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How to deal with Ukrainian heirs and stay out of trouble: the guide for foreign banks
Автор: Юрій Некляєв
Джерело: Lexology, 7 лютого 2019 року

Wealthy Ukrainians prefer to keep their savings in foreign banks. Switzerland, Austria, and Liechtenstein are especially popular.

Regardless of jurisdiction, there are circumstances where any bank is obliged to allow a third party to access a client's bank account or safety deposit box. This includes for example, death of the client where money in the bank account or valuables in the safety deposit box are part of an inheritance and heirs become new owners.

Ukrainian inheritance rules affect both potential heirs and foreign banks keeping inheritance property. The property can be passed on to heirs by provisions of law (intestacy) or under a will (testament).

Under intestacy laws, heirs are divided into classes (tiers). A member of each class receives an equal share of the estate. Members of the first class are children, spouse and parents of a deceased. The right to inherit passes on to the second class and so on only if there are no heirs of preceding class or if they did not accept or refused the inheritance, or where the court denied their inheritance rights.

For succession by will, the testator determines the order of succession at his own discretion. Any individual (whether related to the testator or not) and/or legal entity may inherit the property under a will.

The procedure for transferring title to an heir is the same for inheritance by law or under a will:

  1. Heir must file an application with a Ukrainian notary to accept the inheritance in person within six months from the testator's death. A court may grant an extension. 
  2. The notary prepares a list (an inventory) of probate property. The notary in charge of inheritance case is entitled to make requests to national and/or foreign authorities in order to verify the testator’s title to the property (incl. money).

In practice, some notaries make requests directly to banks. A response to such a request shall only be sent to the inquiring notary, but not the heir. Disclosing information about accounts and deposit boxes to potential heirs (for further transfer to the notary) is not advisable and may be considered as a violation of bank secrecy and rights of other heirs, who potentially may claim damages from the bank.

  1. Upon expiration of the six-month acceptance period and in the absence of formal / procedural obstacles, the notary issues an inheritance certificate to each heir indicating his or her share in the estate.

Only an inheritance certificate is the proper document authorizing an heir to claim money from a bank account or contents of a safety deposit box.

A special standard form of inheritance certificate is used for property (incl. money) located abroad. Forms 16 and 17 approved by Order No. 3253/5 of the Ministry of Justice of Ukraine. If the certificate is not of a standard form, the bank may refuse the heir access to the safety deposit box or bank account.

However, even an inheritance certificate is not always a guarantee of an heir’s undisputed entitlement to the property of the deceased. Other heirs may use certain legal instruments to change the content of the inherited property and the heir’s share. The question is how may the bank respect the rights of all legitimate heirs and avoid litigation over compensation of improperly paid funds / illegally disclosed information?

The main recommendation is that the bank should, prior to granting access to the safety deposit box or bank account (especially in the case of inheritance under a will), verify the facts, which may affect the content of the estate and the size of the shares in the inheritance, including the following:

 

1. Statutory share in the inheritance

Under Ukrainian law, the testator’s minor children (i.e. up to 18 years old), children, spouse or parents who are disabled or have reached the retirement age (60 years old), are, in any case,  entitled to ½ of the share they would receive under an intestacy if there was no will. Moreover, if the above-mentioned individuals permanently resided with the testator at the time of his death, they are deemed to have automatically consented to accept their share of inheritance, and no additional action is required for this.

Thus, if the notary fails to discover the heirs entitled to the statutory shares prior to issuing inheritance certificates to other heirs, such individuals have the right to take legal action to claim their statutory shares of money in the bank account or valuables in the safety deposit box.

 

2. Prenuptial agreement of the deceased

Under Ukrainian law, spouses may determine the status of marital property (incl. money) in a prenuptial agreement (the "prenup").

A prenup may provide that money in the husband’s bank account is private property of the wife. If so, such funds are no longer part of the husband’s estate and cannot be transferred to his heirs.

If such money is released to heirs, the wife may challenge the inheritance certificate and claim back the funds she is entitled to under the prenup.

 

3. There is no dispute with the former spouse on division of the marital property

Generally, property acquired by any spouse during the marriage is considered as marital property, unless applicable law or an agreement between the spouses (e.g., a prenup) provides otherwise. The spouses may divide their marital property in or out of court, during their marriage or after divorce. Before the division, it is still considered as their marital property. Thus, if one of the spouses opens a bank account before the divorce, his or her former spouse may claim ownership of half of the money. If the court grants such claim, this half of the money is excluded from the inheritance.

 

4. No challenge of the validity of a will

An interested person may sue to have the will invalidated. A will is not a public act, and unhappy relatives of the testator may file claims after his or her death or even after the issue of the inheritance certificate and challenge the will or the inheritance certificate or both.

If there is a court dispute, the notary must not issue the certificate until the dispute is resolved if the notary has been duly notified of the proceedings by one of the heirs or by the interested person ("claimant").

Accordingly, there is a risk that the certificate can be issued even if there is a dispute, and that the heir, to whom such certificate is issued, may lose his or her case in the court and will not be any longer entitled to inherit the money in the bank account.

Again, the above situations demonstrate that even a duly issued inheritance certificate is not always a 100% guarantee for foreign banks that other heirs will not raise any claims.

The key recommendation is that foreign banks should be prudent in their communications with potential heirs, ask for detailed background on all inheritance-related matters, and make sure that there are no third-party claims against a specific bank account. As a safety measure, a foreign bank should grant access to money and deposit boxes only after completion of all court proceedings related to the estate.