How is property inherited in the UK?
In England and Wales, when someone dies their property passes to their personal representatives (PRs). They have power to hold and deal with the estate, until they have finished its administration and transfer the assets to the beneficiaries.
In the case of minors (children under 18), inherited property will be held on trust for them until they turn 18. This is because, minors cannot give a valid receipt for any type of property, nor hold legal title to land.
How may the position differ in other countries?
The rules relating to property inheritance often differ in other jurisdictions. For example, ownership of property may pass directly to the heirs, rather than to a personal representative.
In many civil law countries, where an heir is a minor, the child may hold legal title to property, though a parent or other adult will be appointed by a court to deal with such property on their behalf.
What happens when a minor in this country inherits property abroad?
Issues may arise if a minor in this country inherits property overseas. There are currently no legislative rules to deal with such a situation, and a foreign court may decline jurisdiction to make an order appointing someone able to deal with the property on behalf of a minor resident in the UK. [However, two recent cases in the Family Court suggest that there is a way to resolve the problem].
In Re AC (a child)  EWFC 90, a minor who was domiciled in the UK inherited a share of an Italian property. The mother made an application for an order under Section 3 of the Children Act 1989 to accept the inheritance on the child's behalf with the intention of selling and investing the proceeds for the child. The judge considered both Italian and English law, including an earlier English case where the court was not satisfied that parental responsibility under section 3 extended to a disposal of property. He approved the Order allowing the mother to act in the child's best interests and inherit the share of the property on the child's behalf.
More recently, in Re B (a child)  EWFC 7, the same judge was asked to consider whether a mother could inherit the shares of a French property and enter into a contract to sell the property on the child's behalf. Building on Re AC, the judge held that the definition of parental responsibility in the Children Act included the administration, conservation or disposal of the child's property as long as it was in their best interests, and considered the factors that would be relevant in making a decision.
Is a court order required?
The Children Act does not require a court order for powers under section 3 to be exercised. However, while obtaining one may not be a necessity in this country, a notary in the foreign jurisdiction is very likely to expect a court order before title to the property is transferred.
Furthermore, applying for and receiving an order to sell or otherwise deal with property on the child's behalf would assist the parent if any challenge were made in future in respect of how they had dealt with the property on the child's behalf, for example, by the child on reaching their majority.
To summarise, while it is not a legal requirement to do so under English law, it is advisable for a parent, or other adult with parental responsibility, to apply for a court order for permission to inherit and sell a minor's share in overseas property on their behalf. Without such an order, the adult may leave themselves open to arguments as to whether they have acted in the child's best interests.
Until recently, there was little case law in this area. However, as families lead increasingly international lives, and may have property in more than one country, it is likely to become increasingly common for minor children to inherit property overseas.
If you have any questions regarding an inheritance of property overseas, whether by a minor child or an adult, please contact Monika Byrska or another member of our Trusts and Estates Disputes team.