Estate planning for overseas assets

With one in four Australians born overseas and almost half of us with a parent born overseas1, it makes sense that you or your family may have a home or other assets located outside Australia. While this is positive for your overall wealth it may impact your estate plan.

So, you’ve bought a holiday home overseas or you’ve received an overseas inheritance from a family member. While you may think that you can leave these assets to whoever you want when you die, this is not necessarily the case.

Forced heirship

There are many countries around the world that operate under a system of forced heirship. In Australia, we are free to give our assets to whoever we want under testamentary freedom. Certain categories of people can challenge a Will but there are a number of things that they need to prove before their claim is successful.

In contrast, in countries with forced heirship, a proportion of a person’s estate has to pass to certain classes of beneficiaries. Typically, these are spouses, parents and children. This means, if you have property or other assets in a country with forced heirship, your Australian Will may not be recognised and your assets may not go to who you want them to.

Forced heirship exists in parts of Asia, Latin America, the Middle East and Europe in countries such as Greece, Italy, France and Germany.

Overseas Wills

Some countries do recognise Australian Wills however, if you have overseas assets, it’s advisable to have an overseas Will prepared in addition to your Australian Will.

You should also obtain advice from a lawyer in the country where you own the assets. Not only to check if your Will would be recognised in that country but to find out what the tax implications are for your estate and for your beneficiaries.

Tax considerations

In Australia, we don’t have estate, gift, succession, inheritance or death duties but some countries like the United Kingdom (UK) and United States of America (US) do.

For example, in the UK when your assets reach a certain threshold, inheritance tax applies at a rate of 40%.

If you hold US citizenship, your worldwide estate is subject to US Federal Estate Tax. However, there are deductions available to offset this estate tax. For example, there is a marital deduction available for bequests made to a spouse who is a US citizen.

Every country is different and arrangements can get very complicated when you have assets overseas. Please contact us if you or a loved one has assets overseas and we can help you with your estate planning arrangements.

Source: Australian Executor Trustees

1 ‘Australian Census of Population and Housing’ ABS, 2016.