By Mark O’Shea of the Alexander Beard Group
One aspect that is often overlooked when living the expatriate lifestyle is what happens on death when you have assets in different countries. Normally you would have a will (if not you should!) in countries where you have property, but what about other assets such as bank accounts and investments that are often held offshore? These should also be covered by your will but it is not often realised that it will still be necessary for your executors to obtain probate in the countries where the assets are located.
Probate can only be issued once the legal process has been completed to prove that the beneficiaries are legally entitled to inherit. This may not necessarily be a huge problem but it can take many months and be expensive, as a lawyer in the country usually has to be involved. Remember also that additional hassle is the last thing loved ones want at a time of bereavement.
Having bank accounts in joint names will normally overcome the problem on the first death but probate will be still required on the second death. However, this may not always help as inheritance laws can differ from country to country. In certain countries, such as Cyprus, the laws dictate that the surviving partner does not automatically inherit. The account is not considered as being owned jointly but that each partner owns 50%. If the bank is informed of the death of one of the account holders this can result in the account being frozen until probate has been granted and the courts have decided who is legally entitled to the 50% share. This can happen in Cyprus, even if a will is in place. Where there is no will, the children will be entitled to inherit part of the money under the forced heirship rules.
It is possible to hold deposit accounts in a structure that can overcome this problem.
As far as investments are concerned these can be covered by a simple arrangement that will negate the need for probate. You should also ensure that life insurance policies are held in trust as this avoids probate and can also take the death benefit out of your estate for UK inheritance tax purposes. This can often be sorted out at minimal or nil cost.
UK Inheritance Tax (IHT) is paid when an amount in excess of £325,000 is left to anyone other than a UK domiciled spouse. Mixed nationality marriages and unmarried couples could therefore have a tax liability on the first death. The tax is 40% of the amount in excess of £325,000. The tax is assessed on worldwide assets for anyone who is UK domiciled, even if you don’t live in the UK. For those who are not UK domiciled, the tax is assessed on any assets in the UK.
You should be aware that any PEP’s and ISA’s are subject to IHT. Also, it is not often realised that the dividends and interest from these are subject to the Special Contribution for Defence tax in Cyprus.
Mark is a member of the Society of Trust and Estate Practitioners and the Personal Finance Society in the UK.
We, at Expat Informer have years of International Financial Services experience. If you have any questions or would like impartial, up-to-date advice please do not hesitate to contact us.
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