Distribution of assets sometimes leads to disputes between heirs and cause undesirable consequences. In this respect, many people prefer to decide how their estate will be distributed by making testamentary dispositions while they are still alive. Hence, in order to eliminate possible conflicts between heirs or for other reasons, individuals may choose to plan their estate prior to their death, based on personal wishes. Today, more people than ever prioritize estate planning.
In this second article of the Turkish Law of Inheritance Series, we will examine some critical legal concepts regarding estate planning.
What Are Testamentary Dispositions?
Testamentary dispositions are legal transactions that comprise the wishes of legators that will have consequences after the death of the legator. They can be made in two different forms: wills and testamentary contracts.
What Is a Will and How Is It Drawn Up?
A will is a written document or a verbal statement that contains the last wishes and requests of the person [legator] and the principles of inheritance distribution. Wills are unilateral testamentary dispositions made with a declaration only.
A will can be made in the form of a public deed, in handwritten form or orally. The validity of a public deed depends on its notarization. On the other hand, drafting a will in the form of a public deed is not mandatory; a person can also write their will on a piece of paper or on another medium such as a notebook with their own handwriting. Also, a person can make a will through oral testament in specific extraordinary circumstances.
What Is a Testamentary Contract and How Is It Drawn Up?
A testamentary contract is a contract a person signs in vivo [while they are alive] to enter into force after their death. Testamentary contracts can either be positive or negative. In a positive testamentary contract, a legator is obliged to leave their inheritance or a certain property to the other party or a third party.
In negative testamentary contracts, a right of inheritance is abolished by the legator, and the heir partly or completely renounces their right of inheritance. Thus, they are also sometimes called “inheritance waiver agreements”.
What are the Differences Between a Testamentary Contract and a Will? What are the Advantages and Disadvantages?
Since a will is drawn up with the unilateral decision of the legator, a person can always withdraw it until their death. On the other hand, a testamentary contract cannot be unilaterally withdrawn except for specific cases since a testamentary contract is a bilateral legal transaction.
While a testamentary contract is more difficulty to revert, since the heir is also a party to the transaction and their will is also manifested in the contract, testamentary contracts minimize possible conflicts that may arise following the opening of the succession. Unlike a will prepared solely by the legator, it is much more difficult for an heir to oppose a disposition they personally participated in and approved.
Moreover, it can be easily said that the testamentary contracts are safer in terms of formal requirements. Indeed, a testamentary contract must be made in the form of a public deed. The probability of loss, falsification of this disposition made with the participation of an official authority [notary] is very unlikely.
I. Is It Possible to Make a Contingent Will?
The legator may impose conditions for the testamentary disposition to come into effect or for the reversal of dispositions that had already come into effect. Such contingent dispositions are valid unless they are against the law or immoral.
II. Is it Possible to Withdraw a Will/Testamentary Contract?
It is possible to withdraw both a will and a testamentary contract. A will is a unilateral instrument, which enables the legator to renounce it at any time. This renunciation may be made in the form of a testamentary disposition made later [a new will or testamentary contract], by destroying the will or by making a disposition inter vivos on the object of the testamentary disposition conflicting with the will.
On the other hand, unilateral renunciation of a testamentary contract is not possible, except for extraordinary cases. A testamentary contract, like any contract, can always be terminated through mutual agreement of the parties. Also, according to the Turkish Civil Code, [i.] if one of the possible reasons for disinheritance is present or [ii.] if a consideration [quittance] has been stipulated in the contract but was not fulfilled, a legator has the right to withdraw from the contract unilaterally.
III. Can the Legator Designate a Person to Whom the Inheritance Will Pass After the First Heir?
When the legator is designating a beneficiary or a testamentary heir, they may also want to determine the person or persons the relevant portion of the inheritance will succeed to after the designated person. In this respect, the possibility of designation of a reversionary heir is foreseen in Turkish law.
The legator may make a disposition to pass the inheritance first to the prior heir and then to the revisionary heir through the determination of a prior and a revisionary heir. However, it is not possible to make a disposition regarding whom the inheritance will pass to after the revisionary heir.
IV. Can the Legator Determine How the Assets Will Be Distributed Without Making a Testamentary Disposition on Inheritance Shares?
A legator can make a testamentary disposition regarding the percentage and the method of distribution as well as make arrangements about which property/right will be given to whom. For example, if a legator wrote "I am passing my summer house in Bodrum to my daughter Ayşe" in their will, in principle, this statement is not interpreted as if the summer house is passed down to his daughter in addition to her statutory inheritance share; but as a method of distribution which means the assets will be distributed in a way the summer house will pass to the daughter as a part of her inheritance share.
Such distribution rules set in testamentary dispositions prove to be very beneficial in terms of protecting assets and minimizing conflicts that may arise in the distribution process since in cases where an agreement cannot be reached in regard to non- monetary assets such as a car, a home etc., are sold and the distribution is made in terms of money generated from the sale of the asset.
V. Is it Possible to Draw Up an Estate Plan Covering Several Generations?
As Turkish law allows only one degree of successive heirdom, it is impossible to appoint multiple revisionary heirs covering more than one generation. Even family foundations, which are permitted by the Turkish Civil Code, cannot be designated as a revisionary heir in this way
Therefore, a legator who wants to draw up an estate plan covering several generations, could expand the possibilities in terms of estate planning through transactions in vivo such as arranging a "Family Constitution", in addition to designating prior and revisionary heirs.
VI. What is a Family Constitution?
A family constitution is a set of rules that define and regulate relationships family members have established and will establish with each other and with the family business. Family constitutions, which are frequently adopted in companies publicly known as family businesses, mostly determine the principles and procedures of the influence of the family on the management of the company. Family constitutions are binding like any atypical/innominate contract, as they are not specifically regulated in the Turkish Code of Obligations.
VII. What Role Can Family Constitutions Play in Estate Planning?
Family constitutions play an important role in estate planning, while also contributing to the sustainability of family businesses.
In a family constitution, founders and majority shareholders of family companies can make dispositions on many issues that are out of scope for testamentary dispositions. Therefore, continuity of the family company and the family assets is ensured for a long term.
By M. Tarik Gueryuz, Partner, and Aziz Can Cengiz, Junior Attorney, Guleryuz & Partners