Succession planning is a vital consideration for expats around the world. Putting a strategy in place can make the process significantly easier for your beneficiaries, as well as preserving the value of your assets long into the future.
There are many things to think about:
- Inheritance tax implications and how to minimise that obligation.
- Having a valid will, and Power of Attorney.
- Regularly updating your plans and reviewing your circumstances.
- Letting your family know what will happen and what they need to do.
The reluctance to talk about a will is a common issue, with all the connotations that this is linked with your death – but it is essential to communicate. Not understanding whether there is a will, or not having an appointed Power of Attorney can make the process stressful, complicated, and ultimately more expensive than it need be when a loved one passes away.
Expats have an added complexity. International wills may contradict each other, or may not be legally recognised.
In this article, we have collated our tips for streamlining your succession planning, and ensuring that, when the time comes, you have prepared your beneficiaries with everything they need.
The Importance of Reviewing Your Will as a British Expat
When we talk about succession planning, the first thing that springs to mind is a will – a legal document that sets out what you wish to happen with your estate when you pass away.
Doubtless, a will is a vital part of the process. Many of us create a will at some stage, and then leave it in situ – but it is essential to review this periodically.
- Dual wills, one in the UK and one in your host country, are often advisable.
- Most UK wills carry a default clause that overrides all early versions – and so, if you have a will in another country, you will need to update both to avoid invalidating an overseas document.
- Your will should include all of your major assets, and so if you have disposed of a property or investment, or acquired new assets, you should update it.
- Beneficiaries may change over time if there is a marriage or new children in the family, which also requires an amendment.
If you have two wills, one in Britain and one in your country of residence, these should align to avoid contradictions that can be complex to resolve.
Overseas wills can be recognised in other countries, but having one UK will if you are an expat living in Spain, France or Portugal, for example, isn’t usually the best solution. In most cases, the will would have to go through the UK probate system, and then be officially translated and notarised in your country of residence, which can take a substantial amount of time.
Now that the UK is no longer a European Union member, the previous option to elect for your will to default to British law no longer applies.
Many countries have specific rules about how and to whom an estate can be distributed:
- Forced heirship rules, which don’t exist in the UK, can dictate who can receive what proportion of your estate. For example, most Spanish estates distribute two-thirds of a parent’s assets directly to children, with one third being distributed equally, and the remainder allocated according to the will.
- Portugal also has forced heirship laws, although if you have a Portuguese will, and lodge this with the Central Wills Registry, you may be able to leave your property to whomever you choose.
It is crucial to understand the local succession planning rules, how these impact your will, and the options available.
Why Granting Power of Attorney Is Crucial
While having a will is commonplace, Lasting Power of Attorney is often overlooked. If you’re looking to make things as straightforward as possible for your heirs, it is crucial to consider.
Having a representative who can make decisions on your behalf can be a safeguard in unforeseen circumstances, and ensure that your wishes are respected. An appointed Lasting Power of Attorney can handle events such as:
- Making decisions about your care and medical treatment.
- Authorising payments from your bank accounts.
- Managing investments and pension schemes.
- Dealing with the sale of properties.
Your Lasting Power of Attorney is crucial, since if you become unwell, or have an accident, you have chosen your own representative who you trust to manage your assets sensitively, and as you wish. As an overseas expat, if you have not granted Lasting Power of Attorney, the courts will usually take control of your assets.
Each decision about your estate or welfare requires an application to the courts, which can leave your loved ones unable to make fast decisions, and with legal fees and time delays.
Pensions Planning for Expats
Pension funds are also relevant since most schemes allow you to designate a beneficiary.
Like a will, you should review this nomination to ensure that a recipient has been named and that this remains in line with your wishes.
Should you pass away and not have an up to date expression of your wishes identifying who receives any funds in your pension scheme, this can give rise to disputes, and rely on the pension Trustee deciding on the outcome.
Inheritance Tax Strategies for UK Expats Overseas
Finally, it’s important to review your tax liability – many beneficiaries are left in a difficult situation should they be entitled to assets from an estate.
In the UK, inheritance tax obligations can be as high as 40%. They are payable within six months, and the recipient cannot sell the assets to raise the finances to cover the tax responsibility.
Structuring your will and estate can make a significant difference in the value of your estate, the tax burden on your beneficiaries, and the ease with which your estate can be distributed.
- Putting assets into a trust can be a tax-efficient option – but the type of trust and location will impact the tax arising.
- Your domiciliary and permanent residency status will also have an effect and may determine in which country your assets are liable for inheritance tax.
- UK inheritance tax is charged on worldwide assets, so if you remain a UK domiciliary, any overseas investments or properties remain liable.
Estate planning should always be bespoke to your circumstances, estate and beneficiaries, so it is vital to seek independent guidance from a financial adviser with international expertise to recommend the best tax-efficient structures for your assets. By working through each of these factors, you have the opportunity to reduce tax liabilities for your heirs, ensure your estate is distributed quickly, and as you wish, without incurring additional time and costs to resolve any challenges.
For a comprehensive review of your succession planning strategy, please contact your nearest Chase Buchanan office. Our consultants have years of experience structuring efficient estate management plans for overseas expats, with your beneficiaries’ comfort as our key priority.*Information
*Information correct as at February 2021