It is also important to have an understanding of the tax implications that arise upon death.
In England and Wales the rules of domicile, as opposed to residence or nationality, dictate the jurisdiction of a Will. Our domicile of origin is that of our father or mother depending upon whether or not they were married at the date of our birth.
This can be altered in adult years if we move from our country of domicile of origin to another with the fixed intention of remaining permanently in that new country.
You may acquire a domicile of choice within the new home country.
Domicile is also linked to the nature of the assets you own, which can be classified as immovable or moveable. Immovable assets include realty (interests in freehold and leasehold property), whilst all other assets are moveable.
If you are domiciled in England and Wales at the date of your death your English Will may have jurisdiction over all immovable assets situated in England and Wales and all worldwide moveable assets.
Where immovable assets are held outside of England and Wales it is advisable to seek the advice of a lawyer in that jurisdiction to put in place a Will to deal with any such property.
Local advice assists in negotiating any laws of succession peculiar to that jurisdiction.
If you have a foreign domicile your English Will may be restricted in jurisdiction to immovable property in England and Wales and a Will may be put in place in the country of domicile to deal with worldwide moveable assets and immovable assets situated in that country.
IHT treatment
Of course, this interpretation is in accordance with English law and legal advice in foreign jurisdictions will highlight and help resolve any conflict with these principles.
Domicile also dictates the UK inheritance tax (IHT) treatment of an estate upon death.
Where a deceased domiciled in the UK owned English and overseas assets, their worldwide assets will be assessed for UK IHT, but payment of IHT may be affected by UK Government tax treaties in place with foreign countries in which assets are held.
A deceased domiciled abroad will only have their UK assets assessed for UK IHT.
There are also ‘deemed domicile’ rules which impact the scope of UK IHT. Perhaps the most important is if you are UK tax resident for 17 out of the 20 tax years prior to your death you will be deemed domicile in the UK and your worldwide assets will be subject to UK IHT.
Thus, if you move from the UK and intend to live in a foreign country permanently, you will be caught by the deemed domicile rule if at your death you have not lived outside of the UK and been non-UK tax resident for more than three years.
If you were to die domiciled in England and Wales without a Will, the English laws of intestacy apply to your worldwide moveable assets and your immovable property in England and Wales.
If domiciled elsewhere those same laws of intestacy will apply to your immovable property in England and Wales and your moveable assets will pass in accordance with the rules of succession as provided by the country of your domicile.
The English laws of intestacy stipulate a strict formula for the distribution of an estate and may cause an unwanted outcome.
Multi-jurisdictional estates are by their very nature complex and professional advice should be obtained in all relevant countries to ensure smooth and tax efficient succession planning.
James Lewis is a solicitor for London law firm Howard Kennedy
