by Anatol Dutta
1. Concept, function and origin
Subsequent succession is notably a concept of civilian succession law known, for example, as fideicommissarische Substitution in Austria, as substitution or libéralité graduelle ou résiduelle in France, or as Vor- und Nacherbschaft in Germany and Switzerland. The tool of subsequent succession allows the testator to appoint a subsequent heir who is to obtain the estate at a certain point in time, or on the occurrence of a certain event, after a first heir has already inherited the estate from the testator. Subsequent succession is to be differentiated from substitutional succession; most succession laws allow the testator to designate a substitutional heir for cases in which the actually designated heir is not able to inherit the estate, eg because he or she predeceased the testator.
The function of subsequent succession is, first and foremost, to perpetuate the estate beyond the first generation of heirs. Almost every legal system familiar with the concept of subsequent succession limits the first heir’s power to dispose of the estate (see 4. below). Hence, in the ideal case, the substance of the estate remains untouched in the hands of the first heir so that it can later be transferred to the subsequent heir. Taking this function into account, subsequent succession has to be distinguished from other—past and present—legal institutions also enabling the testator to perpetuate assets post mortem. This particularly concerns foundations and testamentary execution, but also the German Familienfideikommiss, the common law entail or inter vivos and testamentary trusts, or the Italian atto di destinazione. By establishing a Familienfideikommiss—an institution which was abolished during the first half of the 20th century in Germany—the settlor created a special fund by means of a transaction inter vivos or a testamentary disposition which was subject to a special succession order and which could not be disposed of by the beneficiaries or third parties. With comparable effects, the common law entail allowed a person to reduce the estate for following generations to an entailed interest. Perpetuities of assets similar to those of the civilian subsequent succession can today also be achieved by transferring the estate to a foundation or a trustee, or by providing for a permanent testamentary execution. By an atto di destinazione the owner can separate certain parts of his property (especially immovables) and subject them to a certain purpose (Art 2645ter Codice civile).
The civilian subsequent succession has its historical roots in the Roman universal fideicommissory substitution (fideicommissum). In Roman law, the testator could impose the obligation on the heir (heres fiduciarius) to transfer the estate to a third person at a certain point in time or on the occurrence of a certain event. This arrangement was put into effect by an—initially non-binding, later binding—request of the testator. After the estate was transferred by the heir to the third person, the third person ex lege succeeded into the heir’s position with regard to inheritance rights against third parties and liabilities of the estate. Also in the ius commune the fideicommissory substitution continued to be constructed as a legacy, not as a true heirship of the subsequent heir, though secured by a prohibition to transfer the estate that was directed against the first heir. It was not until the Allgemeines Landrecht für die preußischen Staaten and the Austrian Allgemeines Bürgerliches Gesetzbuch that the fideicommissory substitution was ‘rationalized’ (Theodor Kipp, Helmut Coing) and the subsequent heir was made a genuine heir of the testator.
2. Limitations on subsequent succession
Subsequent succession is subject to the general restrictions on the freedom of testation, especially the limitations created by the rules on forced heirship or equivalent institutions (see § 2306 Bürgerliches Gesetzbuch (BGB); Art 1054(1) French Code civil; Art 782 Spanish Código civil, see also compulsory portion), and the limits of public policy (see invalidity). Additionally, subsequent succession is in most jurisdictions restricted by special limits in order to avoid an undesirable perpetuity of assets. The testator is not supposed to bind assets over several generations by appointing an infinite series of subsequent heirs. The scepticism towards unlimited perpetuities has, on the one hand, a political dimension: private law should not foster a concentration of economic power in one hand; therefore, it is not surprising that especially in times of revolution limitations on subsequent succession were particularly fashionable. On the other hand, the economic consequences of assets being entailed by subsequent succession might be harmful, considering that, for instance, the most efficient use of the assets on the part of the heirs can be foreclosed. Furthermore, the rule of the ‘dead hand’—which is facilitated by institutions such as subsequent succession—traditionally contradicts libertarian views.
The most severe limitation on subsequent successions is certainly its total prohibition—a solution which, however, has lost popularity amongst the legal systems. In the egalitarian spirit of the French Revolution, the French Code civil did not only weaken the perpetuity of assets by means of testamentary execution but, more importantly, the original version of Art 896 Code civil, in principle, prohibited subsequent succession entirely (‘Les substitutions sont prohibées’). Only exceptionally was subsequent succession recognized. Such a sceptical approach can still be found in other legal systems, particular those influenced by the traditional Code civil (eg Arts 896 ff, 1048 ff Belgian and Luxembourg Code civil; Art 21(2) Bulgarian Succession Act; § 645 Hungarian Civil Code; Art 692 Codice civile; Art 79(3) Slovenian Succession Act). Current French inheritance law, however, has abandoned its traditional restrictive position. A disposition by the testator obliging the beneficiary of a gift to preserve the gift in order to transfer it later to a third person is recognized if permitted by law (Art 896 Code civil). Provisions widely allowing subsequent succession can now be found in Arts 1048 ff Code civil in its new version.
Most legal systems limit subsequent succession by means of temporal restrictions. Dutch and German law, for example, both provide that the testator may only entail assets by subsequent succession for a period of up to 30 years (Art 4:140(1) Burgerlijk Wetboek (BW); § 2109 (1)1 BGB). Under German law the binding effect of subsequent succession may be extended in two situations: if the event triggering the subsequent succession is an event occurring in the person of the first or the subsequent heir and, in addition, the first or subsequent heir concerned was already born at the time when the first heir inherited (§ 2109(1)2 no 1 BGB) or, alternatively, if, in case a sibling of the first or subsequent heir is born, the testator appoints that sibling as (another) subsequent heir (§ 2109(1)2 no 2 BGB). A similar limiting effect is brought about by the so-called rule against perpetuities in the common law which invalidates future interests unless they ‘vest, if at all, not later than 21 years after some life in being at the creation of the interest’ (John Chipman Gray)—a rather complicated rule which has come under pressure not only in the United States but also in the European common law jurisdictions. In the United Kingdom the rule against perpetuities was recently replaced by a statutory time period of 125 years (s 5(1) Perpetuities and Accumulations Act 2009); Ireland has abolished the rule in toto (s 16 Land and Conveyancing Law Reform Act 2009). Comparable time limits (lifetime of the beneficiary, or 90 years) can be found in Art 2645ter s 2 Codice civile for the atto di destinazione. Other legal systems create temporal limits by restricting the number of subsequent heirs. In Austria, for instance, the appointment of subsequent heirs, who were not born at the time when the testator died (§ 611 ABGB), is limited to two subsequent heirs for movable assets (see § 612 s 1 ABGB; see also Arts 781, 785 Spanish Código civil) and to only one subsequent heir for immovable assets (§ 612 s 2 ABGB). In other legal systems, the testator can, in general, only appoint one subsequent heir (Art 1923(2) Greek Civil Code; Art 486(2) Latvian Civil Code; Art 2288 Portuguese Código civil; Art 488(2) Swiss Civil Code (ZGB); see also Art 1053(1) Code civil).
3. Establishing subsequent succession
Subsequent succession is regularly established by a testamentary disposition. In France, however, the subsequent succession may also be established inter vivos; provisions regarding subsequent succession (Arts 1048 ff Code civil) refer to all gifts (libéralités). Both the donataire and the légataire can as a ‘first heir’ be burdened with a ‘subsequent heir’ (second gratifié).
According to the general principles of interpretation for testamentary dispositions (wills), subsequent succession may not only be established explicitly but also implicitly. Only Spanish law apparently requires an explicit disposition (Art 783(1) Código civil). Additionally, in some legal systems statutory presumptions for or against subsequent succession can be found. German law, for instance, determines that, in cases of doubt, substitutional (see 1. above) rather than subsequent succession has been ordered (§ 2102(2) BGB). Also, a disposition in a joint will, by means of which the spouses reciprocally appoint each other as their heirs and, furthermore, provide that after the death of the surviving spouse the entire estate has to go to a third person, is not presumed to establish subsequent succession. Rather it is supposed that the surviving spouse is to become a full heir (see § 2269(1) BGB). Austrian law also presumes that, in case of doubt, a limitation of the heir by means of subsequent succession was not intended by the testator (see § 614 ABGB).
On the other hand, German law—keeping in mind the roots of subsequent succession in Roman law and the ius commune (see 1. above)—assumes an intention of the testator to establish a regime of subsequent succession if the testator provides in his will that the heir has to transfer the estate to a third person at a certain event or point in time (§ 2103 BGB). In other legal systems, the prohibition against disposing of the estate inter vivos or upon death addressed by the testator to the heir is interpreted as an implicit establishment of subsequent succession in favour of, for example, the first heir’s statutory heirs (see Arts 1927 ff Greek Civil Code; § 610 s 1 ABGB; Art 2295(1)(a) Portuguese Código civil). The testator—when establishing subsequent succession—not only has to designate the first and the subsequent heir, but also to determine when the subsequent heir is to inherit. Often statutory provisions assume that, failing a disposition by the testator, the subsequent succession is to be triggered by the first heir’s death (§ 2106(1) BGB; Art 1935(1) Greek Civil Code; Art 487(1) Latvian Civil Code; Art 489(1) Swiss Civil Code).
4. The first heir’s position
After the death of the testator, and before the subsequent heir has succeeded to the estate, the first heir administrates the estate. His status is generally characterized by three elements: (1) the limitation of his power to dispose of the estate; (2) his right to derive the benefits from the estate; and (3) his duty to administrate the estate properly. Some legal systems allow the testator to improve the first heir’s position to the detriment of the position of the subsequent heir by partly relieving him from his obligations. The first heir’s position relates to the entire estate, unless something else is provided by the testator. The estate is often secured by statutory substitutions or subrogations ordering that substitutes obtained by the first heir for an asset forming part of the estate belong to the estate (see ch 12 § 8 Finnish and Swedish Succession Act; Art 1049(2) Code civil; § 2111 BGB; Art 491 Latvian Civil Code; Art 4:138(2)1, 3:213 Burgerlijk Wetboek (BW)).
Most legal systems recognizing the concept of subsequent succession limit the first heir in his power to dispose of the estate in relation to third parties, although the first heir technically becomes owner of the estate (§§ 613, 509 ABGB; ch 12 § 4(2)1 Finnish Succession Act; Art 1937(2) Greek Civil Code; Arts 489 ff Latvian Civil Code; ch 12 § 4(1)1 Swedish Succession Act). Also under Swiss law the first heir becomes owner of the estate (Art 491(2) Swiss Civil Code); nevertheless, at least according to the prevailing opinion, he is not able to dispose of the estate. German law, in contrast, in principle allows the first heir as the owner to dispose of assets belonging to the estate (§ 2112 BGB). However, in order to preserve the estate this power is limited. Transfers of immovables as well as gifts become ineffective at the time the subsequent succession is triggered if such dispositions impair the subsequent heir’s rights (§ 2113(1) and (2) BGB). Other legal systems require an authorization of the court for dispositions of the first heir (ch 12 § 4(2)3 Finnish Succession Act; Art 694 Codice civile; Art 2291 Portuguese Código civil; ch 12 § 4(1)2 Swedish Succession Act).
Dispositions of the first heir’s creditors, notably through enforcement proceedings against the first heir, are subject to the same limitations as dispositions of the first heir himself (§ 2115 BGB; Art 695 Codice civile; Art 2292 Portuguese Código civil). According to Dutch law, which conceives subsequent succession as a conditional appointment of an heir (Art 4:138 Burgerlijk Wetboek (BW)), the first heir is the owner of the estate in relation to third parties (Art 4:138(1) BW). However, construed as a condition the subsequent succession has no retrospective effect according to general principles of Dutch law (Art 3:38(2) BW); the validity of the first heir’s dispositions is not affected when, in the case of subsequent succession, the time or event triggering subsequent succession arises. The legal position of the first heir under the new French succession law is not entirely clear. On the one hand, subsequent succession is to have effect only as far as the estate still exists in the hands of the first heir at his death (Art 1049(1) Code civil). That provision suggests a power on the part of the first heir to dispose. However, the statutory substitution of shares contained in the estate (Art 1049(2) Code civil), a duty to disclose the establishment of subsequent succession regarding immovables (Art 1049(3) Code civil) and, most notably, the possibility of a subsequent succession being limited to the residual value of the estate (Arts 1057 ff Code civil) suggest some limitation of the first heir’s power to dispose.
The relationship between the first and subsequent heir usually allocates the benefits to be derived from the estate to the first heir. The first heir is a usufructuary or is, at least, in a usufructuary-like position. Partly, the position of a usufructuary is explicitly provided by law (§ 613 ABGB; Art 693(2) Codice civile; Art 4:136, 4:138(2) BW; Art 2290(1) and (2) Portuguese Código civil). In other legal systems, the usufructuary-like position is accomplished by allocating the benefits to the first heir if taken according to a proper administration of the estate (cf ch 12 § 3(1)1 Finnish and Swedish Succession Act; §§ 2111 (1)1, 2133 BGB; Art 1941 s 1 Greek Civil Code; Art 489 s 4 Latvian Civil Code). In turn, however, the first heir generally has to bear the costs of administering the estate (ch 12 § 3(2) Finnish Succession Act; § 2124 BGB; Art 1938 Greek Civil Code; ch 12 § 3(3) Swedish Succession Act). Also according to the new French succession law, emoluments are allocated to the first heir, as is demonstrated by Art 1050(2) and (3) Code civil which allow the first heir to transfer any benefits received to the subsequent heir before the subsequent succession is triggered.
At the same time, the first heir also has fiduciary duties. The first heir has to consider the subsequent heir’s interests when administering the estate. He has to administer the estate properly (see §§ 613, 513 ABGB; ch 12 § 3(1)5 Finnish Succession Act; §§ 2119 f, 2130(1)1 BGB; Art 1937(1) Greek Civil Code; Art 492(1) Latvian Civil Code; ch 12 § 3(2), § 5 Swedish Succession Act). However, this obligation is partly mitigated by the fact that the first heir is only liable for breach of duty once the subsequent succession has been triggered (§ 2130(1)1 BGB); also, he is often only responsible for diligentia quam in suis (§ 2131 BGB; Art 1937(1) Greek Civil Code; see also Art 492(2) Latvian Civil Code).
5. The subsequent heir’s position
The first heir’s position corresponds with the subsequent heir’s expectancy to obtain the estate when the time or event triggering subsequent succession occurs. Once that has happened, the future interest of the subsequent heir vests; the subsequent heir becomes the testator’s heir ipso iure and obtains the estate. Unlike in earlier legal systems (see 1. above), the vesting of the interest does not require any transfer, although this is suggested by the wording of some statutes. The French Code civil, for instance, on the one hand provides that the first heir is obliged to transfer the estate to the subsequent heir (Art 1048). On the other hand, the subsequent heir’s rights are supposed to arise ex lege with the first heir’s death (Art 1050 Code civil) and are directly derived from the testator (Art 1051 Code civil). The subsequent heir’s expectancy is in some jurisdictions not only transferable but also inheritable (see § 2108(2)1 BGB; Art 784 s 1 Spanish Código civil; see, however, also Art 492(2) Swiss Civil Code). Once the subsequent succession has been triggered, the subsequent heir is entitled to claim the estate (§ 2130 BGB; Art 1941 s 1 Greek Civil Code; Art 489 s 2 Latvian Civil Code; Art 491(2), 492(1) Swiss Civil Code).
6. Succession tax
The entailment of assets by means of subsequent succession has its price, for some succession tax laws classify both the first succession and the subsequent succession as taxable—to some extent applying special provisions to avoid unfair results (eg § 6 German Inheritance Tax Act).
Wolfgang Siebert, ‘Nacherbe’ in Franz Schlegelberger (ed), Rechtsvergleichendes Handwörterbuch für das Zivil- und Handelsrecht des In- und Auslandes, vol V (1936) 403; John Chipman Gray, Rule Against Perpetuities (4th edn, 1942); Murad Ferid and others (eds), Internationales Erbrecht, vol I–IX, looseleaf (1955 ff); JAC Thomas, ‘Perpetuities and Fideicommissary Substitutions’ (1958) 5 Revue internationale des droits de l’antiquite—Troisième série 671; Theodor Kipp and Helmut Coing, Erbrecht (14th edn, 1990) 273; Carsten Thomas Ebenroth, Erbrecht (1992) 409; George Gretton, ‘Fideicommissary Substitutions—Scots Law in Historical and Comparative Perspective’ in Kenneth GC Reid, MJ de Waal and Reinhard Zimmermann (eds), Exploring the Law of Succession—Studies National, Historical and Comparative (2007) 156; Jens Beckert, Inherited Wealth (2008) 114 ff.