If you are an expat and want to make sure your wealth goes to the people and causes you love and care about, then making a will for expatriates is the only way to make sure your final wishes are carried out.
Making a Will is fraught for anyone, but even more so for expats who could have their estate spread across two or more countries that apply different rules to who can inherit.
Because inheritance rules vary so much between countries, expats need a will in each place where they have assets.
Dying intestate – without a will in place – can pile on financial stress for families who do not receive what they expect from an estate as assets are distributed according to the law rather than the deceased’s wishes.
It’s easy to relieve these concerns by making a will, but so many expats don’t bother, often put off by the thought of death, worries about their inheritance decisions upsetting the family or the complicated legal issues involved.
Sometimes, expats who think they have all the time in the world to make a will are caught out by accident, illness or some other unforeseen event and die before they have a chance to write their will.
Uncertainty means the best time to make a will if you do not have one is always now.
This guide will help by highlighting some of the issues expats need to consider when making a will.
Don’t forget this is guidance, not legal advice, and that your personal circumstances will need a tailored solution drafted by a professional estate planning expert.
What is a will?
A will is a legal document in a format recognised by a court that lists how someone wishes to distribute their money, property and other possessions after death.
A well drafted will can ensure someone’s estate does not pay more death or inheritance taxes than needed and that their wealth and possessions go to the people that they wish to inherit.
Expats can write their own wills, but this is not advisable as the wording should be clear and unambiguous to avoid misunderstandings about their intentions.
A valid will also needs formal witnessing and the expat’s signature.
A poorly written will is open to challenge in the courts, especially if someone feels they are undeservedly disinherited.
Updating a will needs an official alteration called a codicil, or the drafting of a new will to replace the old one.
A new will should include a clause that revokes or cancels any older wills and declares the person making the will is competent to make decisions about how their estate is distributed.
What happens if an Expat dies without a Will?
The legal term for passing away without a will is dying intestate.
If an expat dies intestate, laws in each country where they have money, property or possessions detail how the estate is distributed. This process is called succession.
Because succession laws can vary widely between countries, an expat’s estate can end up in the hands of someone unexpected to inherit rather than loved ones, close friends or worthwhile causes.
In some countries, like the UK, a will overrides succession laws, while in others, such as Spain and France, succession laws take precedence regardless of what a will says.
Sharia compliance will also dictate succession in many countries following Islamic law.
Good reasons for expats to make a will
If you are young, single, rent a home and have little in the way of investments or savings, then writing a will is probably not a priority.
For any other expat, especially those living together who are not married but have children, there are many good reasons for putting pen to paper as quickly as possible:
- A will allows expats to appoint people they trust to act as executors to wind up their estate and distribute the proceeds according to their wishes
- A will can include a gift to the executors for taking the job, as a way of saying thanks for what can be a time-consuming and stressful job
- A letter left with the will can outline funeral arrangements and help the family with decisions like if the deceased’s organs should be donated
- For parents, the will can appoint guardians for children and trustees for any money to invest on their behalf
- Personal possessions that may have a sentimental value and other belongings can go to those the expat wants to have them
- For unmarried couples with children, a will can say what happens to their home and other property for the benefit of the family ahead of other relatives
- A well written will can avoid claims against the estate
- Making a will can halt family squabbles over who should inherit
Pensions and property
If you are an expat with money in the bank, property and investments in more than one country, cross-border tax and succession issues are likely to complicate how your estate is distributed.
Forced heirship laws of succession impose a template dictating who inherits a share of an estate that is difficult to work around.
These laws ensure the deceased leaves a fixed percentage of their estate to their spouse and children and the formula cannot be overridden by a will.
If you have land, a home, personal belongings, money or investments in a country, regardless of if you are a national or resident, you should have a will which is written and executed according to local law to make sure your estate is distributed according to your wishes.
The will should cover all assets in that country only and care should be taken that the terms of the will do not clash with any other wills you may have in other countries.
Domicile and residence
Many expats are uncertain how the concepts of domicile and residence can impact their wills.
Although expats can freely move home and change residence from one country to another, changing domicile – set by family ties and where you were born – is much harder.
One indicator of domicile is which country will issue an expat with a passport. Domicile is a legal status and someone can only have one domicile at any time during their life.
Many expats fail to understand that they stay domiciled in their home country even if they have lived as a resident in one or more other countries for most of their lives – and that this can means their death can trigger unexpected inheritance taxes.
So, domicile and residence define tax liability on death.
This liability can extend to gifts made by the deceased when they were alive or receiving a legacy after their death. Domicile and residence can also determine where inheritance tax or death duty on some or all the estate is paid.
If you are an expat domiciled in the UK but resident elsewhere, then HM Revenue & Customs tots up your global wealth and assets to calculate any inheritance tax that your estate may be liable to pay after your death.
An inheritance tax review is underway by the Office of Tax Simplification that aims to make the tax easier to understand and calculate as the current rules are considered complex and opaque by the government.
In a nutshell, inheritance tax is a tax on the money, property and possessions of someone who has died.
The tax is paid if the value of your estate is more than £325,000, but no tax is due if the estate passes to a spouse, civil partner, charity or community sports club.
The tax-free threshold or nil rate band increases to £500,000 from April 2020 if an expat leaves their main home to their children or grandchildren.
IHT is paid at 40% on the value of an estate over the nil rate band, or 36% if 10% or more of the estate is left to charity in a will.
Expats are unlikely to pay death duties or IHT twice on their estate as the UK and most other countries have double taxation treaties that take away this double jeopardy.
A will is a vital tool for parents wanting to specify who looks after their children in the event of their deaths.
The will can appoint legal guardians and explain any financial arrangements made for the children, including their education.
This makes wills important for every parent, not just those with significant wealth.
Shariah Compliant Wills for Expats
The Gulf States are a popular destination for expats for work as employers pay good salaries and governments impose no income, capital gains or inheritance taxes.
The same tax benefits plus excellent weather, entertainment and high living standards are also attractive to older expats as the United Arab Emirates encourages those in retirement to make Dubai their home.
Making a will is a top priority for expats in Dubai or Abu Dhabi as Sharia law is imposed on the estate of anyone dying intestate.
Sharia law ensures the son or sons receives most of any inheritance, if the deceased has no sons, the inheritance is split between brothers, sisters and parents.
A surviving wife can expect to receive an eighth of the husband’s assets, but depending on family circumstances, this can reduce to nothing.
Land and other real estate can bypass a wife and children as a bequest to the closest male relative.
A wife does not automatically keep here children on the death of her husband, and if both parents die, they are likely to go into care until a guardian is appointed.
Access to money, property and investments can be frozen on someone’s death, but bills, debts and mortgages are not, meaning a surviving family could face mounting debts.
The Personal Affairs Law in the UAE can help non-Muslim expats avoid Sharia succession rules by allowing them to opt for the succession law of their domicile to apply to their estate in the UAE if they have a will.
Power of attorney
A power of attorney goes hand in hand with writing a will.
The power of attorney is the formal legal process for appointing trusted people to make decisions about your money, health and welfare for you if you have an accident or illness that stops you making decisions for yourself.
For instance, if you suffer from dementia and struggle to manage your finances, your attorney can administer your bank account and pay the bills.
Power of attorney rules vary between countries – even England has a different process from Scotland or Northern Ireland.
Most countries have a process for power of attorney with similar rules as those in the UK, such as poderesin Spain.
Updating a will
Keeping a will current and relevant is just as important as making one in the first place.
Life keeps rolling on, personal circumstances change, and if a will is not reviewed and updated alongside them, the terms can quickly go out of date.
Expats should update their wills after any major life event, such as:
- Separation or divorce from a partner
- Getting married
- Having a child
- Buying or selling significant assets
- Moving home
- Moving to another country
- Acquiring land, property or investments in another country
- Suffering a serious accident or illness
Other issues that can impact a will or tax or legal changes where an expat lives or in a country where they have money, property or investments.
Setting a review once every two years is ideal for most expats.
Getting the right advice
The golden rule is do not take estate planning advice from anyone other than a professional who is qualified to draft a will in the country where you have money, property, possessions or investments.
Your adviser must be qualified to give estate planning advice in each country where you need a will. If they are not, you will need to appoint an adviser in each jurisdiction.
You also need to account for cross-border tax, so will need a suitably qualified international tax consultant or a tax consultant in each country where you might have a tax liability.
The advice is complicated even more by investments.
For example, if you have unspent funds remaining in a Qualifying Recognised Overseas Pension Schemes (QROPS) on death, they are exempt from inheritance tax in the UK, but may not be treated the same in other countries.
Trusts can face differing treatment under the tax rules of various countries.
Here are explanations of some of the legal terms mentioned in this article:
- Bequest- Cash, property or a possession left to someone in a will
- Codicil- A clause in a will that changes or adds to the terms
- Domicile- The country which provides someone’s permanent nationality, but not necessarily the place where they live
- Double taxation treaty- An agreement between two countries that ensures the same income or gain is not taxed twice
- Estate- The net worth or assets of a dead person
- Estate planning- Making a will and other arrangements to manage an estate on someone’s death, especially looking at how to minimise death duties
- Executor – The person responsible for distributing someone’s wealth on their death
- Forced heirship- Mandatory succession rules dictating how an estate is distributed between relatives
- Inheritance- See bequest
- Intestate- The status of someone who dies without a will
- Legacy- See bequest
- Nil rate band- The net worth of an estate that is free from death duties in the UK
- Power of attorney- A legal document appointing a trusted person to act on your behalf if you can no longer make decisions for yourself
- Residence- The country where you have your main home
- Sharia law- A code for living that is followed by Muslims
- Succession- Rules that set out the order and amount of an estate relatives can expect to inherit
- Trustee- A trusted person who manages money in a trust
- Will -A legal document that explains someone’s final wishes about what to do with their wealth and looking after the wellbeing of their children