When someone dies, the administration of their estate needs to include all assets, wherever they are situated in the world.
It has become quite common for individuals to own foreign assets, from holiday properties and possessions, to bank accounts or other investments, such as stocks and shares. If you have worked overseas, you may have been offered shares as an employee benefit, for example.
As a result, those dealing with the financial, legal and tax affairs of someone who has died are increasingly having to deal with the extra complication of managing overseas assets.
With cross border inheritance and taxation issues to consider, foreign estate administration can be hard work and extremely complicated. Therefore, it is essential that individuals who own assets in more than one country put adequate plans in place. If they don't, they risk leaving their family members and executors facing complicated rules and regulations in foreign countries, expensive procedures and long delays in accessing funds.
In worst case scenarios, it may create family disputes when unforeseen foreign legislation results in unintended or unexpected divisions of assets.
All too often, foreign assets are not discovered until after death, leaving executors with extra administrative problems. For example, even the apparently simple task of closing an overseas bank account after death can give rise to significant delays and unnecessary administrative costs in a different jurisdiction.
Now there is a new challenge – Brexit. It’s currently unclear what impact this will have on assets that UK nationals hold in the EU. It does, however, raise questions surrounding which jurisdiction’s taxes will apply and how assets should be protected. It is advisable for owners of European assets, such as property, shares or foreign bank accounts, to stay alert to changes in this area. They may need to update their Wills* to protect EU assets from being unnecessarily taxed after their passing.
Exchange rates are likely to continue to fluctuate while Brexit remains unresolved, and this could affect the value of funds that are repatriated. Given that executors are responsible for maximising the estate value for beneficiaries, it’s important they keep a close eye on the sterling/euro exchange rate where necessary.
“Dealing with an estate can be a complicated process even if overseas assets aren’t involved,” says Andrea Pierce, Director of Legal Services at Kings Court Trust.
“Many people think that they have enough knowledge and experience to deal with the estate, but often end up requiring professional assistance at some stage in the process.”
“Executors are financially and legally responsible for the distributions that are made, so you have to be 100% confident that you know what needs to be done; otherwise there could be a nasty shock waiting after the estate has been distributed,” says Pierce.
International estates are complex, as are the rules that determine how they must be administered. As a result, disputes invariably arise that can destroy family relationships and may be extremely costly. It is therefore vital that the necessary steps are taken to carefully plan what will happen to assets when multiple jurisdictions are involved.
If you are faced the responsibility of administering an estate yourself, it is important to remember that you have a choice of whether to take on the role. Specialist estate administration firms can do all of the legal and tax work required, and help you overcome challenges such as foreign paperwork and language barriers.
The levels and bases of taxation, and reliefs from taxation, can change at any time and are dependent on individual circumstances.
*Will writing involves the referral to a service that is separate and distinct to those offered by St. James's Place. Wills are not regulated by the Financial Conduct Authority.
For the orginal St. James's Place Article, please use the following link: https://www.sjpinsights.co.uk/article/dealing-with-estates-with-foreign-assets