Take Elsie, a fictitious client born and raised abroad. Elsie married an Englishman, George, and moved to London 20 years ago. Her parents and siblings remain in her country of birth where she visits them regularly and where she owns a small property. George has recently died and Elsie is considering whether, long term, to remain in England or return to her country of birth, but she is planning to stay in England for at least the next five years. She has inherited the bulk of George’s estate, including their marital home in England.
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Although Elsie says she wants a simple Will giving all her estate both in England and her country of birth to Andrew, one of her three children, her circumstances mean that various complicating factors may need to be considered, including the following:
- Her country of domicile
Domicile is something which is more than merely being resident in a particular place. It is the place which might be regarded as where you actually belong and intend to live permanently. Elsie’s domicile will determine (amongst other things) which country’s laws will apply to how her assets are distributed upon her death, including ‘personal’ property (e.g. investments and bank accounts) in her country of birth.
- Her property interests
‘Real’ property (for example, a house or land) is commonly subject to the laws of the country where it is situated, rather than the laws of the person’s country of domicile. As Elsie owns both ‘personal’ and ‘real’ property in more than one country, she should make a separate Will in each of those countries. It is important that her legal advisers in each country are aware that she is making more than one Will, so the two Wills can be drafted in such a way that they act alongside each other rather than revoking the other.
- Who should she appoint as her executors?
Where a Will covers assets in a foreign country, it can be helpful to appoint an executor or executors located in that country who will understand the process of administering the estate there.
However, in many European countries the concept of executors does not exist as the deceased’s estate passes directly to the beneficiaries. Moreover, most European countries don’t understand the concept of Trusts, which commonly appear in English Wills; yet another reason to have two separate Wills.
Domicile is also relevant for inheritance tax because if a person is domiciled in England all their worldwide assets will be subject to inheritance tax, something that Elsie hadn’t reckoned on. Moreover, UK legislation will deem Elsie to be domiciled here if she has been UK tax resident in 17 out of the last 20 tax years. There may also be death taxes to pay in Elsie’s country of birth, although there may be a double taxation treaty avoid such taxes being paid on the same assets.
You need only have one foreign connection for some of these considerations to become relevant. Do you own a holiday home? If so, the laws of that country may determine what happens to the property on your death regardless of what your English Will says. This is because in many countries a person is not free to dispose of their estate as they wish as a percentage of it has to pass to specified family members. This is called forced heirship. So it may not be possible for Elsie’s son, Andrew, to be the sole beneficiary of her assets as she wants. Many people don’t realise that Scotland falls into this category and should be treated as a foreign country for these purposes.
If you have any foreign connection, before making a Will or undertaking other estate planning, it is vital that you obtain specialist advice. Our expert lawyers and tax specialists are able to help you. If you don’t take advice you run the risk of settling your affairs in one country, only to find that your careful planning is undermined by another country’s law, at a time when it may be too late to do anything about it.