The Importance

Of Estate Planning

For Expats

How To Save Your Family A Fortune

If motivation to write an article was ever needed, meeting people that have had to make huge, but avoidable payments to HMRC provides it. The subject of arranging wills can be uncomfortable because imagining life continuing after our death isn't enjoyable. 


But remember, this isn't about you.


Wills are often considered ‘boring’ in financial services and bypassed in pursuit of bigger-ticket items. Statistics show that one in two adults in the UK does not have a will, so it could be fair to assume the numbers for British expatriates are similar.   


Wills are not expensive for individuals (depending on circumstances) and if they are, it can come as a surprise because many people don't expect complexities to arise.  Many often request ‘just the basic will’ but discover it's much less straightforward than they had hoped. Ultimately, whatever the cost is, it us usually relative to your wealth and well worth it. 


There aren't many things more cost-effective than a will, or more comforting to know it’s been arranged. So why doesn't everybody that needs one, have one? 


Apart from being perceived as not urgent or something to do tomorrow, arranging wills is seldom lucrative for advisers to get involved with and often deemed not their responsibility.


Crucially, people tend to know what they are worth financially, but millions are unsure what the tax liabilities would be in case of their untimely death.  This can easily result in a massive tax bill becoming payable by loved ones, and a disappointing legacy left behind.


Tax law is complex, sometimes unfathomable and certainly unforgiving if you get it wrong.  As your estate will most likely encompass everything you own, it will also include your most expensive assets such as properties, investments and personal collections. It is therefore, often easy for the wealthy to get into millions, meaning potentially life-changing tax bills and possible heartbreak for beneficiaries.


If you die without a will in place, properties you own are distributed by court-appointed administrators in accordance with statutory rules for 'intestate succession.' They will be apportioned among your surviving spouse, children, and very likely among other relatives under the law that your jurisdiction, or the jurisdiction where a property is situated, specifies.


You won’t get the opportunity to gift specific items people (or exclude any you wanted to).  In addition, if you don't have loved ones your property will go to the state, not those you love, acquaintances or chosen charities.


That’s just the financial side, and the tip of the iceberg.  You can appoint Guardians to ensure your children are cared for if no parental rights remain after your death.  Property owners should clarify joint tenancies or tenancies in common.  If you're worried about becoming vulnerable during old age or illness - Lasting Power of Attorney or Last Will is essential.   The options can be mind boggling.


Many seemingly straight forward cases have anticipated issues that would have emerged had a wills expert not been introduced. Subsequently, pitfalls were foreseen and immense inconvenience and loss of capital avoided.  As one client explained, “watching HMRC take years of hard work from the [deceased’s] estate that was ear-marked for us would have be as painful as the tax bill itself.  Not to mention the stress, time and expense of tribunals and other associated legal costs.”


Does this all seems too obvious? If so, here's a couple of examples that show that anyone can get caught out.


1Comedian Rik Mayall failed to have a valid will in place when he died unexpectedly in June 2014, raising inheritance tax (IHT) issues on his £1.2m estate. When a married parent dies without a will, a portion of their assets goes directly to their children, but if the gift exceeds the ‘nil rate band’ (currently £325,000 per person) 40% IHT applies.


Rules for ‘intestacy’ changed in October 2014, so dying ‘intestate’ with children before then, his wife would receive £250,000 of his assets with the remaining assets being equally divided between his wife and children.  Of those remaining assets, she has only a life interest in the 50% after £250,000 meaning that she would have had to keep that amount in her estate until she died to pass on to the children.  Furthermore, it would have been taxed for IHT again on her estate if it was above the prevailing nil rate band. Therefore, his children's share was worth more than £325,000 and taxable on his death.


Had a will been written requesting all funds went to his wife, no tax would be payable on his death. His wife could have then combined Rik’s ‘nil rate band’ with hers creating a total allowance, including the transferable amount of £650,000. Future IHT bills on her death could then have been navigated around by ‘gifting’ assets to the children whilst it being likely she would survive another seven years.


2 In a more recent case, JP Morgan contested the jury’s verdict to award $8 billion to the family of Max Hopper, a former American Airlines executive and pioneer of a reservation system for the airline who died in 2010 without a will. Surprisingly, one might think that as owner of a $19 million estate, he might have taken time to make a will, but sadly Mr. Hopper died unexpectedly.

Paradoxically, the family could actually benefit enormously from Mr. Hopper dying intestate, but only after a long and painful 7 year battle with one of the world’s largest investment banks.  While $8 billion over 7 years represents a good return for the Hopper family, the case could have very easily gone against them and had it done so, the legal bills would have been in the milliions.

Remove Doubt For Your Loved Ones

As none of us usually know the date we are going to die, we don't have the luxury of time to get our affairs in order, so it’s imperative to get this crucial, but cost-effective part of lives addressed professionally. 

It takes very little time to arrange, is inexpensive and if it does cost more than you hoped, your loved ones will enjoy the benefits in the future. The peace of mind it brings provides the most value, of course.

If you would like to know more about wills and just how easy they can be to arrange one, please get in touch and we’ll be happy to help.