Last Updated on 2nd October 2024
Estate planning, or succession planning, is always a key priority for expats who want to ensure their assets and wealth are distributed to their intended recipients when they pass away. However, the rules around wills and estates can vary substantially throughout Europe and indeed the world.
It is critical to understand those rules to control how your estate is managed and to whom your wealth is distributed. Identifying available strategies can reduce tax exposure and avoid the potential for assets to be passed on to pre-determined beneficiaries according to national laws.
Here we explore some of the potential scenarios that can help our clients plan for their estate without uncertainty or concern.
Managing Estates Across Borders
Most expats will recognise the crucial importance of having a valid will, but whether you have one registered in the UK or Spain is a different matter.
It is also possible to have dual wills, one in each country, but this can cause substantial difficulties when distributing your estate. In some cases, one will may contradict the other, and having a will officially translated and notarised can be costly and time-consuming. There is also a balance between managing your wealth as tax-efficiently as possible and also preparing for the most efficient structures when the time comes to pass on that wealth.
Chase Buchanan always recommends consulting an experienced, international wealth management adviser before making any irreversible decisions about a cross border estate.
The legislation and compliance rules are very different between Spain and the UK, and your plans must adhere to all tax regulations and laws in both jurisdictions.
Estate planning is often regarded as a straightforward exercise:
- Creating a will to determine who receives your wealth and assets.
- Choosing tax-efficient structures to minimise inheritance tax liabilities.
In fact, it is tremendously complex and even more so for expats living in Spain who have two different sets of laws to comply with. Many British expats living in Spain have assets in the UK, such as properties, investments or accounts. With the complexities of cross-border estate planning, it is imperative all declarations and documentation declare all valid assets in the correct country.
Estate planning can include a raft of measures, strategies, products and plans to accommodate every eventuality.
That could mean:
- Reviewing estate distribution laws in your home country and identifying ways to ensure you control who receives your wealth when you pass away.
- Looking at how you wish your capital to be distributed and implementing processes to manage the timing of those payments.
- Building safeguards to protect against any mismanagement of your assets or distributions of your wealth that contradict your instructions.
- Ensuring you have optimal tax efficiencies available now and also tax-efficient plans to benefit your heirs when your estate passes along.
Given the vast number of variables, having a Spanish will simply isn’t sufficient to have any assurances that your estate will be distributed as you wish. A far more proactive approach is crucial.
Planning for Spanish Estate Taxes
Inheritance tax is a significant concern, and depending on which country you live in, the type of assets you own, and where your wealth is located, the tax charges can be extremely steep.
Most expats in Spain would prefer 100% of their wealth to pass directly to their heirs, but unfortunately, planning for taxes is an integral part of succession planning!
Some UK nationals living permanently in Europe have further issues around the potential for dual taxation falling onto their beneficiaries. Expats who remain British domiciles may incur inheritance tax charges against the value of their estate in the UK, in addition to Spanish succession taxes. Both of these tax regimes work very differently and have different allowances, exemptions and rates.
Therefore, it is vital to consult a wealth management consultant with experience in both the UK and your home county. This ensures you have a fully balanced overview of how the inheritance tax rules will work and how they might impact your recipients.
There are very many favourable tax initiatives and structures available. Please contact your nearest Chase Buchanan office to schedule a private consultation to discuss your wealth management and estate planning should you be interested in learning more.
Controlling Estate Planning with Gifted Assets
One potential is to consider the use of your assets or wealth and whether you wish for it to be used for particular scenarios, such as:
- Leaving funds to children or grandchildren but restricting access to lump sums until you feel they will be mature enough to use the wealth responsibly.
- Allocating an inheritance to provide a comfortable retirement for a loved one or cover costs associated with medical expenses.
- Deciding that your heirs should use your assets to ensure your children or grandchildren can access their chosen educational route, covering costs such as university or course fees.
There are many options here, which avoid the uncertainty and loss of control associated with leaving assets to your beneficiaries in a will. For example, you might opt to leave a proportion of your estate to a grandchild, with a sum released to finance their university education and the balance available to help them purchase their first home.
In some cases, you can choose to set aside capital or funds now, intended for specific uses. The exact way the structure works is tailored to your requirements but could mean:
- Creating fund accounts with immediate ownership rights, including making deposits and withdrawals, so you continue to have full access to your finances.
- Setting up structures, which enable your beneficiaries to receive selected access permission when you pass away, according to your wishes.
This strategy can be an excellent way to make decisions about the future use of your estate while having funds available for your retirement and personal use.
While this option is one of many, it remains critical to consult a qualified, experienced professional wealth management advisor who will be able to walk through each scenario with you. That allows you to make informed judgments about the best solutions to manage your estate – now and when it passes along to your beneficiaries.
Contact Chase Buchanan for further information and expert advice about keeping control of your Spanish and British estate management affairs.