Abstract
This article examines a recent District Court decision in which the Court was called upon to determine whether assets transferred via trust declarations during the lifetime of the deceased should be excluded from the deceased’s estate for the purposes of inheritance under the Wills and Succession Law, Cap. 195. The case, successfully handled by our firm, reinforces the legal distinction between inter vivos dispositions and testamentary or intestate succession, and affirms the enforceability of properly constituted trusts under Cypriot law.
Introduction
The use of trusts in Cypriot succession planning has become increasingly prevalent, especially in scenarios where a settlor seeks to make irrevocable arrangements for the disposition of property during their lifetime. A recurring legal issue is whether such arrangements can shield specific assets from inheritance claims brought by statutory heirs. The recent case under review contributes significantly to the clarity of this issue under domestic law.
Factual Background
The deceased, an unmarried individual without children, executed two declarations of trust during her lifetime, one relating to immovable property and the other to movable property. These trusts expressly designated a beneficiary and provided for the transfer of legal and beneficial title. Following her death, certain relatives instituted legal proceedings, claiming that these assets should be included in the estate and subjected to distribution under Cap. 195, specifically invoking their entitlement to a forced share under section 41.
The primary argument advanced by the plaintiffs was that, notwithstanding the trust declarations, the fact that certain assets remained registered in the name of the deceased at the time of death was sufficient to include them within the estate for inheritance purposes.
Legal Framework
Under section 21 of the Wills and Succession Law (Cap. 195), the estate of a deceased person includes the property that was legally vested in them at the time of death. Section 41 further restricts the testator’s freedom of disposition, reserving mandatory portions of the estate to close relatives (such as spouses, parents, and descendants).
Conversely, under the Immovable Property (Tenure, Registration and Valuation) Law (Cap. 224), section 65IE provides that a declaration of trust concerning immovable property must be executed in writing and signed by the settlor. Though registration with the Land Registry is not required for validity, it is often used for evidentiary and protective purposes.
The Court’s Analysis
The Court rejected the plaintiffs’ claim and held that the trust declarations constituted valid and enforceable inter vivos dispositions. It emphasized the following findings:
- The trusts had been created in accordance with the formal requirements of Cap. 224.
- The deceased’s intention to transfer beneficial ownership during her lifetime was clearly expressed.
- Legal title, while remaining nominally with the deceased in some cases, was no longer determinative of beneficial ownership.
Importantly, the Court clarified that property subject to a valid inter vivos trust does not form part of the estate as defined under Cap. 195 and is therefore not subject to forced heirship rules. The Court followed existing jurisprudence which distinguishes between ownership in law and ownership in equity, and reaffirmed that trusts constitute binding legal arrangements capable of overriding subsequent inheritance claims, provided they are not a sham or fraudulent conveyance.
Implications
The judgment has several notable implications:
- Recognition of the trust mechanism as a legitimate and enforceable structure for lifetime wealth transfer in Cyprus.
- Clarification of the estate’s composition under Cap. 195, excluding trust property from succession disputes where the trust is lawfully constituted.
- Affirmation of the settlor’s autonomy, subject to the caveat that the transfer must occur during lifetime with sufficient certainty and intention.
The case offers valuable guidance to practitioners involved in estate planning and litigation, particularly in matters where familial expectations may conflict with the deceased’s expressed intentions.
Conclusion
This decision strengthens the legal foundation for the use of inter vivos trusts in Cyprus, particularly in the context of estate exclusion and succession planning. It serves as a reminder of the importance of clarity, formal validity, and timely implementation of trust structures in order to safeguard the settlor’s intentions and mitigate the risk of future litigation.
The matter was successfully litigated by our firm, and the ruling contributed meaningfully to the consistency and predictability of trust-related succession disputes in Cyprus.