At Infinity we have seen a recent upturn in enquiries about wills as a result of the coronavirus. Not only do people have more time to get on top of their estate planning during lockdown but perhaps the pandemic has forced more of us to face up to our mortality. Last week we hosted an informative webinar which covered all the most commonly asked questions about will. Here is a q and a of the information provided during the webinar.
Do I really need a will?
Yes, everyone should have a will – no exceptions. It is common for people to assume that their assets will automatically go to their wife, husband or kids, but assumptions are not always correct, added to which, there is more to a will than simply saying who gets your money.
Dying intestate – with no will – can have some serious consequences including:
- Loss of control over an estate
- An excessive tax liability on the estate
- Personal items of monetary or sentimental value, such as watches, jewellery or artwork, cannot be gifted to friends or loved ones
- No say over your funeral arrangements
- No say over who will be the executor of your estate
- No control over when children will inherit – many people wish to defer access to money for young adults until they are mature enough to spend it wisely
- No control over who becomes guardian for your children
I have assets in more than one country. How many wills do I need?
It is not uncommon for expatriates to have assets in two, three, four or even more different countries. While it is not a legal requirement to have separate wills for each jurisdiction in which you hold assets (including property, investments or businesses), it is advisable to do so. Different inheritance laws will apply in different countries and it works out easier, quicker and cheaper for those left behind if there are separate wills.
In an ideal world these will all be signed and witnessed at the same time with care taken to ensure that your wishes in different countries do not contradict one another. We would always advise getting professional help on this.
Do all my assets go into my will?
Any investments that you hold where a beneficiary is named, such as a life insurance policy, pension, death benefit from an employer etc, fall outside of a will. This means that funds can be accessed very quickly after a death without waiting for probate to occur.
Will my estate be subject to inheritance tax?
This depends on where your assets are held. In many countries, including the UK, the US, Japan, Thailand, the Philippines, Taiwan and Vietnam, your assets will be subject to taxes in the event of your death. In the UK for example, inheritance tax of 40% is payable on investment properties whether the deceased is from the UK or not.
In addition, some countries, including the UK and the US, both countries where estate taxes are high (40%), levy tax on all worldwide assets if you are domiciled in that country.
What is domicile?
This is a critical concept when it comes to inheritance tax. Your domicile of origin is usually dictated by your father which means that you can be a citizen of a country even if you were not born there. It is possible, although quite difficult, to lose your domicile of origin by adopting a domicile of choice but you must be able to prove that you have severed all ties with your domicile of origin. If you opt for a domicile of choice you should make sure this is written into your will and be aware that it could still be contested by tax authorities.
In addition, the UK has the concept of deemed domicile which means that if you have spent 15 of the last 20 years as a UK resident the UK is deemed your country of domicile regardless of your nationality, which means that IHT is payable on your worldwide estate.
Should I appoint a guardian for my child?
Parents of dependent children should make it a priority to appoint a guardian for their offspring in their will. A failure to do so means that in the event of the death of the parents the decision will default to a court and their choice may not tally with your wishes.
As well as appointing a long term, permanent guardian – often a brother, sister or close family member – expatriates should also consider nominating a temporary guardian if the permanent guardian does not live in the same country. This person – often a friend or neighbour – can step in until the long term guardian can get there ensuring that the children are not taken away by the authorities and can continue to be cared for by nannies or helpers.
What is probate?
When you die, your assets cannot simply be accessed. A formal court-supervised process must be followed to authenticate your will or, in the absence of a will, distribute assets according to heirship laws. This adminstration process can be lengthy – six months or more – and is carred out by an executor. The more countries you have assets in, the more complex the process is.
What is an executor?
You must nominate an executor in your will. This person is given the legal authority from a court to access and deal with your assets. They perform a number of important roles including:
- Arranging your funeral
- Securing your estate until it can be distributed
- Overseeing the probate process
- Submitting the documents required during probate including death certificate, passport, marriage certificate etc.
When you draw up a will it is important that you ask permission to nominate someone as an executor, and that you ensure they know where your will is held, and ideally have a copy.
It is worth noting that the executor does not have the power to decide who gets your assets but must act in accordance with the wishes outlined in your will.
The executor can be anyone of your choosing and is often an adult child, sister or brother. The executor can also be a beneficiary of the will.
My children are young – who will look after my assets on their behalf if I die?
If you have young children you should name a trustee in your will to look after the assets they inherit until your children are old enough to do so themselves. The trustee can make money available for education and maintenance as required.
people also use the will to dictate at what age the children should take over managing their own money. 25 is a common choice for many people as younger adults are considered less mature with the potential to squander their inheritance! Often the trustee is the same person as the executor.
Who should write my will?
A will does not have to be written by a lawyer. It is perfectly legal to write your own will although we would advise against this as it is important that it is drafted, signed and witnessed correctly. To give one example of what can go wrong, many people are unaware that a beneficiary should not also witness a will and acting as a witness can mean they lose their entitlement.
A lawyer can draw up a will but usually they will be restricted to their local jurisdiction. For expatriates with assets in different countries that means dealing with more than one lawyer which is why a professional will writer working across borders is a better choice. They will make sure that wills are not revoked or cancelled out and that there is no jurisdictional overlap. In an ideal world all your wills should be signed and dated at the same time with no overlap of jurisdictional coverage.
Where should I keep my will?
If a professional will writing company prepares your will they will keep it safely stored and should also write to you annually to check if your situation has changed. Any major changes in circumstance, such as marriage, divorce or the birth of a child, may need you to update your will. Indeed, it is a little-known fact that getting married can make a previous will void.
If you don’t use a professional will writing service some countries have a will registration service and you should also make sure your executor has a copy or at least knows how to access one.
Will my joint bank account be frozen if I die?
Any jointly owned assets including bank accounts, property, proceeds of life insurance and pensions are not subject to a will. This is called the right of survivorship. That means that if you die any accounts you hold jointly with your partner will not be frozen and the surviving partner will continue to be able to use them as normal to access money and pay bills.
Beware that the same is not true for signatory rights and supplementary credit cards. These will be cancelled upon the death or incapacity of the main account holder and access to the account and credit card would cease for the signatory or supplementary card holder.
If you are not sure about what would happen if one of two joint holders were to pass away ask the bank or financial institution for clarification in writing.
What happens if I lose capacity – who will handle my affairs?
Although unpleasant to think about, it is best to nominate someone who will be authorised to access and manage your financial affairs if you lose the capacity to do so. This is particularly relevant as we age, and are more prone to diseases such as Alzheimer’s, but could happen at any time as the result of an accident.
This is done by an enduring power of attorney which appoints someone to look after your finances either until you recover and can do it yourself or until you pass away, when the executor of your will takes over. Legislation on powers of attorney is jurisdiction-specific so you should consult someone with local expertise.
Can I choose what happens to me when I die or become incapacitated?
Anything relating to after your death, such as whether you wish to be buried or cremated or specific funeral requirements, can be stated in your will however, as a will is only valid after your death, this is not the place to state the medical decisions you wish to be taken if you are alive but unable to express them yourself.
End of life medical decisions such as whether to resuscitate or keep life support going can be laid out in an Advance Medical Directive. These decisions can be a big burden on next of kin, and in many countries, including Hong Kong, doctors will not follow the wishes of a next of kin so this can be an important document to put in place.
What should I do about my business?
Business owners often neglect to make provisions for the succession of their business affairs. Think about whether there is a reserve director and a shareholder agreement and whether or not you need keyman insurance. Often there will be restrictions on giving away shares in the articles of association so make sure that you include your business in your estate planning and make provisions that are legally appropriate.
Can I leave my assets to whoever I want?
The answer to this question is country specific. Some countries, often those which have a civil code, have forced heirship laws which dictate how assets must be distributed so that certain family members, usually children, cannot be disinherited. This is the case for Japan and Indonesia for example.
There are solutions if you want to disinherit your children, such as selling property and giving cash or changing ownership of assets to a company. If this is your case you should take legal advice.
I am buying a house soon, is it best to wait until that is done before making my will?
It is not necessary to know the value of an estate to write a will (although a ball park figure can be useful for tax planning purposes). Assets are not usually listed in a will and wording is kept generic – for example ‘I give my estate to…’ – so that it doesn’t need to be changed every time an asset is acquired.
Similarly, children are not usually named in a will with will writers favouring the phrase ‘current and future children’ so that it remains valid even if new family members come along.
Procrastinating over getting your will written because you anticipate changes in the future is a bad idea. As none of us has a crystal ball we simply don’t know what life has in store for us. If you don’t have a will, prioritise it NOW.
How can trusts help in estate planning?
Trusts are often used as a tax mitigation tool to pass on wealth, protecting family assets by keeping them outside of probate. They can be established during an individual’s lifetime or upon death. This is a complex subject and Infinity will be hosting a separate webinar in the near future to discuss this. Keep an eye on our webinar page to find out more.
We hope that this article answers many of the questions that you have regarding your last will and testament and inspires you to put one in place if you haven’t already.
What is clear from the information is that this is quite a complex subject, which is why we would always advise taking professional advice on all elements of will writing and estate planning. Do feel free to get in touch with us if you have further questions, need help with writing a will (or wills) or would like information about the estate planning tools at your disposal to reduce your inheritance tax burden.
A leading provider of expat financial services and wealth management services across Asia.