Lost in translation

Increasing international migration and globalisation means it is no longer uncommon to have individuals who accumulate assets in multiple countries during their lifetime. Protecting both family and personal wealth requires more care and planning than ever before, and as every case is unique, it is vital that an individual's worldwide assets are looked at as a whole when planning their international estate.

It would appear that while many wealthy international families are setting up their 'base' and/or are increasing their level of investment in the UK, few appreciate the implications that this may have with regard to the succession of their estate.

Applicable law in England

The first issue is to establish which legal system will govern each part of an individual's assets. Under English law, it is generally the domicile of the individual that governs which system of law is applicable to different classes of assets (referred to as moveable and immovable assets) in their estate.

As a general rule, gifts of moveable assets such as cash, stocks, shares, and household goods, are governed by the law of the deceased's domicile at death ('lex domicilii').

Gifts of immoveable assets are generally governed by the law of
the country in which the land is situated ('lex situs') regardless of the deceased's domicile.

Accordingly where a non-UK domiciled person dies owning assets situated in England, English law will govern the succession and administration of their immovable property situated in England, but the law of their foreign domicile will govern the devolution of their moveable assets.

If they were to die without leaving a valid will (or a non-UK valid will), then the English rules on intestacy will apply to their immovable property in England, and their moveable assets will pass in accordance with the rules of succession as provided by the law of their domicile.

The meaning of domicile

Our domicile of origin is that of our father or mother, depending on whether or not they were married at the date of birth. This can be altered in adult years if we move from the country of domicile of origin, to another with the fixed intention of remaining permanently in that new country. In this circumstance, we will acquire a domicile of choice within the new home country.

It should be noted that a person's domicile under general law may be different to their domicile for inheritance tax purposes. For instance, a person may be domiciled under general law in Saudi Arabia but deemed UK domiciled for UK inheritance tax purposes, because they have lived in the UK 17 out of the last 20 tax years.

Applicable law in civil law countries and beyond

Civil law jurisdictions such as Spain and France apply a different approach. The rules on succession are based on
the law of an individual's habitual residence or citizenship, and that this single legal system will govern their worldwide assets.

The approach assumes its own laws will govern the succession of an individual's worldwide estate, but nevertheless accepts that the English courts will apply English law to the succession of immovable property situated in England.

Generally civil law jurisdictions have some form of forced heirship, where at least a share of property and other assets must be left to certain members of the immediate family, usually a child or spouse.

Forced heirship rules may also apply if an individual is a domiciliary of a Muslim country where Sharia law applies automatically, although under the general principles, a testator may freely dispose of up to one third of his estate to non-heirs. Male heirs receive double the inheritance of a female heir in the same category.

One will or two?

Once consideration has been given to which law (or laws) of succession and administration will apply to the testator's estate, it is thereafter necessary to ascertain whether there are restrictions that will limit the testator's freedom to dispose of their assets. It can then be determined whether it is sensible to have one will dealing with their worldwide estate, or separate wills in each principal jurisdiction where the testator owns assets.

For instance, as noted above, the succession to UK situated moveable assets will be governed by the law of the deceased's domicile. If the deceased is domiciled in a country which imposes a forced heirship regime, thus contradicting a UK will, it would not be upheld in the UK even if validly executed. In such circumstances, it may be sensible therefore for an individual who is not domiciled in England to limit their English law will to the immoveable assets situated here.

Take the following example. A Saudi Arabian domiciled man who has been living in England for 30 years asks his lawyers to draft a new will for him. They draft a standard English-law worldwide will, giving everything to his wife if she survives him. They advise him that it is tax efficient to prepare a will on this basis due to the inheritance tax spouse exemption, and the transferability of the nil rate band.

The solicitors were unaware that sharia law applied, due to the clients domicile. Equally they did not know that sharia law prevented a man giving everything to his wife if he also has children.

The English law was invalid in respect of all of the client's moveable assets. Further examination of the estate showed that the only real estate he owned was held via an offshore company. The result was that the client owned moveable assets and did not own any immoveable assets. Sharia law therefore applied to his whole estate, and the English law will was essentially invalid.

To resolve this, an option would be to make wills in each legal jurisdiction in which he has assets. This would also help speed up the administration of an estate on death. If a person has one will dealing with their worldwide estate, it is usual for the will to be proved firstly in the country in the jurisdiction in which they were domiciled, and then in each separate jurisdiction.

The administration may be delayed until the formalities have been dealt with in the country of domicile. However it is important that multiple wills work properly together, are appropriately limited in scope, and do not by default revoke any others.

Brussels IV

It is now possible for individuals in EU member states to make a single will dealing with all of their assets within the EU.

The European Succession Regulation, known as Brussels IV, aims to simplify cross-border EU succession. It allows individuals across EU member states to choose whether their foreign assets will be governed under local succession rules, or those in their country of nationality.

Accordingly, for an individual who is habitually resident in an EU state, such as Spain, the default position is that Spanish law will apply to both their Spanish and UK assets. However this can now be overridden by the individual making an express election in their will for UK law to apply, if they feel this may be more favourable to them.

Further, a UK individual with a holiday home in France can now update their UK will to cover the French property with an election for UK law to apply, instead of having a separate French will for their holiday home.

Brussels IV provides an excellent opportunity for those with multi-jurisdictional assets to take control of their heirs' financial future. At the core of succession planning is preservation of wealth. The introduction of an EU succession law is a major step forward in providing certainty in will writing for all those with assets in the EU. 

Sarah Sarwar is an associate in the private client department at Druces

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