Cross-border Will Planning

At some point a will drafter may come across a client who owns assets outside of the UK. To understand this area better it is important that the concept of domicile, immovable property and movable property are clear to the consultant and to the testator. These concepts are key to the operation of English & Welsh private international law and will affect what dispositions can be made in a will governed by the law of England & Wales. We also need to appreciate what effect EU law still has on succession.

Domicile

In England & Wales a person’s domicile is, for practical purposes, synonymous with his permanent home. It is where they intend to spend the rest of their life. Everybody has a domicile but nobody may have more than one. Everybody is born with a domicile of origin as a matter of law, but this could change through dependency (if the person is under 16 or lacks capacity and the domicile of the person they are dependent on changes) or through choice e.g. moving to another country and intending to remain there forever. A child born to unmarried parents takes the mother’s domicile while a child born to married parents takes the domicile of his father (unless the parents are living apart and the child was living with the mother in which case he takes her domicile).

If a person acquires a domicile of choice by moving to a new country with the intention of remaining there indefinitely or permanently but subsequently changes their mind they will resurrect their domicile of origin until they acquire a new domicile of choice. Most people have an obvious domicile but, for some, it can be difficult to determine.

It should be remembered that foreign jurisdictions may have a radically different concept of domicile and many are more reliant on concepts of residence or nationality which are quite different and less permanent.

In the UK there is also concept of deemed domicile for inheritance tax purposes by which a person who does not have a domicile in England & Wales under the general law may nonetheless be deemed domiciled in the UK for inheritance tax purposes. Essentially the deemed domicile provisions provide that subject to certain exceptions a person will be deemed domiciled in the UK if he was domiciled in the UK within the previous three years or was resident in the UK in not less than 15 of the previous 20 years. The importance of this is that UK IHT is charged on the worldwide estate of a person with domicile in the UK. Where questions of IHT mitigation are concerned the deemed domicile of the testator is therefore as important as his actual domicile.

English Private International Law Rules

The following are the essential rules which will apply in the absence of legislation specifying otherwise with regards to succession and foreign assets:

• the essential validity of a Will of movables or a gift of movables in a will is governed by the law of the testator’s domicile at the time of his death;
• the essential validity of a will of immovables or a gift of immovables in a will is governed by the law of the country where the immovables are situated;
• a will is to be interpreted in accordance with the law intended by the testator. In the absence of indications to the contrary, this is presumed to be the law of his domicile at the time when the Will is made.

English law follows the principle of scission so that there are different private international law rules for moveable and immoveable property. These rules, also referred to as the conflict of law rules, mean that if a will is drafted in England & Wales for a testator domiciled there then all his gifts of movables will be governed by English & Welsh law. However, gifts of immovable property situated in a foreign country will be governed by the law of that foreign country. This is particularly important when a property is in a country which has concepts of forced succession as this may dramatically restrict the testator’s testamentary freedom in relation to some or all of his assets. For example, if an English domiciled testator has a house in a country which requires that all property on an unmarried person’s death should go to his children then a provision in his English Will leaving the house to his parents or friends will be ineffective and it will be given to his children.

These rules demonstrate why it can be very important for the consultant to establish the testator’s domicile and what foreign property is owned prior to giving advice in drafting the Will. Whenever a consultant is advising or drafting a will for a testator with a foreign domicile or who owns immovable property abroad the consultant is strongly advised not to draft a will with international scope without taking advice from a lawyer in the correct jurisdiction. This is because the drafting of a foreign will is a specialist topic which requires specialist advice.

When a testator has foreign property which is governed by foreign will or by forced heirship rules it would normally be advisable to restrict the jurisdictional scope of the English will.

Great care should also be taken with revocation clauses in wills. Without appropriate questioning it is possible to fail to establish the existence of a foreign will and to include a revocation clause revoking such foreign will by mistake.

EU regulation number 650/2012

EU regulation number 650/2012 (or ‘Brussels IV’) provides an important addition to the consultants knowledge whenever a testator holds property in another EU country. As detailed earlier, the general rule is that for a testator domiciled in England and Wales his movable property will be governed by domestic law but his immovable will be governed by the law of the state in which they are situated.

Brussels IV changes the position with regards to most EU states. The regulation applies to the succession of all persons dying after 17 August 2015. It provides that for deaths occurring after this date a single national law of succession will apply to the whole of the testator’s estate (both movables and immovables). A key concept in the regulation is that of ‘habitual residence’ because the default law which will apply to a testator’s whole estate ‘shall be the law of the state in which the deceased had his habitual residence at the time of death’. Thus, if a testator dies habitually resident in Spain in September 2015 but with property in France it will be Spanish law that will apply to both his movable and immovable property.

The regulation also provides for a testator to make a choice of law to apply to his estate which can replace the default application of the law of the state of habitual residence. Under Article 22 a testator may choose the law of any state whose nationality he possesses at the time of making the choice or at the time of his death.

The UK opted out of the regulation and of course now the UK has left the EU. However, Brussels IV is still relevant to the will writer and it still affects the succession of estates of testators who have connections to both the UK and any EU member states who are bound by Brussels IV (so this excludes Denmark and the Republic of Ireland). This is because under Article 20 the law specified or chosen to apply shall apply whether or not it is the law of a member state.

If a testator has property in an EU member state the consultant should be aware of the regulation and consider it when advising the testator. In particular if the testator is or may be habitually resident in an EU member state, holds a UK nationality, and wishes for his estate to be governed by UK law then the consultant should consider inserting a declaration to this effect. An example of such a declaration of choice of law under Brussels IV would be

I hereby declare that the dispositions of property contained in this will shall be governed by and take effect according to the law of England and Wales

Execution of wills outside England & Wales

What if the will is executed outside of England & Wales? Section 1 of the Wills act 1963 provides that a will shall be treated as properly executed if it conforms to the law of any of the following:

• The territory where the will was executed.
• The territory where the testator was domiciled at the time of execution or death.
• The territory where the testator had their habitual residence at the time of execution or death.
• The state of which the testator was a national at the time of execution or death.

A will executed abroad by an English nation would be valid as long as it complied with the s9 Wills Act 1837 requirements.