Estate planning for US domiciled individuals with Scottish assets: an Independence Day reflection

As the US celebrates Independence Day, a day symbolic of freedom, it is fitting to consider the concept of independence in other facets of our lives. For those with ties to multiple countries, ensuring your affairs are in line with your wishes is crucial. Estate planning, particularly when it involves cross-border considerations, is a prime example. For US domiciled clients with assets or interests in Scotland, understanding the nuances of Scottish estate planning is essential to ensure your wishes are met.

Understanding Estate Planning in Scotland

Estate planning in Scotland has unique elements that differ significantly from the US system. As a US domiciled individual with assets or interests in Scotland, it is important to grasp these distinctions to ensure your estate passes in accordance with your wishes.

1. Will – a will is fundamental in expressing how you would like your estate to be distributed. A Scottish will must meet specific requirements to be valid. For US domiciled clients, it is important to ensure that your will is recognised under Scottish law to avoid potential disputes. Without a will, Scottish intestacy rules dictate how your assets will be distributed, which might not align with your wishes. Writing a Scottish will ensures your assets go to your chosen beneficiaries.
2. Legal rights – unique to Scotland, surviving spouses, civil partners and children have "legal rights" to a portion of your estate, regardless of the provisions of your will. Legal rights only apply where you die domiciled in Scotland. Legal rights can complicate estate planning, which requires careful consideration.
3. Executors and trustees – the role of executors and trustees in Scotland are similar to those in the US, but their responsibilities and the legal context in which they operate may differ. Appointing executors who are familiar with how the system operates in Scotland and/or the US can help streamline the administration of your estate.
4. Cross-border considerations – one of the most significant concerns in cross-border estate planning is double taxation. The US taxes worldwide estates, while Scotland (and the UK) has its own inheritance tax regime which is much less favourable than the US position. Fortunately, the US-UK Double Tax Treaty can help by allowing tax credits for estate taxes paid in the other country. Consulting with professionals who are familiar with the tax regimes in each country is crucial.

Strategies for Effective Estate Planning

Achieving your wishes in your estate planning involves proactive steps and strategic planning. Some important things to think about include:

1. Wills in Scotland and the US – we recommend putting in place separate wills for your US and Scottish assets, depending on what those assets are and of course advice in the US. Having a will in each country can help avoid conflicts between different legal systems and streamline the probate process and application for confirmation (the Scottish equivalent of probate). However, it is important to ensure that the wills do not inadvertently revoke or contradict each other.
2. Professional guidance – instruct professionals who are well-versed in US and Scottish estate planning. Advisors in both jurisdictions can work together to create a cohesive plan that addresses all cross-border issues.
3. Regular reviews – estate planning is not a one-time event, but an ongoing process. Regularly review and update your estate plan to reflect changes in your circumstances and personal wishes.
4. Planning ahead – if you are about to have a change in circumstance it is so important to plan ahead before this. This means that planning opportunities can be explored in advance.

In the spirit of Independence Day, take control of your estate planning today whether you are in Scotland, the US or elsewhere. It is important to obtain professional advice at an early stage from advisors in each relevant jurisdiction, and ensure those advisors collaborate to meet your objectives.

Brodies' personal team are highly experienced in dealing with personal affairs where there are US and Scottish planning elements. For more information, please get in touch.