International Estate Planning
Australia is a nation of migrants. Relative to our population size (of just over 20 million people), Australia has one of the largest diasporas in the world, with some 1 million Australians, or 5 per cent of our population, currently living outside our national borders.
International migration has increased markedly as a result of the rise of the global labour market, more affordable international transport and sophisticated communication technologies. As such, it is not uncommon to have clients who accumulate assets in multiple countries in their lifetime. This creates a special challenge for estate planners as we need to understand the interactions between the legal systems of different jurisdictions.
In the estate planning context, one of the most fundamental questions we need to resolve is whether to have one will dealing with the client’s worldwide assets or to have multiple wills dealing with each jurisdiction. My view is clients who have overseas assets should have wills dealing with each local jurisdiction.
Have A Local Will
Firstly, a well-drafted will in Australia will probably cover the Australian assets/estate whilst the clients reside in Australia, because most of their assets and interests will still be in Australia. As they move overseas and purchase assets there, they need to think seriously about making a second, local will in the host country.
Although most industrialised countries recognise the basic provisions in each others' estate laws, there are huge and notable exceptions. It is impossible for estate planners to be familiar with the legal systems of overseas jurisdictions, and as such, it is impossible to properly plan for assets in overseas jurisdiction.
No Delay in Administration of Estate
Secondly, where there are two separate wills, one dealing with assets in the forum and the other with assets abroad, the executors may obtain probate in each jurisdiction independently of the other. Therefore, they may simultaneously apply for probate and therefore reduce delay in the administration of the estate. If a testator/testatrix only has one will his/her executors must obtain probate in one jurisdiction and then a re-seal or another grant in the other.
Thirdly, if a testator/testatrix executes a local will appointing local executors and beneficiaries, he/she may reduce the estate’s tax liability. This is because a bequest of an Australian “capital gains tax” (CGT) asset to a non-resident may result in the estate paying CGT which may otherwise have been avoided had the testator/testatrix nominated a resident beneficiary. Further, assets with no connection with Australia may also be liable to CGT if they pass to a resident beneficiary.
The next issue is the difference between common law system and civil law, Islamic law and customary law.
For example, forced heirship is essentially a civil law concept. Most civil law countries limit a person’s testamentary freedom, by providing that a portion of the estate must be reserved for spouses, descendants and, apparently in some cases, ascendants.
The Australian common law traditions are quite different to the civil law systems of most of Western Europe. The problem with having an Australian will applying in a foreign jurisdiction is forced heirship in civil law countries.
In civil law countries the processes of forced heirship and of succession, which provides for the automatic passage of assets at death, are used rather than a probate system to dispose of the testator's property. These regimes can cause concerns because the testator may not have the same freedom of testamentary disposition that we enjoy in Australia.
If you buy a property in France, your ability to give it away or to leave it by Will is governed by French Law. This gives your legal heirs entrenched rights to a certain proportion of your French estate.
If you are survived by one child, you cannot give away any more than half your French estate either during your lifetime or by Will.
If you are survived by 2 children then this limit is reduced to one third, and to one quarter if you are survived by 3 or more children.
Should you have no children then other members of your family may qualify as legal heirs and enjoy entrenched rights to a proportion of the estate.
You cannot vary the share of your French estate which each of your legal heirs are entitled to but you can specify out of which parts of the estate your legal heirs can take their shares.
Further, a country such as Japan has a strong tradition of the family providing for the survivors of a deceased family member. Wills are often viewed as not necessary or desirable in such a system and many such citizens do not have and would not prepare a will, but would depend upon the laws comparable to our laws of intestate succession.
Some countries do not recognise trusts as a legal entity for use in estate planning and so this common Australian planning device may not work for them. Consequently, in order to effectively serve our client, the estate planner must be sensitive to both the cultural differences and the conflicting legal systems employed worldwide.
Local Will Minimises Administrative Headache
Perhaps the best reason for having a local will is that it makes things easier on the survivors. It minimises the administrative headache of moving the client’s estate through the courts, and it avoids the trouble of having lengthy documents translated into the local language. This should reduce the need for supplementary affidavit evidence in support of a grant of probate or for judicial interpretation of a foreign document.
For the above reasons it is recommended to have an Australian will and a local will in the host country for Australians with overseas assets. The Australian wills should specify that it will apply solely to the Australian assets; and the host country will apply solely to the assets in that country. This is the preferred approach because you ensure that local laws are complied with (as immovables are determined by local law) and will speed up the probate process.
Michael Henley, Partner