Estate Planning For UK Expats Living Abroad
Embarking on a new life abroad can be the start of an exciting and fulfilling new chapter, whether you’re moving for work, starting a business, or getting ready to retire. The opportunity to experience new cultures and embrace a different way of life can be incredibly rewarding. However, along with these changes comes the need to plan ahead and prepare yourself - particularly when it comes to estate planning.
Whilst contemplating what will happen in the event of your passing is never pleasant, estate planning is essential. Moving abroad adds another layer of complexity, and ensuring your affairs are in order will give you peace of mind and protect your loved ones.
Estate Planning For UK Expats
Estate planning is the process of setting up your legal and financial arrangements to ensure that your wishes are respected, and your loved ones are provided for after you’re gone. This matter is especially important for expats, as different countries have different laws around inheritance and taxation. Without proper planning, your assets could be distributed in ways you didn’t intend, or your family could face unnecessary costs and tax burdens.
As an expat, it is crucial to ensure that you have a valid will. If you were to pass away abroad without one, your estate could default to UK inheritance rules and be distributed under UK law - even if this goes against your wishes
If you hold assets in more than one country, you may need to have a separate will in place for each respective jurisdiction to prevent conflicts between different legal systems.
The Wealth Genesis: Double Taxation Treaties - A Guide for Expats
Understanding Domicile And Residency
Your domicile and residency status play a significant role in determining how your estate will be taxed and divided. Even if you’re no longer resident in the UK, you may still be considered domiciled there, which means your worldwide assets could be subject to UK inheritance tax (IHT).
Your domicile status can be affected by factors such as long-term ties or owning property in the UK. If you wish to lose your UK domicile, or to reduce your IHT liability, seek guidance from a financial adviser.
Note, the current Labour government is in the process of amending domicile and long-term residency tests for the purpose of Inheritance Tax, which are expected to be formalised in 2025.
See HMRC's guidance on residence and domicile here.
Inheritance Tax Obligations
Moving abroad doesn’t necessarily mean escaping UK inheritance tax obligations. British expats often remain liable for IHT on UK assets such as property. The UK currently has a nil-rate band for inheritance tax up to £325,000, with amounts above this taxed at 40%.
There are ways to mitigate or reduce your IHT liability, such as setting up trusts or making lifetime gifts. These can be effective tools, but as tax and legal implications may vary between jurisdictions, it's important to seek professional advice and ensure your estate planning is both tax efficient and legally compliant.
Forced Heirship Laws And Brussels IV
Be aware that some countries, such as France, Spain and Italy operate a system of forced heirship when it comes to succession law.
This may result in certain portions of your estate being allocated to specific heirs, such as children or a spouse, regardless of what is stated in your will. It’s also important to note that some jurisdictions have varying rules of how an estate is taxed, for example if the entire estate is taxed at source, or if the tax obligations fall on beneficiaries.
Fortunately, the EU Succession Regulation, commonly known as Brussels IV, allows UK expats to choose whether their estate is governed by UK law or the laws of their country of residence. This gives you greater flexibility and control, but it must be clearly stated in your will or a legal declaration.
Navigating international inheritance laws, tax obligations, and estate planning tools like trusts requires expertise. A specialist adviser can help you create a plan tailored to your unique circumstances and goals, ensuring your estate is structured efficiently while reducing tax burdens on your loved ones.
Estate Planning For British Expats
As a UK expat, estate planning is a critical part of your financial life. It ensures your family is protected and avoids unnecessary stress during difficult times. By addressing these complexities now, you’ll have one less thing to worry about as you build your life abroad.
At The Wealth Genesis, our expert advisers specialise in helping UK expats protect their wealth and plan for a secure future. We can create estate strategies tailored to your unique circumstances and financial goals. To find out more, book a free discovery call today using the diary below.
