International succession planning: how do you reconcile different laws applying to assets in each country?
In the globalised world we now live in, many Australians either acquire assets overseas or have originally come from another country and may retain assets in their country of birth. In this video, Partner James Whiley discusses the problems this can cause from an estate planning perspective, potentially with different laws applying to different assets, and also complex tax issues. This first video in our new series considers Australian tax issues, and also US and UK estate taxes.
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[Transcript]
[James Whiley:] In the globalised world we now live, many Australians spend time living overseas and often acquire assets overseas, or may have children who spend time living overseas.
Conversely, many Australians, like myself, may have originally come from another country and may retain assets in their country of birth.
This can cause problems from an estate planning perspective, potentially with different laws applying to different assets, and also complex tax issues.
In this update series, we consider such tax issues with Australian tax issues being considered, but also US and UK estate taxes.
And this first update, I consider what law applies to your estate and whether you should have separate Wills dealing with assets in different countries.
Turning to the first point. So, what law applies to your assets?
From an Australian perspective, we characterise assets as either immovable property, which is essentially real estate, or movable property, which is essentially everything else, including cash and shares.
We then look at what’s called your domicile position, which is a somewhat archaic concept because you’re born with a domicile of origin, which typically follows that of your father if your parents were married at the time of your birth, but you can acquire what’s called a domicile of choice if you move to a different country and acquire intention to reside here permanently, indefinitely.
For your estate planning, this is relevant because if you die domiciled in New South Wales, for example, we determine that New South Wales law will govern succession to your worldwide movable assets.
When looking at real estate, though, the law of the country in which that is situated, determines succession to that. So, for example, a house in New South Wales will be dealt with by New South Wales law. But a house in Italy will be dealt with by the succession laws of Italy, which may be significantly different to Australia.
For this reason, it’s often recommended to have separate Wills in different countries, particularly where the laws are very different, and even while this isn’t essential, it’s often advisable for two key reasons.
The first is that, although you may be able to obtain what’s called a grant of probate, for example, in New South Wales and get it resealed overseas, this can take time. So, it’s often advisable to have separate Wills dealing with assets in different countries because you can obtain probate at the same time.
And secondly, for tax planning reasons, because each Will can be structured best to obtain the optimum tax outcome for each country.
It’s also very important to have local incapacity documents prepared because you can’t have a worldwide power of attorney.
How can Hall & Wilcox help you with this?
We regularly deal with clients with international assets who are from overseas, so we’re very aware of the issues which affect your estate in each country, and we work with international advisors to ensure that your estate planning is appropriately structured to obtain the best tax outcome, but also make sure that each country is appropriately covered.