If you have family or assets in a jurisdiction outside of England and Wales, there will be additional considerations for your estate planning arrangements.
If you have foreign assets, it is important that your advisors review your will to ensure that it will be recognised both in England and abroad, and enforce what you want to happen to your assets on your death.
Some issues to cover with your advisors are as follows:
The recent case of Morina and others v Scherbakova and others highlights the complexity of potentially conflicting laws (in this case heightened by family conflict), the importance of reviewing your will to ensure that it reflects your wishes (considering the applicable law), taking advice before revoking a will and, lastly, keeping the original documents in a safe place.
Lifetime gifts of UK property are potentially exempt transfers (PETs) (if not exempt), and you need to survive seven years from the date of the gift in order for the gifted asset/amount to pass free of inheritance tax. If you do not survive the gift by seven years, its value is brought back into your estate on your death and it will use up the first part of your inheritance tax free allowance, known as the nil rate band, which is currently £325,000.
If you give away more than your nil rate band in the seven years before death, inheritance tax is payable on the gift at 40%, subject to taper relief, if relevant.
If you make gifts of foreign assets, the inheritance tax position of the gift depends on your domicile status. If you are UK domiciled or deemed domiciled, gifts of foreign property are treated as PETs as above. However, if you are foreign domiciled, gifts of foreign property are not chargeable to inheritance tax.
Depending on your personal circumstances, this can present estate planning opportunities. However, if you and your spouse do not have the same domicile, the spousal exemption does not apply in full, so it is particularly important that you take advice to best utilise the exemption.
If you are giving away assets abroad, you will need to consider whether the gifts are subject to tax in the relevant jurisdiction (during your lifetime and/or on death). In addition, if forced heirship rules apply and you make a gift of property to an individual who is not a compulsory heir, some jurisdictions have ‘claw-back’ provisions, enabling assets, or their value, to be reclaimed for the entitled persons. Before making gifts, it is therefore advisable to discuss gifting with your advisor at home and abroad.
In England and Wales, a lasting power of attorney (LPA) allows you (known as the donor) to appoint one or more people (known as attorneys) to help you make decisions, or to make decisions on your behalf, in the event that you become incapable of making them yourself.
There are two types of LPA:
Practical issues to consider when appointing an attorney who lives abroad include whether they will:
In addition, you may want to consider that non-professional attorneys can claim their reasonable expenses, such as postage and travel costs, from your funds. These could be significant depending on your attorneys’ location and involvement.
You do not need to live in the UK or be a British citizen to put these documents in place, but their main function relates to property, and the donor’s health and welfare, when based in England and Wales.
Currently, there is no globally recognised form of lasting power of attorney and, importantly, some jurisdictions may not recognise an English LPA, or may have their own documents or process. STEP, the world's leading organisation for private wealth professionals, has launched a ‘Global Representative Power’, which, if adopted, would provide a template for global use and, thereby, consistency for those with assets and family abroad.
It is therefore wise to check with your advisor abroad as to whether the local jurisdiction would recognise your LPAs and, if not, what alternative measures could be put in place to ensure that someone you trust can make important decisions for you.
It is of vital importance to seek professional advice both in England and Wales and abroad. If you are unclear on your position, please get in touch, as a member of the private client and tax team will be able to discuss these matters with you.