How to manage foreign assets in your will

For individuals with property or investments abroad, managing foreign assets in your will is important to ensure that everything you own is passed on according to your wishes.

From holiday homes to overseas investments, foreign assets can complicate the estate planning process if not carefully included in your will. A will covering foreign assets helps simplify inheritance for your loved ones and ensures your estate is managed according to UK law, avoiding legal complications.

In this guide, we’ll explore the key steps to include overseas assets in your will, the role of tax laws in estate planning, and how to avoid common mistakes that people make.

Including foreign assets in your will: Key considerations

If you own property or assets abroad, including them in your UK will can seem complex, as foreign assets are often subject to the laws and tax systems of the country where they are located.

Here are some important points to consider:

1. Understanding local inheritance laws

Inheritance laws vary significantly from country to country, and some jurisdictions have strict regulations that may override the instructions in your UK homeowner will.

For example, France has “forced heirship” rules that require a portion of your estate to go to specific family members, regardless of what your will states.

In contrast, the UK allows more freedom in how you allocate your assets.

Here’s a quick look at inheritance laws in some popular countries for UK expats and property owners:

• France: Follows forced heirship rules that reserve a portion of your estate for direct descendants (children or grandchildren), regardless of your will.
• Spain: Also follows forced heirship laws, which allocate a fixed percentage of your estate to children, with the remainder free for allocation.
• Italy: Similar to France and Spain, Italy’s forced heirship laws guarantee a portion of the estate to immediate family members, with children and spouses having protected shares.
• Portugal: Has a forced heirship system that reserves a part of the estate for family, but also allows for some flexibility in allocation.
• Germany: Enforces forced heirship by ensuring that close relatives, particularly children and spouses, inherit a mandatory portion of the estate.
• United States: Varies by state, but generally offers more flexibility than European countries, with most states allowing full freedom in asset allocation as per the terms of your will.
• Australia: Has freedom of disposition, allowing you to distribute assets as you wish, but certain family members can contest the will if they feel unfairly excluded.

Consulting with a legal professional in the country where your assets are located is recommended to ensure your estate plan aligns with both UK and local laws, so your intentions for foreign assets in your will are followed.

2. Dual wills for foreign and UK assets

One effective approach to managing foreign assets in your will is to create dual wills: one that addresses your UK assets and another specifically for your overseas assets. This can help avoid delays and streamline the probate process in each country.

However, it’s important to consult an experienced estate planning solicitor to ensure the two wills don’t conflict with each other.

Conflicting wills can lead to probate conflicts that could invalidate certain parts of your estate plan, making it important to draft each will carefully and to specify which assets are covered by each document.

3. Tax implications of foreign assets in your will

Taxes can significantly impact the inheritance of overseas assets in your will, as both the UK and the country where the assets are located may impose taxes.

Here are some common tax considerations:

• Inheritance tax (IHT): In the UK, inheritance tax may apply to your global assets, not just those within the country. This means that your foreign assets could increase your estate’s value and, therefore, your overall tax liability.
• Local taxes: Many countries impose their own inheritance or estate taxes on foreign assets. If you own property in the US, for example, American estate tax laws will apply to that property, which could affect the overall distribution of your estate.

By consulting with tax experts in both the UK and the countries where your assets are located, you can develop a strategy to minimise tax obligations for your beneficiaries.

This is especially important for foreign investments in your will, which may be subject to additional tax regulations depending on the type of asset and the country in question.

4. Naming a trusted executor for overseas assets

Managing assets across borders can be a complex task, so choosing an executor with experience in handling foreign property or investments is wise.

You may even wish to appoint separate executors for different jurisdictions: one to manage your UK estate and another for overseas assets in your will.

Alternatively, you can work with an executor familiar with the relevant international probate laws to help ensure a smooth administration process.

Make sure to choose someone you trust who understands the nuances of dealing with foreign estate laws, as this will help prevent any unnecessary complications during probate.

5. Providing for children and guardianship abroad

If you have minor children and want to ensure they’re provided for from both your UK and overseas assets, it’s essential to consider how inheritance laws in each country could impact their access to funds.

Additionally, if you’re appointing a guardian for your children in your will, be aware that the appointed guardian may not automatically have access to foreign assets to support your children’s needs.

This is another reason why consulting with legal professionals in each country is important when creating an estate plan involving assets abroad.

A dual approach, combining a UK will and a local will, can simplify this process by ensuring that local laws will allow the guardian to access those assets.

What happens if foreign assets aren’t included in your will?

If you don’t include foreign assets in your will, or if your UK will is unclear about their distribution, these assets could end up subject to intestacy laws.

This means they will be distributed according to the laws of the country where they are located, rather than according to your wishes. For example, if you have a holiday home in Spain that is not mentioned in your will, it might be distributed to heirs according to Spanish intestacy laws.

This can cause significant delays, as the legal systems in each country work differently and may require additional steps, such as translations and extra legal documents.

Not including foreign investments in your will also risks leaving these assets unclaimed or in legal limbo.

Keeping your will updated for overseas assets

As with any will, it’s important to regularly update your will to reflect any changes in your foreign property or investments.

This includes changes such as buying or selling a property abroad, starting or liquidating an overseas business, or acquiring other significant assets in another country.

Storing your will securely is also important, especially if you have more than one will to cover assets in different countries.

Many people store copies of their wills in both countries where they have assets, ensuring that both versions can be accessed during the probate process. This is particularly helpful if legal documents are required from both jurisdictions.

Types of wills for foreign assets

When it comes to including foreign assets in your estate planning, different types of wills can provide the flexibility you need.

Here’s a quick overview of the types of wills that are particularly relevant if you have foreign assets:

Traditional wills with international provisions

A traditional will that includes international provisions can be a suitable option for those with modest foreign assets. This will specifies all of your UK and overseas assets in one document, allowing for a unified estate plan.

However, if you have complex international investments or substantial foreign property, it may be easier to create separate wills.

Dual or separate wills

Creating separate wills—one for your UK assets and another for foreign assets in your will—can help simplify estate administration. Each will is tailored to the specific laws of the country in which the assets are located.

Dual wills are especially useful if you have significant assets in multiple countries, as they help avoid confusion and minimise delays.

However, it’s important to coordinate both wills carefully to avoid potential conflicts, as discrepancies between them could lead to probate issues.

Final thoughts

If you have property or investments abroad, managing foreign assets in your will ensures that these assets are distributed according to your wishes.

From understanding international inheritance laws to creating dual wills, a carefully planned estate strategy can help avoid complications and ensure that your loved ones receive their inheritance without added stress.

Whether you’re considering a single will with international provisions or separate wills for each jurisdiction, consulting legal and tax experts in each country is the best way to ensure a smooth and secure estate planning process.