Probate Abroad – Dealing with foreign assets.
Living abroad is becoming a popular option among British retirees. With the cost of living in the UK increasing, the opportunity to exchange rainy days for sea and sand is an attractive one. Making your money stretch further with lower property prices, cheap goods and all-year sunshine, it’s easy to see why many Brits are making the move. However, with the excitement of a more leisurely lifestyle, it’s easy to forget things like updating your will or writing a will to include dealing with foreign assets.
Property or assets are subject to the laws of the country in which they are held and provisions need to be made to ensure your estate passes to your chosen beneficiaries. It is also highly likely that a UK Grant of representation also known as a grant of probate will not be valid in any other country, which means it cant be used to probate foreign assets.
Both for cases of British ex-pats, as well as cases of “non-domiciled” foreign nationals living in the UK, administering an estate with overseas assets, will often require professional advice at the pre-planning stage and at the stage of administering and distributing the estate.
Moving abroad does not discharge any tax liability on property overseas under the UK law unless you change your domicile of origin. Despite popular belief, changing residence does not automatically make you a “non-UK domiciled”. The result of this can be double taxation, which may leave you or your loved ones at a serious disadvantage, having to pay both domestic and foreign taxes on foreign assets.
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 to a foreign country, 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 a number of “tools” a person can use in planning for an estate which includes foreign assets.
- Writing up separate Wills in each country where you have assets, the aim being to cover the estate held in England and Wales and the foreign estate.
- Creating a Will which will cover the distribution of their UK and foreign estates in both/all countries.
*It is crucial to remember that a will made in the UK may not be valid abroad. This will depend on the terms and complexity of the will. For straight forward cases, the UK will is likely to be accepted. In some more complicated situations where minor beneficiaries or trusts are present, you may need to make a will in the country of residence. This will simplify the process and make it cheaper, but be aware that a new will made abroad may revoke your previous UK will.
- 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 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.
It is highly advisable that you take professional advice before moving abroad and seek advice from a solicitor in the country you plan to move to. In the long run, this will save you and your family from great stress and considerable financial losses.
Unfortunately, a very close friend of mine has found herself subject to this difference in Laws. My friend, with her husband, owned a property in Cyprus. Sadly her husband has recently passed away. We have started to administer the Estate and have been informed that Cypriot Law states that 50% of the property, jointly owned by her and her husband, will pass not to her as the surviving owner and spouse but to her stepson. This differs from UK law where property owned in joint names passes to the surviving owner.
There are so many possible problems she could encounter in Cyprus when dealing with these foreign assets. Hopefully, she can come to an agreement with her stepson which means she can stay in the property for the rest of her life. If she chooses to sell, 50% will go to her stepson upon sale.