With increased travel (now that borders have reopened) and globalisation many Australians now own assets abroad, spend time living abroad or enter into relationships with foreign individuals. Likewise, individuals moving to Australia often retain assets in the country they have moved from and enter into relationships with Australians. On death or incapacity, this can create a complex situation with different succession laws applying to different assets and individuals including conflicts as to which law applies and complicated tax issues both in Australia and overseas particularly when dealing with other countries which impose estate tax.

In this series of updates, we look at some common issues with part one covering what law applies to your estate and if you should have separate Wills for each country in which you own assets.

What law applies to your estate?

In Australia, property is classified as movable or immovable. Immovable property includes real estate whereas movable property is essentially everything else including shares and cash. Under Australian law:

  • law of the relevant State or Territory governs succession to immovable assets situated in that State or Territory. This rule also provides for the law of another country to govern succession to immovables in that country (such as a holiday house in Italy).
  • succession to movable assets is determined by the domicile position of the individual at the date of their death. This means that if the individual died domiciled in New South Wales, New South Wales law would apply to their worldwide movable assets noting that under Australian concepts of domicile, you either have a domicile of origin (which is usually your father’s at the date of your birth) or domicile of choice (which can be acquired depending on the facts if you move somewhere else with the intention of residing there permanently and indefinitely).

However, the above position in complicated when dealing with other countries which:

  • do not recognise the same concepts of immovable and moveable property;
  • may not accept a reference back (‘renvoi’) where the jurisdiction's laws refer succession issues to the foreign individual's home jurisdiction; or
  • do not recognise domicile and instead determine succession by nationality or habitual residence (which is different from tax residence and focuses on the past facts rather than future intention (unlike domicile of choice).

As an example, it could be that an individual was domiciled in New South Wales (eg due to a domicile of origin), but at the time of their death domiciled in the UK (as the individual had acquired a domicile of choice there), habitually resident in Spain (due to spending half the year there), a national of the US after acquiring US citizenship when working there, and with real estate in Spain, the UK and Australia. It is then possible for five different laws of succession to apply with conflicts applying between different jurisdictions. Obtaining advice from an international succession planning specialist is key in such a scenario.

Whether to have one worldwide Will or separate Wills?

Once the applicable succession regimes and their effect for different classes of assets are determined, it is necessary to consider whether to have one worldwide Will or separate Wills. Due to the complications noted above where someone owns assets in different countries (particularly where they are of a significant value) and even if a foreign Will is not strictly required, it may be advisable if:

  • it avoids the need for re-sealing of an overseas grant of probate which may cause delays to the administration of the estate (if that is, the jurisdiction allows this), since obtaining grants concurrently may save time and cost;
  • there are language difficulties;
  • there are different legal requirements for a Will to be validly signed;
  • it will keep assets quarantined against potential claims against the estate from disgruntled beneficiaries or creditors;
  • having local executors in each country may be better from an administrative perspective (for example to deal with selling or managing real estate); and
  • it will be more tax effective and/or flexible. For example, because:
    • different tax rates apply to resident compared to non-resident estates;
    • the assets are subject to a form of inheritance tax in one jurisdiction, but not another; or
    • one jurisdiction does not recognise testamentary trusts and another does.

However, while having separate Wills can be advisable for the reasons above, they can also cause problems if they are not prepared correctly and conflict, since care must be taken to avoid either Will being revoked unintentionally noting is usually advisable to have a global Will which carves out assets in specified jurisdictions for local limited Wills to cover.

Incapacity

It is important not to forget the importance of having local incapacity documents, as these documents are jurisdiction specific. The following should be considered:

  • a local equivalent of an enduring power of attorney for financial and legal decisions in any jurisdiction in which the individual owns assets; and
  • a local equivalent of an appointment of enduring guardian for medical and lifestyle decisions in any jurisdiction where someone spends a significant amount of time.