Estate planning can be complex, especially for individuals with foreign connections. Whether your clients have assets abroad, dual citizenship, or family members living in different countries, these are just some of the red flags to watch out for to ensure nasty surprises are avoided and clients have an effective plan for protecting their wealth across generations.
1. Domicile
In Scotland (and the rest of the UK) the concept of domicile is crucial to determine the law applicable to the estate of a deceased person. Scotland, like the rest of the UK, makes a distinction between heritable assets (land and buildings) and moveable assets. A person's moveable estate will succeed in accordance with the law of their domicile whereas heritable property will be dealt with in accordance with the law of the country in which it is situated.
Broadly, a person will have a domicile of origin, acquired at birth and usually the same domicile as that of their parents. They will retain this domicile unless they move to a new jurisdiction intending to remain there permanently and to give up their previous domicile. The test for determining a person's domicile is subjective and proper analysis of the question is particularly important when advising clients with connections to other countries because it will have an impact on succession, forced heirship rules and, until April this year, inheritance tax (more on that below).
Other jurisdictions have other rules for determining the law applicable to a person's estate on death. For example, in most European member states it will be the law of the country in which you are habitually resident that will determine the law applicable to the succession of your assets on death under the EU Succession Regulation. There is also no distinction made between the law applicable to heritable and moveable property. Understanding how foreign rules interact with the concept of domicile in the UK is essential when advising clients with interests in multiple jurisdictions.
2. Inheritance tax and double taxation treaties
One of the biggest issues affecting clients with foreign connections is inheritance tax. Different jurisdictions have different approaches to inheritance tax. While still fundamental to determining the law applicable to the succession of a deceased person's estate, from 6 April 2025, the concept of domicile will no longer be relevant for UK inheritance tax ("IHT") purposes. Instead, long term residents (those who are resident in the UK for 10 out of 20 tax years) will be subject to UK IHT on their worldwide assets, wherever they are situated. Long term residents that leave the UK could still face the impact of UK IHT on their worldwide estate for up to 10 tax years after they have moved elsewhere, even if they are domiciled elsewhere for succession purposes.
Other jurisdictions have different rules for determining how inheritance tax is paid, and it is not uncommon for estates with connections to multiple jurisdictions to face UK IHT in addition to their foreign equivalents. The UK has double taxation treaties with a limited number of countries – these are designed to prevent individual estates from being taxed twice on the same assets. Being aware of the different ways in which inheritance tax can be applied to cross border estates is essential and international clients should plan ahead to minimise their exposure.
3. Forced heirship
Scottish private client lawyers are familiar with Scottish "legal rights" in terms of which the surviving spouse and children of the deceased are entitled to inherit a proportion of their moveable assets on death irrespective of the terms of their will. Many other jurisdictions have rules of forced heirship that place much more significant limits on testamentary freedom and those advising clients with connections to multiple jurisdictions should be aware of how these rules might affect them.
4. Multiple wills
It is sometimes appropriate for those with assets in multiple jurisdictions to prepare more than one will. It is vital to ensure that any wills drafted work together and one will does not revoke another. Taking local advice from experts experienced in international estate planning matters is essential.
5. Expert advice
Having multiple advisors in different countries can lead to miscommunication and conflicting advice. It’s important to have a coordinated approach, with experienced cross border advisors working together to ensure all aspects of an international client's estate plan are aligned.
Estate planning for individuals with foreign connections requires careful consideration and input from those with experience in the jurisdictions concerned. By being aware of these red flags and taking proactive steps to address them, you can ensure your clients receive advice that is robust, effective, and reflective of their wishes.
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