News and Insights
11 October 2017
If you have assets located abroad, you will need to consider the implications on your estate planning.
Most of us know where we keep the things that are important to us, such as cash, jewellery, cars and any other valuables. We also know where we bank our money, but we may be less aware of the location of any investments we hold. It is important to remember that just because you deal with a high street bank in St Helier, or have investments managed by a local company, it does not necessarily mean that the underlying assets are actually held in Jersey. Knowing the exact location of your assets is important for estate planning for a number of reasons. If your assets are not all located in Jersey then you need to consider the following points.
If you have assets that are actually held in another jurisdiction, when dealing with your estate your executor may be required to take out probate in that jurisdiction. Whilst your Jersey will may cover your worldwide estate, the grant issued by the court is, for most purposes, only valid for assets located in Jersey. Different jurisdictions have different rules on what they will release on a foreign grant. For example, if you are not domiciled in Jersey and have an asset in Jersey, then the assets holders are legally allowed to release that asset on production of a foreign grant as long as the value of the asset is less than £10,000. If the value is over £10,000 then the estate of a non-domiciled person would need to take out Jersey probate, even if they already had probate in the place of domicile. Taking out probate in another jurisdiction can be costly and time consuming as well as confusing if you know little about the legal process there.
Nasty foreign taxes
You may be aware that (thankfully) we do not have inheritance tax in Jersey. However, if you have assets located in other jurisdictions, the law in that jurisdiction would apply with regard to any inheritance tax that is due on those assets. For example, we have known of Jersey residents with large investments in the UK who thought that they would not pay any inheritance tax on them because they were Jersey resident. However, because the assets in the UK were over the inheritance tax threshold they ended up paying significant inheritance tax, which can be up to 40%. This is also often payable before UK probate can be obtained, which can then force the beneficiaries to take out a significant loan to pay the tax before the asset can be released.
UK inheritance tax advice is a specialist area; certain assets are exempt or may be subject to special rules. It is therefore worth getting specialist tax or legal advice regarding any assets you hold in other jurisdictions; it could save your estate a lot of money in the long run.
When drafting your will, it is very useful to inform your lawyer if you have any assets in other countries. If the lawyer is not aware of these, or any foreign wills you may have, then they could easily make a will that inadvertently revokes any foreign wills, or make a will that does not cover your foreign assets.
As previously explained, probate may be required in the jurisdictions where you hold assets on your death. It is important that your will meets the requirements of the various jurisdictions otherwise it may not be accepted, which could lead to delays and additional costs. A simple example of this is France, which has a notarial system. People living in France do not usually appoint an executor in their will, however, this is a requirement for Jersey. Therefore, if a person who is domiciled in France requires probate in Jersey then it is often necessary to first confirm who would be entitled to administer the estate in France, which is not always easy as they do not have the same concept of probate or executors as we do in Jersey.
If a will is not accepted in a jurisdiction then your assets could ultimately end up going to your heirs under intestacy (the ones who would have been entitled if you died without a will) rather than the beneficiaries of your will. For this reason it is often worth taking advice in the country where your assets are held, or even having separate wills for each jurisdiction.
How to find out
As with anything, the best way to find out is to ask someone who knows. The bank or financial institution that holds your assets should be able to tell you where your assets are ultimately held. It would also be a good idea to ask them if they would accept a Jersey grant of probate to release the assets to your executor on your death. Certain assets, such as those held by a nominee or policies under seal, may not require probate in the place of domicile depending on how they are held. A tax adviser would also be able to tell you what questions to ask to ensure you are safe from foreign inheritance taxes. When you do find out where your assets are it is a good idea to pass this information on to your advisers and lawyer to assist with the planning of your estate.
Just because you bought an asset that was based in Jersey does not mean that it is still here. Companies can move the assets they manage; investments you thought were in Jersey can end up in Guernsey, the UK, Isle of Man, Ireland, Switzerland or wherever the business is moved. A company should inform you if the destination of your assets is changing, but be aware this may be included in one of those long “terms and conditions” letters that many people do not read in full. Remember that the location where the asset is being administered or managed is not always where it is ultimately held. It is therefore important to check this from time to time to avoid any pitfalls.