How many wills do you need to deal with all your assets?
The term ‘global citizen’ is attached not only to your mobility, but also to your assets
It is unusual in today’s global arena for high net-worth individuals to confine ownership of assets to one jurisdiction. It has become the norm to expand one’s asset base across territories, across the world.
The term “global citizen” is attached not only to your mobility, but also to your assets. This increase in global reach has resulted in added layers of complexity in dealing with multiple jurisdictions when passing these assets on to future generations.
A will is arguably the most important document you will draft during your lifetime and it is of utmost importance that you get it right. When assets are scattered all over the world you must consider the need for putting in place separate wills to deal with certain assets in certain jurisdictions.
This is a highly complex field and few appreciate the many sensitivities that need to be taken into account.
Where are the assets held?
First, you need to ensure the exact location of your investments. This may seem a strange thing to say, but investment accounts are not always held in the same place as the actual assets. One might open an account with a London broker for an investment into a Jersey fund.
Although these would be Jersey assets for inheritance tax purposes, the transfer of the asset in terms of the will would be governed by the laws of England, which is where the account is held.
For probate purposes, it is therefore an English asset and would not be dealt with under a Jersey will. If a Jersey will was drafted to deal with this asset, an application would have to be made to the UK courts to allow for the assets to be dealt with under Jersey law, otherwise they would be treated as intestate.
This would add to the already time-consuming process of winding up the estate, not to mention adding to the costs.
There are those testators who prefer to keep it simple, and deal with all assets under one will. While there is nothing inherently wrong with this approach, it can, in some cases, cause delays in the administration process
Therefore the lesson is that when investing into various funds through one adviser, make sure you understand which law is applicable to the devolution of the assets as it is not always as obvious as it might seem.
Some countries, particularly civil law countries such as Luxembourg and Switzerland, will not recognise a will drafted in their country, in accordance with the laws of their country, by a non-resident of their country. So, before putting in place a foreign will, governed by the laws of that country, make absolutely sure that the country recognises a will that is drawn up by a non-resident.
If you do not inquire as to these details, the complexities are only uncovered once it is too late. This can result in months, sometimes years, of careful planning being inadvertently undone.
One will is also possible
Then there are those testators who prefer to keep it simple, and deal with all assets under one will. While there is nothing inherently wrong with this approach, it can, in some cases, cause delays in the administration process, depending on how many jurisdictions are involved.
If you put only one will in place, it will need to be resealed (a process required for approval of a foreign document by a local court) as many times as there are jurisdictions involved before the foreign assets can be dealt with. This can prove time consuming.
In addition, some countries impose a time limit on the completion of the probate process. For example, a Spanish estate must be wound up within six months of the testator’s death after which period penalties are imposed. Therefore, a UK testator with Spanish assets would be strongly advised to consider putting in place a separate Spanish will for the Spanish assets to avoid running into these time constraints.
Immovable property passes in accordance of the land where it is situated. Therefore, when dealing with immovable property we look not only to the laws of succession, but also to laws that govern the transfer of fixed property. For this reason, we would always recommend having in place a separate will that is governed by the laws of the jurisdiction where immovable property is owned.
In Europe, the EU Succession Regulation (known as Brussels IV) came into effect in 2015 and states that the law where one is “habitually resident” is the law that will govern the devolution of one’s estate, in the absence of an election. Under Brussels IV, a testator may elect that the law of their nationality should apply to their estate.
In other words, if you are Spanish, born in Spain and living in Madrid and have a house in France, Spanish law will apply. If, however, you moved to Rome, you would need to elect that Spanish law apply to your will if this was your intention. Failing an election, Italian law would apply to your estate.
Joint bank or investment accounts
Many people circumvent the need for assets to form part of the costly and time consuming administration process by opening a joint bank or investment account, usually with their spouse or partner. While this is an effective means of estate planning, it is important to understand that these assets, although they may not form part of the administration process, do not fall outside your estate for inheritance tax purposes.
So if you are tax resident in a country that imposes inheritance tax on worldwide assets, these assets would be taxed. Similarly, if the assets are situated in a country that imposes inheritance tax, they would be taxed in that country.
And a final word of caution: when drafting more than one will, it is of utmost importance that none of the wills revoke the others. The wills should be carefully worded so as to ensure they revoke only any previous wills that deal with those particular assets.
• Stephens is a senior associate at Maitland Family Office.