Too many overseas property owners fall foul of international inheritance laws and tax regimes. Stone King’s Dan Harris explains how to protect your foreign assets for future generations.
Most people aspire to the dream of living abroad and owning foreign property. But few of us consider what would happen to our overseas assets if we should pass away. Too often people assume that if they buy a property abroad they can hand it on to whoever they choose. This is rarely the case because each country has its own rules governing who should benefit when someone dies.
Even within countries as diverse as Spain, the USA and Lebanon each region, or indeed religion, has different rules on who can inherit property and how much tax is paid. Stone King’s trusts and estates department specialises in helping people with overseas assets navigate the notoriously complex world of international estate management.
Broadly speaking, succession law – or who gets what when you pass away – and the taxation law in respect of buildings and land is governed by the jurisdiction of the country in which they are situated. Lawyers call these immovable assets.
Everything else – what we call moveable assets such as stocks and shares – is governed by the jurisdiction of your domicile. In most cases your domicile is determined by where you or your father were born, not where you live as many mistakenly believe.
Most foreign jurisdictions do not enjoy the same testamentary freedom we have, that is, the freedom to make a will and give our assets to whomever we wish. Instead, countries like France operate a system of forced heirship which means assets are divided up between the deceased’s parents, siblings and – if they’re lucky – their surviving partner.
These rules take precedence over a will, although some countries allow a portion of the deceased’s assets to pass in line with their written wishes. So it is important that you have a properly drafted will that takes into account different legal jurisdictions or even have a will for each country where you hold assets.
And watch out for hidden tax surprises. In most foreign jurisdictions for example, there is no spouse exemption for inheritance tax which means a surviving partner can end up paying crippling death duties.
Remember that if you have foreign assets such as stocks and shares in say France these may also be subject to UK inheritance tax if you are UK domiciled. Unless properly advised you could end up paying tax in both countries.
If you do decide to move away from the UK you can adopt what’s called a domicile of choice. But your domicile is not easily changed and you have to convince the taxman that there is sufficient evidence for that.
As you can see the laws governing succession rights and the taxation of foreign assets are extremely complicated. So it is crucial to seek professional advice from solicitors skilled in international probate to ensure your assets are distributed as you would wish.