I live in Europe but own assets in the UK. What will happen to my estate when I die?

Posted on By Joanna Pegum
woman at airport

Are you among the many British citizens who have retired to Spain or Portugal, but have kept your home or other assets in the UK? If so, it is important that you understand what will happen on your death.

All EU Member States, except the UK, Ireland and Denmark, apply the EU Succession Regulation, which governs cross-border or international successions of people who have died after 17 August 2015. As the UK is not bound by the Regulation, estates of British citizens who live in a Member State but hold assets in the UK may be more complex.

Which court will deal with my succession?

Under the Regulation, the court of the Member State in which you have your last ‘habitual residence’ will deal with your worldwide estate. This applies whether the assets are real estate or movable items.

Unfortunately, the Regulation does not define the concept of ‘last habitual residence’. To work this out, you need to assess your circumstances during the years leading up to your death. You’ll need to factor in how long and how often you stayed in each country, the reasons for your presence there, and where your ‘centre of interests’ is, which takes into account the full range of your social, domestic, financial, political and cultural links.

Since the Regulation does not apply in the UK, successions involving assets in a Member State as well as in the UK can give rise to problems, known as ’positive conflicts of jurisdiction’, meaning that the courts of both countries may want to deal with your succession. In order to limit this uncertainty, you should seek advice from an expert on the practical implications of the Regulation.

Which law will govern my succession?

As with the decisions as to what court deals with your succession, under the Regulation, the law of the country in which you have your last habitual residence will govern your entire succession.

If the law of a European country applies, this could also mean that some of your heirs will enjoy an enforceable right to a share of your estate, irrespective of what you may have specified in your will. This is known as ‘forced heirship’.

The Regulation does offer you another option, however. You can choose the law of your nationality (or one of your nationalities, if you hold several passports) to apply to your succession.

As this depends on your family circumstances, you should speak to an expert about making a choice of law to govern your succession.

David W Wilson TEP is a Partner/Attorney at Law at Schellenberg Wittmer in Geneva, Switzerland.

Where is my domicile?

Posted on By admin
man looks at earth, searches for domicile

Domicile describes the country that you consider to be your home or where you have your permanent home. It is not the same as nationality, citizenship or residence.

You can only have one domicile at a time and the domicile that is allocated to you defines which system of law will be applicable to you in relation to things like marriage, divorce and succession.

The UK has three different types:

  1. Origin – where you are born, take father’s if married or mother’s if unmarried
  2. Dependency – children under 16 acquire their parents’ domicile (women would take husband’s when getting married prior to 1973)
  3. Choice – physical presence and an intention to stay ‘indefinitely’

Can I change my domicile?

Everyone acquires a domicile at birth. If you wish to change your domicile of origin or dependency then you need take a number of steps:

  • Purchasing property in new domicile, and abandoning property in old
  • Obtaining a new domicile passport and relinquishing the old one
  • Closing accounts and opening accounts in new domicile
  • Moving family and children’s education to new domicile
  • Drawing up a will and arranging to be buried in new domicile

It is very difficult to acquire a new domicile and the intention must be proven that not only do you intend to stay in the new domicile permanently, but to spend your final days there.

What does ‘deemed domiciled’ mean?

Once a person has been tax resident in the UK for at least 17 out of the preceding 20 tax years they will be ‘deemed domiciled’ in the UK. They will not have a choice about this and will not be able to change their domicile unless they can prove their physical presence and an intention to stay ‘indefinitely’ in another domicile outside of the UK.

Figuring it out

If you are uncertain of your domicile it would be prudent to speak to an expert, since a UK-domiciled person will be subject to UK inheritance tax on their worldwide assets.

*Although it is common to refer to UK domicile, for tax purposes a person is actually domiciled in England & Wales, Scotland or Northern Ireland.

Will my power of attorney be recognised abroad?

Posted on By admin
anxious man with suitcase,abroad,foreign,power of attorney

If you are moving abroad, you should consider whether any planning you have undertaken will be valid in your destination.

If you have taken the step of setting up a Lasting Power of Attorney (LPA) or an Enduring Power of Attorney (EPA), you may have to revisit it if you decide to move abroad to work or to retire, or if you own property or assets overseas.

In any of these cases you will need to take specialist legal advice to make sure that the right documentation is in place in the event that you lose capacity.

What problems could arise?

You should bear in mind that not all jurisdictions have the same approach to mental capacity. Depending on the particular circumstances, a number of questions may arise:

  • Which country’s courts will have the jurisdiction to be able to make orders in respect of your property and finances?
  • Will the jurisdiction you are moving to be able to recognise and enforce either:
    • the orders of the court of your jurisdiction; or
    • an LPA or EPA that is valid in your jurisdiction?

If you have been well advised, then you will hopefully have signed a similar power of attorney document in the foreign jurisdiction where the property or money is situated. It is much simpler to be able to deal with assets abroad using an equivalent power of attorney in that other jurisdiction.

If you haven’t taken the step of having another foreign power of attorney in place, then if your LPA or EPA has been registered with the relevant authorities, in some circumstances it may be acceptable to be used in the foreign jurisdiction. Foreign advice would have to be taken as to its acceptability or otherwise. Even if the LPA or EPA is recognised abroad, there may still be local requirements that will have to be met before it is used. Lawyers or notaries in those jurisdictions would have to give advice as to what is required.

In some countries, the LPA or EPA may have to be translated into the local language in order for it to be used and some jurisdictions will require an ‘apostille’ to be affixed to it by the Foreign Commonwealth office so that it can be used. This is a certificate attached to the document that confirms that the signature, seal or stamp on the document is genuine.

Planning ahead

If you are thinking of moving abroad to either work or retire, then you should consider taking advice on what would happen to any assets that you own abroad, should you subsequently lose your mental capacity. It is always advisable to plan ahead as no one knows what the future may hold. In all circumstances where advice or the law of a foreign jurisdiction is needed, it should be obtained from a legal practitioner who is suitably qualified in that jurisdiction.

The test for mental capacity differs throughout various foreign jurisdictions. They each have their own approach in the way that they define mental capacity as well as the various forms of representation that can be used like an LPA or EPA. Sometimes these are referred to as continuing or durable powers of attorney in other jurisdictions. The differing powers can be revoked by incapacity, marriage or divorce, so specialist advice will always need to be taken in respect of the jurisdiction in which the relevant power is to be used.

TEPs are well qualified to give specialist advice in these complex interjurisdictional situations. There are over 20,000 STEP members across the globe, so there is always someone who can help with the difficult cross-border issues that can arise.

This article does not apply to health and welfare issues that may arise if you are moving or retiring abroad as there may be additional or different issues that may arise. Again, specialist advice will be needed.

Patricia Wass TEP

I am retiring abroad – what should I do?

Posted on By admin

Retirement can be a golden time for many, and the prospect of moving abroad to the sun, or to be with family, can make it even more enticing.

Before you start packing your bags, see our article on ‘How to Prepare for Retirement’. If you are retiring abroad, there are additional factors to consider.

Top of the list will be finances. You’ll need to be confident that your money will stretch far enough, and for long enough, even with exchange rate fluctuations. The climate, the culture and the cost of living will also be significant factors to weigh up, and there are other considerations too.

Estate planning

  • Consider whether any planning you have undertaken in the UK will still be valid in your destination:
    • check with a qualified advisor as to whether you will require separate wills for assets and property held in the UK and your destination
    • if you have taken the step of setting up a Lasting Power of Attorney (LPA) or an Enduring Power of Attorney (EPA), you should check whether it will be recognised in your destination – see ‘Will my power of attorney be recognised abroad?

Medical

  • Arrange medical insurance that’s valid in the country you’re moving to, as well as for return trips to the UK
  • Notify your GP about the move, and check that you’re entitled to healthcare in your new country
  • If you are moving within Europe, you may wish to buy a European Health Insurance Card (EHIC). Bear in mind this may not be valid after Brexit.

Renting out your home

  • Make sure your property is fully insured. Check you’ll still be covered if the property is empty, for example between tenancies
  • Consider appointing a management agent to find and replace tenants, and look after problems that crop up
  • Notify the tax authorities about your move
  • Check with your mortgage provider that you are entitled to rent out your property, and find out what would happen if it is left empty
  • If you plan to sell your UK property in future, you may be liable for capital gains tax, so discuss this with a legal advisor.

Financial planning

  • Notify the tax authorities – otherwise you may be taxed in both countries
  • Speak to a legal advisor about tax implications in the UK, and find out what taxes you will need to pay in your new country
  • Arrange a new bank account in your new country, ahead of your arrival
  • Speak to your pension providers about your move
  • If your pension won’t cover your lifestyle, consider what jobs are available in your new country and if you are eligible to work
  • Investigate property values in your new country, before committing to buy, or even rent
  • Be aware of currency fluctuations if you are going to rely on an income in Sterling and factor in a safety margin.

Speak to a legal advisor who is independent and not connected to any transactions, such as a property sale or purchase, for impartial advice. You will need an advisor who understands UK law as well as the law in the country that you are moving to.

You should also employ a reputable estate agent, ideally who has offices in the UK and in your new country of choice.