Brits Abroad – Holiday Homes and More
As the summer looms many of us will be thinking ahead to our holidays. You may even be one of the over 400,000 Brits who own a holiday home abroad or you may be thinking about joining their ranks.
If you are then it is vital that you take all the necessary steps to adequately protect your overseas assets in the event that something happens to you. Perhaps you made a will in England some time ago? Should you rely on that will to deal with your holiday home? Is your will going to be effective in dealing with your overseas assets? Will you have to pay tax on your holiday home when you die? These are just some of the questions that I get asked when helping Brits with assets abroad.
The first thing to point out is the difference between tax law and succession law. Tax law determines what tax you will pay on your death and succession law determines who gets what on your death.
Let’s get the fun bit out of the way first…tax.
Firstly, what you may not realise is that UK Inheritance Tax is potentially payable on all of your worldwide assets if you are ‘domiciled’ in the UK at the date of your death. This is regardless of whether you have to pay an inheritance tax to the country where your overseas assets are situated. In some instances, there are tax treaties to prevent you paying tax twice but this is not always the case.
Secondly, you should be aware that ‘domicile’ is different to ‘residence’. Your residency status affects what tax you pay on your income and gains during your lifetime. It is entirely possible to be resident abroad but still remain domiciled in the UK, thus falling into the net for UK Inheritance Tax on your worldwide assets. For that reason, it is important to take proper advice on your potential domicile status.
Ok, so if that’s the tax, who will actually inherit?
The law of succession is the law that dictates who your assets will go to on your death. This is obviously where your will comes in. Care must always be taken when you are dealing with overseas assets. The general rule has always been this: if the asset is fixed overseas and not moveable (like a house or land) then the law of succession of the country where it sits applies. Many foreign countries have different laws of succession to England and Wales. For example, in France there operates a system of forced heirship. This means that your children automatically inherit rights to your estate, even if your spouse is still alive. This differs from the law of England and Wales where you can leave your entire estate to whoever you like through your will. To recap, in relation to fixed assets, the rule has always been: if your English will conflicts with the law of the land then it is the law of the land that wins.
However, from 17 August 2015 the laws of succession will be changing throughout much of the EU. If your holiday home or overseas assets are held in a country signed up to the EU Succession Regulation 650/2012 then there is a glimmer of hope for those of you who wish to ditch the law of the land in favour of English law. So long as you can show a close enough connection to England then even if you are a resident abroad it will be possible to choose English law as the law of succession to apply to your overseas assets. The proper way of making this choice is through your will and so if you have assets abroad then you should be considering whether you wish to include this choice in your will now. The choice can be made ahead of August but will only apply for deaths after that date.
Finally, it is important to remember that this does not mean you no longer need to have a will in the country where your overseas assets are held. Having a will in each jurisdiction where you hold assets is nearly always the right thing to do as it will inevitably speed up the process of dealing with your estate. You should take advice in that jurisdiction and, if it is a country signed up to the EU Regulation then you should make the relevant statement in that will to apply English succession law.
At GA Solicitors we are well placed to provide you with comprehensive advice on the preparation of your English will and to advise you on making your choice of succession law.
Our dedicated, qualified and understanding team will be pleased to meet with you. Many members of our wills, trusts and probate team are also members of the Society of Trust and Estate Practitioners and Solicitors for the Elderly.