Families are becoming more internationally mobile and it is therefore not surprising that many individuals are choosing to retire outside the UK. However, many people are not aware of the estate planning pitfalls that can arise.
The UK imposes inheritance tax on the worldwide assets of individuals who are domiciled in the UK, a rule which can catch out the unwary. The question of where you are domiciled is often a complex issue which, very broadly, boils down to ‘where do you see yourself ending up in the long term?’ Domicile can be changed but this is difficult as an individual’s domicile is not necessarily where that individual is currently living. For this reason if an individual moves to another country, their estate, including all of their assets in their new country of residence, could remain subject to UK inheritance tax.
Additionally, the new country of residence may impose tax on a different basis with the effect that all assets wherever located could be subject to tax in both countries. Relief is generally available but estate planning advice will be needed in the UK and in the other country.
Before moving, an individual should also take advice on their will. A will drawn up under UK law can cover an individual's assets worldwide although it is generally advisable to have a separate will for each country in which an individual has significant assets.
Finally: under UK law individuals can generally leave their assets to whoever they like. This is not the case in all countries and individuals are often required to leave some or all of their estate to family members. This is another reason for taking advice in all relevant countries.
By Clare Morison, Senior Associate, Wills, Trusts and Tax Planning, article first published in the Kent Messenger July 2014.