The Importance Of Preparing A Will With Assets Abroad

Your client may have prepared a Will in England, however, if they own foreign assets, whether a holiday home or bank account, the Will they have prepared here may not cover the assets they hold in that country.

Including foreign assets in a Will – laws in the UK and other countries

English law allows for testamentary freedom which essentially means your client can leave their assets in their Will to anyone they wish.

Certain countries such as France and Spain have forced heirship rules which means that your client’s estate has to pass in accordance with those rules. In Spain, for example, the forced heirship rules dictate that their children are entitled to two-thirds of the estate, a third of which must be distributed equally to all children and with only the remaining third being allowed to pass in accordance with their wishes. This could prove problematic if your client owned assets there and their intention was to pass them to a partner or other beneficiary.

Also, forced heirship could impact certain inheritance tax benefits, such as a spouse or charity exemption, which may not apply.

The EU Succession Directive

Despite Brexit, your client can still benefit from The EU Succession Directive, also known as Brussels IV when preparing their Will. This Directive allows them to elect the law of their nationality when preparing their Will to govern their succession worldwide.

This would allow your client to prepare a Will stating that they wish for all their worldwide assets to be dealt with as per English law avoiding the forced heirship rules.

Wills prepared in England and other countries

Your client may have prepared Wills in both England and another country to specifically deal with the assets held in that country. Great care needs to be taken when preparing Wills in different countries, have they both been drafted correctly so one doesn’t cancel the other? Has your client elected to follow English law in a foreign Will to ensure this applies to their estate?

Not only could your client fall foul of forced heirship rules, but a carefully prepared Will could also ensure it is as tax efficient as possible for their estate. Spain again, for example, has greater tax consequences for an estate if the executors your client appoints are not Spanish nationals.

Obtain legal advice

It is always recommended to get legal advice when preparing a Will that includes foreign assets to ensure that it is appropriately drafted to consider all worldwide assets, or alternatively, separate Wills in the different jurisdictions may be more favourable to complete. As mentioned above, these Wills would need to be expertly drafted to ensure that one doesn’t revoke the other to ensure there is no risk of partial intestacy.

If a Will is drafted abroad with a view to taking into account assets held in England and Wales, special consideration needs to be given when it is executed to ensure it can still be proved at the Court.

A person’s domicile is also an important part when considering preparing a Will with assets in multiple jurisdictions. A person’s domicile decides two important and distinct issues:

If a client is deemed domicile in the UK, inheritance tax is payable on all worldwide assets.

Every individual is born with their domicile of origin which is usually the country their father considered their permeant home, but during your lifetime you may elect to change this if you take up permanent residence abroad.

From 6 April 2017, a client is deemed UK domiciled if they are resident in the UK for 15 of the 20 years before the relevant year. – the relevant year/time being the event tax is payable such as on death.

If a client were deemed domiciled abroad, inheritance tax is only payable on UK assets however exemptions for assets passing to the surviving spouse or civil partner will be limited to £55,000 for transfers before 6 April 2013. Transfers made after this date would have the full nil rate band of £325,000 available.