it is the overwhelming majority and that can't be ignored – it is viewed as the correct and appropriate system in countless countries. While some may be a little dubious or based on ideas that are hundreds of years old, it is wrong to think of the UK system as a monolith with no problems like clawback at all.

IN DEFENCE OF FREEDOM OF DISPOSITION:

Planning:

It was noted that  advice given when wealth planning in a civil law jurisdiction, a lot of time  usually goes towards trying to get around the forced heirship system as it is often viewed as a difficult and unwelcome restriction. It was also noted (rather wryly) that no client has ever asked to be moved into a forced heirship regime. 

The issues with a forced heirship system that were identified included:

• One cannot discriminate between children on a needs basis. If one child needs more support, that isn't taken into account
• It restricts philanthropy
• It can be seen as outdated or 'ossified' with a focus on nuclear families. How long can it remain credible in a changing world?
• It can be highly patriarchal in certain jurisdictions where male heirs are favoured over female, and reinforce gender disparity

While it is arguable that freedom of disposition is more open to abuse, there is a system of checks and balances which ensure that individuals are protected. These include acknowledgement of mental capacity, undue influence, matrimonial regimes, pre- and post-nups, and more. These ensure that those who are disinherited can always challenge the ruling, and avoid being set aside if it's 'unfair'. 

Freedom of disposition is arguably a more useful tool when we consider the modern family, which is often multi-generational, multi-jurisdictional and multi-marriage. Forced heirship is more of a blunt instrument.

The UK 1975 Act was referenced as a problem within the system, and one which needs to be given closer attention. 

On a more philosophical or ethical level, forced heirship was questioned on a more fundamental level – shouldn't people be entitled to control their own assets? Why do heirs have any right over their parents' money?

Contentious:

From a contentious and litigation perspective, it was argued that forced heirship is 'nothing but trouble' from a legal side. Each system is complex with a lot of uncertainty, and so plenty of time is spent having to contract out of the rules. If Firewall legislation now protect assets from forced heirship, what is the value in it anymore?

It was argued too, that rather than promote harmony and good family ties as previously argued, forced heirship can lead to serious familial divides when 'fairness' is analysed in depth. In every family there are the deserving and the less deserving, is it too 'Disney' to pretend otherwise?

It was noted, however, that while forced heirship should perhaps be avoided, entirely unrestricted testamentary freedom would not be the answer either. In the UK we don't have that, instead one must be expected to provide for those as much as one can reasonably be expected to – such as to minors, and unprotected spouses. 

It was argued that a 'fixed system' doesn't mean that there is less scope for dispute – in fact, due to the loop-holes such as settling assets behind a firewall, litigation can be more expensive and a much more difficult fight. 

This would also be a serious issue in the case of family businesses: it is not always appropriate to equally divide the assets in this case. Individuals will want to think of the good of the business, not just the good of their family. 

TO CONCLUDE?

While our contingent on the side of forced heirship may not have convinced the room, there was an interesting discussion about a system which might have the best of both, a recognition of convergence.