Expat family finances guide from the guardian, inheritance planning

Expat guide to family finances

In association with the Guardian

Inheritance planning

With the responsibility of a family comes the need to plan for their long-term future. The message is: plan, and act now.

Once you have, or start considering a family, the need to think about their long-term future comes clearly into focus. As ever, planning is essential to keep your affairs in good order, and it's particularly important in terms of thinking about how to .

Be aware of the impact of local laws

When it comes to estate planning and wills, Ronnie Ludwig, partner at accountancy firm Saffery Champness, warns expats to be aware of local laws. "First and foremost, it is important to bear in mind that professional advice taken locally is key if you want to ensure that your wishes can be carried out when you are gone," he says. "Where local law is based on the Napoleonic Code, for instance, it is far more difficult to bypass your children when planning inheritance than in the UK where civil law operates."

For example, the house that you and your partner shared in France would automatically pass on to any children from the relationship. Your surviving partner might still be able to use the house but would not be able to sell it without the children's permission.Back to top

Managing the risks

"Many find trusts a useful mechanism for estate planning. They allow a parent, for instance, to ensure their assets are only passed on to children when they come of age and are able to make their own financial decisions," says Ludwig. "However, trust law developed historically in common law jurisdictions (using court decisions and precedents as opposed to legislative action) like the UK and a trust established on UK soil might not hold up in a civil law jurisdiction, which does not recognise legal structures of this kind. Any estate planning you already have in place should be reviewed in consultation with local [and international] experts."

Holding your wealth in an offshore location could be a way of managing this issue. By using specialist offshore-based solutions, many potentially difficult probate issues could be avoided.

One very common source of headache for expats is the operation of bank accounts abroad. If you have a joint bank account with your partner for instance, the survivor may not be able to access the funds held in joint names at all after the death of one of the partners. Expert advice must be taken to avoid this situation.Back to top

Ensure your will guarantees your wishes

In theory, an English will (one executed and witnessed in accordance with English rules) for a UK national or resident should be accepted almost everywhere in Europe. In practice, though, it can be a good idea to exclude the foreign property from the main will and have a separate will in local form just dealing with the property in that country.

"The local will should be kept as simple as possible, and do ensure that the two (or more) wills tie up," advises Robin Paul, partner at international law firm Withers LLP. "It is very easy for the local will to be worded so as to unintentionally revoke the main (English) will, which could be disastrous."

Sue Medder, another partner at Withers LLP, has experienced first hand the heartache and distress when someone dies intestate (without a will). She says this can have disastrous consequences both from a family and a tax perspective.

"Without a will your estate will not necessarily pass to your loved ones in the way you would wish," she warns. "The problem is undoubtedly much greater where you have second marriages and/or a more complex estate involving assets in a number of different jurisdictions." Back to top

Inheritance laws differ from country to country

Aside from wills, inheritance laws vary from country to country and are often highly complex, but with proper planning it is possible to pass on a legacy to your family without incurring a crippling tax bill.

In many countries inheritance tax (IHT) is charged on an estate when someone dies. In the UK, for instance, the rate is currently 40% for estates valued at over £325,000. The important thing for expats to remember is that IHT is based on your domicile and/or your residency. If you are domiciled (a legal concept) or deemed domicile in the UK, you could be liable for UK IHT on all your assets worldwide even if you live in another country. However, if you are domiciled elsewhere, different rules apply.

In many cases expats will have property, possessions, investments and bank accounts in different countries and this can make things complicated. The key advice for expats is to plan ahead and take local professional advice in the country they are domiciled in.

Please remember that the value of investments, and any income received from them can fall as well as rise, is not guaranteed and you may not get back the amount you invested. We always recommend that any Investments held should be viewed as a medium to long-term investment, at least five years. This could also happen as a result of changes in currency exchange rates, particularly where overseas securities are held or where investments are converted from one currency to another.

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