Author: Helena Luckhurst
I know from having worked with lawyers across the shores from the British Isles that not all jurisdictions place an emphasis on making a will to control the distribution of a person’s assets on death. Some countries set down rules that govern where a deceased person’s assets will pass and therefore a ‘testamentary disposition’, as it is still rather quaintly called in places in English statute, may not be needed in the country in which the British expat resides.
However, English law still assumes that most British citizens will make a will. For sure we have a set of default rules (the intestacy rules) that step in to control the devolution of assets in the event that there is no will, but the concept of testamentary freedom (we have no forced heirship as such in England) is so ingrained in our law that it is assumed that people will take advantage of that freedom by making a will.
There is often confusion among English expats as to whether, particularly if they have not been resident in England for many years, they should make an English will, or indeed any will at all.
The short answer is that, if the British citizen still has an English domicile, or if he or she still owns assets located in England, it would make sense to have an English will at least (and possibly wills in other jurisdictions in which assets are located).
If the person has assets situated in England, chances are that an English grant will be needed to get access to them after the person’s death and it is so much easier to obtain an English grant if you have an English will in the first place. This seemingly obvious point should not be underestimated – it can involve a lot of extra effort and cost, at a difficult time for the deceased’s family when they may urgently need access to the English assets, if a non English will has to be presented to an English probate registry.
However, under English probate and succession laws, a person’s country of domicile is fundamentally important. English domestic law says that if a person has an English domicile, questions of succession concerning their worldwide moveables (essentially all assets other than real estate interests) and capacity to make a will devolving these, even those moveables situated outside England and Wales, are determined in accordance with English law. English law also governs questions of construction of an English domiciliary’s will, even if that will is not an English will, unless the will expressly states a different governing law.
If someone is born with an English domicile (strictly speaking, they acquire an English domicile of origin at birth), goes to work abroad in order to earn his fortune but at no stage does he form a settled intention to remain in the country in which he is working for the rest of his days, his English domicile will persist. This can come as a great surprise to long term British expats who have been working in the likes of, say, Singapore or Hong Kong, for decades – they are often most insistent that they are not English domiciled! Yet, if there is any foreseeable contingency (for example, retirement) that would see them cease to be present in their current country of residence, under English law they cannot acquire a domicile of choice in that country. So their English domicile of origin persists.
Retaining an English domicile also leads to a very British tax problem – our death duties. 40% English Inheritance Tax, or IHT, which by its nature is really a tax on a deceased person’s estate, applies to the worldwide assets of all English domiciliaries. This is the second and even nastier surprise for long term British expats as most have forgotten about English IHT altogether! Whether it is right or not for British expats to attempt to lose their English domicile in order to remove themselves from the English IHT net is not a straightforward matter though. However, British expats would do well to engage with it – bereavement is bad enough without an unexpected tax bill on top.
The good news for married couple British expats is that, with the right kind of English will, it should be possible to defer English IHT until after the second death and possibly reduce the IHT bill itself.
Helena Luckhurst, Partner, Fladgate LLP (firstname.lastname@example.org)