Testaments sans frontières

Finding a client without some cross-border succession issue is becoming increasingly difficult. Does a spouse or partner have a different nationality or domicile? A little digging often reveals a foreign domicile of which the client was unaware. Does a child or other potential beneficiary or heir reside in a state which taxes on a receipt basis? In a world which is globally interlinked, it is now common for clients of even quite moderate means to have assets, such as a holiday home, situated in another state. The traditional response to any foreign issue was that the client should consult a lawyer in the other jurisdiction. Why is this not sufficient?

Different approaches

In the UK immovable property is always subject to the local succession law, while movables are governed by the law of domicile. UK-situated assets are always subject to IHT as are the worldwide assets of persons domiciled or deemed domiciled, subject to one of the 10 current double tax treaties.

Other states have completely different private international law rules, the most common being that succession law is governed by the local internal law of the nationality and that the entire estate, both movable and immovable, is governed by that law. Send the client to the Outer Mongolian (OM) lawyer to prepare a will for OM assets and he is likely to be sent straight back, saying that British law must apply and that a British will should deal with the OM assets.

Taking another example, a surviving partner is often puzzled to learn that the law in Scotland is different to that in England and Wales or Northern Ireland.

For tax purposes, it is usual for the beneficiary or heir to be taxed on what they receive rather than the estate on what it contains. If the beneficiaries are resident in Ireland or Germany, then the gift is to be free of the Irish or German tax the beneficiary must pay. Will this result in grossing up? Will the credit the beneficiary receives be passed on to the UK executors, and the UK IHT payable reduced?

The case of Dellar v Zivy, Zivy, Lemarchand and Zivy [2007] EWHC 2266 (Ch) made it clear that the construction of a will is presumed to be in accordance with the law of the testator's domicile at the date of execution of the will, but can be rebutted by any sufficient indication that the testator intended his will to be construed according to the law of another country. Such intention can be expressed in the will, or may be implied from circumstances such as his use of a particular language or of expressions known only to a particular law.

Complex issues

The impossible question is always whether there should be one will or multiple wills. In the real world there is no simple answer. If testators can be persuaded to move all assets into one jurisdiction then one will is sufficient, but will not solve all cross-border issues.

It is self-evident that, where separate wills are made, one needs to ensure that one of the separate wills does not revoke the other, but in practice the automatic revocation clause in most wills requires an effort of will to remove. Similarly, a document that may not be regarded as a will in one jurisdiction, such as a US revocable trust or a French donation entre époux, may be regarded as a will in another, and thus one law may revoke and another may not. The same applies to doctrines of automatic revocation by marriage or civil partnership for testators domiciled in England and Wales, Northern Ireland or India (other than Hindus) or of the birth of a first child for those domiciled in Scotland or Cyprus. Such revocation may not apply to immovable property situated in another state.

The existence of a will in another state may complicate matters to the extent that each jurisdiction may well still insist on sight of a fully notarised and translated copy of the grant of probate and will from the other state to ensure that the local will has not been revoked.

How can practitioners find their way through this international maze? (Persuading clients to pay for these complications is another matter entirely.)

One of the rewards of dealing with this esoteric area is the licence given to ask direct, impertinent and searching personal questions. Who else is allowed to enquire whether the client has children from a previous relationship, as to details of all previous relationships and about all assets and lifetime gifts?

The vital issue to remember is to leave no stone unturned and discover the place of all assets; to dig through the family history and find all historic and current connections with other jurisdictions; and to establish the domicile, residence and potential nationalities of all the key players under the laws of all the likely relevant states.

Only then is it possible to discover where and from whom local advice is necessary. If you can have an idea as to the private international law of that locality, then you will be ahead of the game.

Richard Frimston is a partner at Russell Cooke in London and chairman of the STEP cross-border estates group

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