Nobody likes to think about writing their will, but if you have assets in more than one country you may need a will for each jurisdiction in which they are located. Laws governing an expat’s property and estate overseas are likely to be different to the laws of the country in which they are legally domiciled. It is advisable that you seek professional guidance when compiling your will or wills to understand which country takes precedence and how taxation on your legacy works.
What should a will cover?
A simple will covers the basics of how you want your estate to be distributed and you can also include instructions for your funeral. It’s important to bear in mind that while funeral arrangements aren’t legally binding, that they can be a source of comfort for your loved ones. Do you want to be cremated or buried, and in which country?
Executors are the people you trust to carry out the wishes of your will. This can often be a time-consuming and complex process, so you must choose someone that you feel is capable of the responsibility. If you have complicated family circumstances, or your estate is international or exceeds the UK inheritance tax threshold (currently £325,000), you should seek professional advice before writing your will.
Are wills international?
When it comes to the law, no two countries are the same, so there’s no one-size-fits-all solution when it comes to wills. In the case of English and Welsh domiciled expats, the law that governs movable assets (such as cash, jewellery and personal items) is the law of England and Wales. However, immovable assets such as homes, land and property owned outside England and Wales usually falls under the jurisdiction of the country in which it is located.
In most cases – if you have relocated to or left the UK – more than one will may be required, but it’s not that simple. Having several wills means they must be carefully worded to complement each other. Normally if a new will is written, it revokes all previous wills. It is important that having more than one will covering two or more different countries, must not revoke the others.
Passing away intestate as an expat
Ducking the issue and not writing a will can leave your estate and beneficiaries ensnared in legal problems. Each country has its own rules about a person’s assets when they die intestate. In some countries, long-term partners that are not married may not have any legal rights and could end up losing the home they shared.
For example, Susan is English domiciled, married to an English domiciled spouse, with one child and one stepchild. She has property in England and in Canada along with other moveable assets. If she dies without leaving a will, her UK property and moveable assets worldwide would be legally split with her husband receiving the first £250,000 (effective from 6th February 2020, spouses or civil partners will be able to inherit £270,000 from intestate estates) of her estate and the remainder divided between her husband and her child. However, her property in Canada could fall under Canadian law and subject to this jurisdiction. While the husband is likely to be exempt from UK inheritance tax, the child is not. Having to pay inheritance tax in Canada could mean that the property has to be sold to meet the obligations. Had Susan written a will leaving the property in Canada solely to her husband, the UK tax liability could have been avoided.
Even in Europe, those owning property could find that without a will their property may fall under the jurisdiction of the country in which it is situated. For example, French law dictates that the law of a person’s habitual residence will take precedence. If that is in the UK, that may not be a problem, but what if you have been working and residing in the Middle East? Your French estate may suddenly be governed by the rules of Sharia Law. You may be able to make an election under your Will to circumvent this.
The above examples are general scenarios for illustration purposes only. Each country has its own law and tax regime so it’s important to take professional advice in each country where you are domiciled, hold assets and/or reside.
Inheritance tax on expat estates
As an expat, you not only need to consider the legal aspect of your assets, you also need to consider the tax implications. By taking professional advice from an expert on international tax and double taxation agreements, you may be able to make decisions that considerably limit your tax liability on your estate. The whole point of writing a will is to leave your assets to the people or institutions of your choice, and that probably isn’t HMRC.
Going back to the case of a person domiciled in England or Wales but living abroad, under the law the estate can easily be categorised into moveable and immovable assets and the appropriate wills can be drawn up to cover it legally.
However, tax law has a longer arm. For example, if a person owns property that exceeds the inheritance tax allowance, then UK inheritance tax would be due wherever those assets are. Tax may also be due in the country in which the property is situated. It is worth noting that there are some countries that will not charge inheritance tax on your estate and others that may also have lower or higher rates. Before making any financial decisions, it might help to consult a financial professional to ensure that you understand the inheritance tax requirements for each jurisdiction relevant to you.
Let’s imagine that you have a property in France that is worth £1 million. Ignoring any spousal exemptions (whereby married couples or civil partnerships domiciled in the UK are able to pass on their estate to the surviving spouse inheritance tax-free), in England (your domicile) the inheritance tax due would be 40% of £675,000 (the amount above the nil tax band) so your estate would have to pay £270,000. But that’s not all. France charges inheritance tax in certain circumstances (which is an article in itself). Fortunately, France has a double taxation treaty with the UK. This means that you may not have to pay tax in both countries. However, it takes a legal expert to navigate the situation and if necessary, claim back any tax that is overpaid.
Final considerations on wills for expats
When it comes to writing a will, every person’s wishes are individual, every country is different and every family situation is unique. The only way to take care of your dependents and loved ones after death is by consulting an expert and having a will or wills in place that cover every eventuality.
Having a will is advisable for everyone. If you have assets overseas, you need to understand the law and the tax situation in both your country of domicile, your chosen country of residence and the country where the assets are situated in order to make the smartest decisions for your surviving family.
If you would like to discuss your will in more detail, please do not hesitate to contact us.