In today’s age many of us find ourselves having ties to other countries, be they through a holiday home, jobs or families. Many of us however never give much thought as to which laws apply to the handling of our foreign assets, or in contentious family circumstances.

Whilst the position regarding what jurisdiction will apply in family law matters has been (somewhat) simplified, multiple jurisdictions may need to be considered when regarding the distribution of your assets on your death. Working abroad can also raise questions as to which jurisdiction applies and how your income will be taxed.

Being aware of these matters and planning in advance can help prevent unintended consequences.

Succession and Domicile

If you die without leaving a Will, how your estate will be distributed on your death depends on two factors:

  1. The Succession Laws of your Domicile

Everyone has a “domicile of origin” - normally the country you are born in. You can acquire a new “domicile of choice” from the age of 16. However, acquiring a ”domicile of choice” is difficult and based on many factors. Thus you may feel you are domiciled in Scotland, however having been born in France you may still be domiciled there.

At this point many of you may think that if you were born in the UK and have always lived in the UK then the matter of your domicile will be straightforward. However, as England & Wales and Scotland are two different jurisdictions the succession laws differ between the countries. The amounts that will pass to your spouse/civil partner and even which members of your family will automatically inherit from your estate are different. If you have lived between England & Wales and Scotland throughout your life, it may be unclear which jurisdiction applies.

  1. Where your assets are situated

Without a Will detailing where your assets are to fall, then your foreign assets could be distributed in accordance with the laws of that country and not that of your domicile. This means that items such as holiday homes may be distributed under local succession laws for that country.

Planning Ahead

Whilst estate planning in the UK can be carried out post death to redistribute assets, the best way to ensure that your assets pass as you intend them to, is to plan ahead and prepare a Will.

In the UK it is possible to prepare a Will to deal with your worldwide assets as many countries will recognise this as valid. However, to avoid against the potential of your UK Will not being recognised, it is best to seek local advice and prepare a Will in the country where your foreign asset is situated.

Also, even if you do have a Will in place, many jurisdictions have “forced heirship” provisions – even Scotland! In such circumstances it is best to take detailed legal advice before the acquisition of foreign assets to consider any steps which may be taken to avoid the impact of these rules e.g. a particular ownership structure or situation of assets in alternative country.

Working Abroad and Residency

If you leave the UK to live and work abroad full time then provided the following circumstances are met you will normally be deemed not resident and not ordinarily resident in the UK:

  • your absence and employment from the UK covers a complete tax year (that is 6 April to 5 April)
  • you spend less than 183 days in the UK during the tax year
  • your visits to the UK do not average 91 days or more a tax year over a maximum of four years

However, HMRC recently suggested that it would challenge the non-residency of those who spend more than ten days working in the UK in a tax year. They have since clarified that this does not mean that if more than 10 working days are spent working in the UK, HMRC will automatically argue that you are not working abroad full time. It simply means that if you spend less than 10 days HMRC will generally accept that this does not affect your non-residency status. While if more than 10 days are spent working in the UK, each case will be treated on its facts and may warrant further investigation. In short, if you can carry out your meeting by conference call, rather than coming back to the UK, it’s probably best to do this to avoid investigation!