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Owning assets abroad – all change following the EU Succession Regulation?

30 Nov 2015

Alison Hall, a partner in our Wills and estate planning team, advises on the ownership of foreign assets.

We are increasingly finding that our clients own assets overseas – particularly homes.  Foreign property hotspots include Europe and the USA. Further afield the Far East and South America seem to be gaining in popularity.

When we meet clients to discuss estate planning we are often asked questions about these foreign assets and in particular whether a foreign Will is needed.

With effect from 17 August 2015, the EU Succession Regulation came into force enabling clients to include an appropriate declaration in their Will that the laws of their nationality should apply to their assets. This means that a UK national can choose to have one UK Will that will deal with all their European assets and this will override any forced heirship rules which exist in the Countries where their foreign assets are held and which would otherwise dictate who could inherit.

However, despite this new legislation, we still recommend that our clients obtain advice in the foreign jurisdiction where they own property as it may still be preferable to have a separate foreign Will to facilitate a smoother and quicker foreign estate administration.  In addition the tax consequences of owning property abroad can be complex. In some jurisdictions the tax rate varies depending upon who you leave the property to and whilst the new Regulation allows an individual to override the rules which dictate who can inherit their property, it does not alter the tax legislation in other jurisdictions.

For example, in Spain tax is calculated not only by reference to the value of the property, but also the relationship the deceased had with the beneficiary (for example a spouse and children pay a lower rate of tax than a non-relative). Owners abroad also need to understand where their foreign assets will be taxed. There are Double Taxation treaties which may prevent assets being taxed twice in different jurisdictions.

Other jurisdictions also may require a form of capital gains tax to be paid on death. This tax reflects the increase in value of the property during the period of ownership and is in addition to any Inheritance Tax that may be payable. Again, clients need to be aware of this.

In the UK all Wills have to be drawn up according to the same formalities. In other jurisdictions that is not the case and there are different types of Wills which are all valid documents.  We at Hay & Kilner Solicitors can provide the sort of information needed for discussion with a foreign lawyer/notary and the kind of questions you need to ask to ensure the foreign issues are fully understood.  We can then dovetail the UK Will as appropriate.  In Italy, for example, UK Wills are recognised provided they include declarations which we can ensure are complied with in the UK Will.

At Hay & Kilner, we have acted in the administration of many estates with foreign assets. As mentioned, invariably it is quicker and more cost effective for a Will to be executed in the foreign jurisdiction as this allows the foreign estate administration to begin prior to the issue of the Grant of Probate and avoids the need for translation and legalisation of UK documents. During the estate administration, we work closely with the lawyer appointed in the foreign jurisdiction to ensure that the administration progresses as smoothly as possible and all tax requirements are met in both jurisdictions.

We have also prepared a number of UK Wills for clients with assets abroad. We are able to assist our clients in considering the implications of any UK Will which purports to deal with foreign assets. We have also prepared Powers of Attorney for clients with foreign assets allowing transactions to be carried out when the client is located elsewhere.

We often have to discuss the issues of domicile and residence with our clients. These issues can have an impact on their tax liabilities and we work with their accountant and other advisers to ensure that clients are fully informed of their status for tax purposes.

The World is a smaller place with people travelling and living in many jurisdictions and therefore the ownership of foreign assets is set to increase. At Hay & Kilner, we have a strength and depth of experience which allows us to assist our clients in obtaining foreign advice and ensuring that our clients understand the need for advice in other jurisdictions.  We also have a good network of contacts in other countries that we can draw on to assist our clients.

For further information contact Alison Hall at Hay & Kilner Solicitors on 0191 232 8345 or email: Alison.hall@hay-kilner.co.uk