Reception of Foreign Law Institutions by the Russian Law as Exemplified by Establishment of the Inheritance Fund Institution in 2018

In its developmental stage the law is affected by historical, cultural, social and other factors, which can be both domestic and foreign. The fact that the Russian Civil Law is relatively young, if compared to the foreign legal experience matured over the centuries, somehow explains the strong influence of the foreign law on the Russian legislation, including entrenchment of many foreign legal patterns.

The sequestration institution, which is one of the institutions of the Russian Civil Law, was borrowed from the French Law. The terms of the sequestration agreement (agreement on custody of a disputable item) stipulate that the both parties shall transfer the item to the third party for custody, unless the dispute is resolved. The agency services institution emerged in the Russian Law under the influence of the English Law (Common Law), which facilitated introduction of the jury trial into the Russian legal procedure, which is now the institution of the judicial system. Legislative recognition of the presumption of innocence in the Constitution of the Russian Federation drew together the ideas of freedom and justice in the Russian and Common Law. Another example of direct borrowing of provisions of the Anglo-American Law is the institution to be introduced in the Russian Law in 2018.

In late July 2017 Russian President Vladimir Putin signed a Decree “On Amendments to the Part 1, 2 and 3 of the Civil Code of the Russian Federation” with regard to establishment of a new institution in the Inheritance Law, the Inheritance Law Institution.

What is the Inheritance Fund in the sense of the Law?

The Inheritance Fund is a fund established in pursuance of the citizen’s testament and on the basis of his/her property, which manages his/her property acquired in the order of succession in accordance with the fund management terms and in the manner stipulated in the Civil Code. Therefore, after the death the entire inheritable property of the owner is accumulated in the new legal institution, which is a way of management of the mass of the succession.

What should the individual do in order to establish the inheritance fund after his/her death?

The inheritance fund is established by the notary public, if the citizen has mentioned it in his/her testament. It is not enough to make a note on establishment of such fund in the testament. If the testament stipulates for the establishment of the fund, it shall contain the testator’s decision on establishment of the inheritance fund, the fund’s charter, terms of the fund management. The terms of management, in its turn, should contain the provisions on transfer of all property or part thereof to the third parties, the procedure, the date or the periods of transfer of the property, the type and the size of the property.

What is the process of establishment of the fund after the citizen’s death?

The notary public should send an application containing the information on the fund’s manager to the authorized body within 3 business days from the date of the inheritance case. When the fund is being established, the notary public shall give him/her a certificate of inheritance. Failing to do so, the fund is established according to the court’s judgment and shall be entitled to appeal the notary public’s activity.

What will be the rights of the beneficiaries of the inheritance fund?

The beneficiaries are entitled to purchase the property or part thereof in accordance with the terms of the fund management. The rights are inalienable. This being the case, the beneficiaries are not liable for the obligations of the inheritance fund and vice versa. This will ensure safety of the assets in the future.

Where does this institution come from and why is it necessary to introduce it?

Overseas, in particular in the UK, the USA and other countries of the Common Law system this institution is called trust.

It is interesting that the trusts initially appeared in the Middle Ages, when the crusaders left their property with their relatives, so that they could dispose it for the benefit of the spouses and kids.

The trust or trust ownership is a special type of ownership, when the trustor transfers the property to the trustee for management thereof for the benefit of the third party or beneficiary. Establishment of the trust helps to secure the property from the creditors’ claims, as well as to decrease the tax burden in some cases. Vesting the assets in the professional management increases the possibility of their effective use.

Russian Civil Law is familiar with this institution. The trust was introduced in 1993 by the Presidential Decree No. 2296 as of December 24, 1993 “On Trusts”. As the Decree says the trust is introduced to improve the economic management during the economic reforms and to facilitate institutional transformations in the Russian Federation. Later on the Decree ceased to be effective in view of enactment of Part 2 of the Civil Code in 1996, which contained an article dedicated to the property management. The difference between the trust in the Common Law and the trust institution in the Russian law is that the founder of the trust ceases to be the owner of the property transferred to the trustee, but the trustor under the trust management agreement still remains the owner of the transferred property.

Moreover, trust relations can be established on the basis of testament. The trust being more confidential in its nature can be an alternative to the testament, for testament execution purposes.

It is hard to say to what extent the inheritance fund institution can be applicable in the Russian legal practice. The goals, for which the Inheritance Fund is being established, currently can be achieved by making a testament or entering into a trust management agreement. Among the drawbacks of the Inheritance Fund one can single out the trustee’s abuse of powers or incompetence, as well as the narrow circle of people, who might be interested in such fund (in particular, in the Russian Federation). On the other hand, the property transferred to the fund will be managed professionally, which will allow to preserve it, or probably enlarge, and the successors will be provided an adequate support.

Therefore, the law of each state is not an isolated phenomenon; the legal systems interact with each other. In particular, the Russian law should not stand still and should become wider both with the help of domestic legal experience and certain European legal structures, which have proved to be effective in practical area and applicable in other countries. But the adoption should not be of a thoughtless and chaotic nature, but given an individuality of the domestic legal regulation, keeping it in one’s mind that Russian legal culture, legal mentality and legal traditions differ from the west European ones.

Vlada Shafirova

Onboarding Specialist

Corporate Services

Korpus Prava (Cyprus)

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