OWNING A PROPERTY OVERSEAS & TAX LIABILITIES

Many UK rsidents are living abroad or have a holiday home overseas- what does this mean for the the beneficeries when they die?

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Key considerations for dealing with cross-border estates written by Kate Arnold CRIPPS LAW October 2018

Many UK residents are living the dream of owning a holiday home abroad or moving overseas permanently for their retirement – but this can mean huge complications for their beneficiaries when they die. Partner Kate Arnold outlines some of the major problems.

Negotiating a completely different legal system in order to deal with these overseas assets is no easy matter as laws of other countries differ widely, and often conflict, with the law in England and Wales. The way in which estates are taxed may also differ widely – for example in the UK the executors bear the responsibility for reporting on and paying the inheritance tax, but in much of the EU this responsibility falls to each beneficiary.

While succession laws in England and Wales allow individuals to direct how their assets should be inherited, this is not the case everywhere. In much of the EU, forced heirship rules dictate how assets pass to the deceased’s next of kin, with fixed percentages passing to a surviving spouse or children. UK residents who produce separate Wills dealing with their foreign assets may find themselves unsuspectingly caught by these provisions.

The EU “Brussels IV” regulation allows an individual to apply English law to property owned in other EU countries, which can be particularly useful where rules of forced heirship would otherwise apply. While this legislation is set to remain in place for UK residents post-Brexit, the way in which assets in the EU will be taxed remains less certain. In Spain, for example, residents of the European Economic Area (EEA) can inherit up to €1 million before there are any inheritance tax charges. If the UK leaves the EEA after Brexit, however, the allowance available to any UK beneficiary of Spanish assets will drop dramatically to between €13,000 and €15,000.

Under Spanish law the beneficiaries of an estate have six months from the date of death to accept the inheritance and to submit an assessment to the Spanish tax authorities. This time period can cause problems where the executors must first obtain a UK Grant of Probate.

In order to accept their inheritance, all beneficiaries must attend the local Spanish civil office in person to sign the necessary documents and to apply for Spanish identity numbers (NIE numbers). Alternatively, they can appoint a Spanish lawyer to act on their behalf at the signing meeting and on the application for NIE numbers.  The lawyer must be appointed as attorney by each beneficiary and executor to deal with the Spanish estate. 

In France, the beneficiaries are deemed to have inherited the deceased’s assets immediately on death, as set out under the terms of the Will. The beneficiaries are responsible for administering the estate and dealing with the tax, with the executor overseeing the process. Where executors in the UK are seeking to deal with French property under an English Will, it will be necessary to do so through a French Notaire who must be provided with a translated version of the Grant of Probate, death certificate and UK Will. 

Executors dealing with assets in the US will find themselves faced with a legal process that varies from state to state, with some regimes more onerous than others. Specialist legal advice will be required, tailored to the laws of the state in question.

Complications with overseas assets can be minimised through careful drafting of Wills, taking account of the foreign assets. Despite this, the executors will almost certainly need to engage a lawyer in the country in question to assist with foreign assets. Ideally, this lawyer will also have an understanding of the English legal system and the administration of cross-border estates.  

Cripps has a team of dedicated private client professionals who are experts in handling cross border estate matters and through contacts and its international Marcalliance network, can refer matters to lawyers abroad where necessary, in order to streamline the process of administering the estate.   

If you would like more information on this, please contact 

Kate Arnold or on 01892 506 337.