Dealing with estates with foreign assets
Administering an estate which includes foreign assets can be taxing and complicated.
Both for cases of British ex-pats, as well as for cases of “non-domiciled” foreign nationals living in the UK, administering an estate with assets overseas will often require professional advice at the pre-planning stage and at the stage of administering and distributing the estate.
This is because a person’s liability to personal taxation in the UK is determined on the basis of their Residence and Domicile status, the place where their assets are held as well as the jurisdictional tax agreement between the two countries in question.
For example, a common misconception with British ex-pats is that their foreign assets are immediately exempt from UK tax when they move overseas, which is incorrect. Equally, a UK resident is potentially liable to Income Tax and Capital Gains Tax on worldwide income/gains.
It is therefore very important for a person to seek financial advice, particularly where foreign assets include property, to help minimise any tax burdens as well as plan forward for the way they wish their estate to be passed on to their loved ones.
Correct estate planning is the process of planning your estate to ensure that the value of your assets does not diminish unnecessarily, while also ensuring that key elements of your estate are managed correctly and reach those intended.
There are indeed a number of “tools” a person can use in planning for an estate which includes foreign assets.
- This may in some cases require writing up separate Wills, the aim being to cover all jurisdictions for the estate.
- Creating a Will which will cover the distribution of their UK and foreign assets estate in both/all countries.
- Setting up the necessary financial structures, such as Trust accounts in the name of the beneficiaries or including Trusts in the Will to protect the erosion of the estate from unforeseen future expenses.
- Arranging for Guardianship of living dependents, such as underage children or vulnerable individuals who are financially dependent on the testator.
- Communicating with the potential beneficiaries in order to update them with any financial arrangements already in place.
- Setting up Lasting Power of Attorney, to ensure the correct management of all assets including foreign assets.
- Pre-paying their funeral costs, by setting a funeral plan which will accommodate any specific wishes they have with regards to their funeral.
Another point worth mentioning is that reducing the Inheritance Tax liability can take a substantial amount of time. Correct estate planning is mostly about having the correct advice at the right time, and planning as early as possible because many of these tools can be used effectively only while that person is still of a sound mental state.