Forced Heirship and Offshore Trusts: How to Protect Your Testamentary Freedom

What Are Forced Heirship Rules?

Forced heirship (also known as "compulsory portion," "legitim," "réserve héréditaire," or "Pflichtteil") is a feature of civil law legal systems that reserves a fixed portion of a deceased person's estate for certain close family members — regardless of the deceased's wishes as expressed in their will.

The policy rationale is protection of the family unit: civil law jurisdictions consider it unconscionable for a parent to disinherit their children or for a spouse to disinherit their partner. The reserved portion is a right of the heir, not a gift from the deceased.

Forced heirship rules exist in:

• France: Code Civil, Articles 912-930. Children are entitled to a reserved portion (réserve): one-half of the estate if there is one child, two-thirds if there are two children, and three-quarters if there are three or more children.
• Germany: Bürgerliches Gesetzbuch (BGB), sections 2303-2338. A disinherited child is entitled to a Pflichtteil (compulsory share) equal to one-half of their statutory intestate share.
• Switzerland: Zivilgesetzbuch (ZGB), Articles 470-480. Children are entitled to three-quarters of their statutory share; the surviving spouse is entitled to one-half of their statutory share.
• Italy: Codice Civile, Articles 536-564. The reserved portion (legittima) varies depending on the number of children and whether a spouse survives.
• Spain: Código Civil, Articles 806-822. Children are entitled to two-thirds of the estate (legítima), of which one-third must be distributed equally and one-third can be allocated by the testator among the children.
• UAE (Sharia-based): Islamic succession rules apply to Muslim decedents, reserving fixed shares for specified relatives. Non-Muslim expatriates may opt for their home country's succession law under recent DIFC and ADGM legislation.
• Japan: Minpō (Civil Code), Articles 1028-1044. Children and the spouse are entitled to one-half of the estate (iryūbun).
• Saudi Arabia: Sharia-based rules allocate fixed shares to specified heirs (farā'iḍ). Testamentary freedom is limited to one-third of the estate (waṣiyyah) and cannot benefit a statutory heir.

The Conflict with Common Law Testamentary Freedom

Common law jurisdictions — England and Wales, Jersey, Guernsey, BVI, Cayman, Bermuda, Australia, Canada (common law provinces) — operate on the principle of testamentary freedom: a person may dispose of their estate by will to any person they choose, subject only to limited family provision claims (e.g., the Inheritance (Provision for Family and Dependants) Act 1975 in England).

This creates a conflict of laws when:

• A civil law domiciliary holds assets in a common law jurisdiction
• A civil law domiciliary establishes a trust governed by common law
• A person dies domiciled in a civil law jurisdiction but with assets held in an offshore trust

The question is: which law governs the succession — the forced heirship law of the domicile or the trust law of the offshore jurisdiction?

How Offshore Trusts Provide Protection

The strategy is straightforward: the client transfers assets into an irrevocable discretionary trust governed by the law of a common law jurisdiction that has enacted statutory protection against forced heirship claims. The trust holds the assets during the client's lifetime and distributes them after death according to the trust deed and letter of wishes — not according to the forced heirship rules of the client's domicile.

Statutory Firewall Provisions

Key offshore jurisdictions have enacted "firewall" legislation that expressly prevents foreign forced heirship claims from being applied to trusts governed by their law:

Jersey — Article 9, Trusts (Jersey) Law 1984

Article 9(1) provides: "A Jersey trust shall be valid and enforceable ... and no claim with respect to the trust property of such a trust ... shall be entertained if such claim is based upon ... the law of any foreign jurisdiction ... relating to ... forced heirship."

Article 9(2) provides that no rule of foreign law that relates to forced heirship rights or community property shall affect:

• The validity of the trust
• The transfer of property to the trust
• The capacity of the settlor to create the trust

This is arguably the most comprehensive forced heirship firewall in any jurisdiction.

BVI — Section 83A, Trustee Act

Section 83A provides that a BVI trust is not to be varied, set aside, or declared invalid by reason of any foreign law relating to inheritance, succession, or forced heirship.

Cayman Islands — Section 93, Trusts Law (2021 Revision)

Section 93 provides similar protection, stating that no trust governed by Cayman law shall be void or voidable by reference to the law of any foreign jurisdiction relating to forced heirship or similar provisions.

Guernsey — Section 14, Trusts (Guernsey) Law 2007

Section 14 provides that a Guernsey trust shall not be set aside or declared invalid on the grounds that any foreign law prohibits or does not recognise trusts, or by reason of any foreign forced heirship, community property, or similar rules.

Limitations and Risks

Recognition in the Forced Heirship Jurisdiction

The firewall provisions protect the trust in the offshore jurisdiction. But they cannot prevent a court in the forced heirship jurisdiction from:

• Refusing to recognise the trust
• Treating the trust assets as part of the deceased's estate for succession purposes
• Ordering the heirs to bring a claim against the deceased's estate for the value of their reserved portion

In practice, if the trust holds assets outside the forced heirship jurisdiction (i.e., there are no assets within the reach of the civil law court), enforcement of the forced heirship claim is difficult.

Clawback Risk

Some forced heirship jurisdictions have "clawback" provisions that allow disinherited heirs to recover the value of their reserved portion from gifts made during the deceased's lifetime. A transfer to a trust may be treated as a gift (or a gift in disguise) and subject to clawback:

• France: Gifts made within the deceased's lifetime are brought back into the estate for the purpose of calculating the reserved portion (rapport des libéralités). The heir can seek to recover the value from the donee (or the trust).
• Germany: The Pflichtteil heir has a claim against the estate (not against the trust directly), but if the estate is insufficient, the heir can pursue the donee (Ergänzungsanspruch) for gifts made within ten years before death.
• Switzerland: Heirs can challenge gifts made during the lifetime if they reduce the reserved portion (Herabsetzungsklage).

Timing and Solvency

The same principles that govern fraudulent transfer claims apply to forced heirship planning: the trust should be established well before the settlor's death, the settlor should retain sufficient assets to meet obligations, and the transfer should not be made with the intent to defeat a known claim.

Hague Convention

The Hague Convention on the Law Applicable to Trusts and on their Recognition (1985) requires signatory states to recognise trusts governed by the law of another signatory state. However, Article 15 of the Convention preserves the application of mandatory rules of the forum state — which may include forced heirship rules. The interaction between the Convention and domestic forced heirship law is complex and varies by jurisdiction.

Practical Structuring

Asset Location

Assets held within the forced heirship jurisdiction are vulnerable to enforcement. The most effective planning ensures that:

• Real estate in the civil law jurisdiction is held through a corporate structure owned by the trust (not held directly)
• Bank accounts are maintained in the offshore jurisdiction or in a jurisdiction that does not enforce foreign forced heirship judgments
• Investment portfolios are managed from and custodied in common law jurisdictions

Irrevocability

The trust must be irrevocable. A revocable trust does not remove assets from the settlor's estate and provides no forced heirship protection.

Timing

The earlier the trust is established, the stronger the position. A trust created decades before death is far more defensible than one created during the settlor's final illness.

Choice of Governing Law

The trust should be governed by a jurisdiction with both a statutory forced heirship firewall and a developed body of case law on trust recognition. Jersey is generally considered the strongest choice, followed by Guernsey, BVI, and Cayman.

Key Takeaways

• Forced heirship rules in civil law jurisdictions reserve a fixed portion of the estate for close family members, overriding testamentary wishes
• Offshore trusts governed by common law jurisdictions with statutory firewall provisions can protect assets from forced heirship claims
• Jersey Article 9, BVI section 83A, Cayman section 93, and Guernsey section 14 each provide comprehensive statutory protection
• The firewall protects assets within the offshore jurisdiction but cannot prevent courts in the forced heirship jurisdiction from ordering clawback or substitutional claims
• Effective planning requires early establishment, irrevocability, and ensuring that assets are held outside the forced heirship jurisdiction
• The interaction between the Hague Trusts Convention and domestic forced heirship law remains unsettled in several European jurisdictions
• Professional advice in both the offshore and the civil law jurisdiction is essential to assess the enforceability of the planning