More and more of the population is enjoying the freedom that being a British citizen affords. Even if a few crucial laws are devolved to the Scottish government, freedom of movement isn’t one of them. This means there is no visa required to move between the two countries and therefore it’s becoming more common for multi-cultural families to form. Parents in the north, grandkids in the south, or vice versa. As such, a lot of beneficiaries are facing the new issue of cross-border estates and the laws that are in fact devolved to the Scottish government in estate planning.
There are quite a few challenges that appear when considering cross-border estates that might arise. It’s best to be ready for the differences in laws and terminology that might appear when faced with this problem which is becoming less unique by the day. Take a look at our guide to handling cross-border estates to understand and be ready to handle anything.
Problem one: understanding the rules
It’s commonly the case that cross-border estates involve multiple wills, for various legal reasons. Each will is created to deal with the corresponding jurisdiction of the estate, so a property in Scotland will need a Scottish will, a property in England will need its own English will, etc. This will allow for the easier distribution of the estate assets to different beneficiaries.
However, they will all need to be understood as a corresponding collective, which is where a solicitor comes in. They can wade through this net of estates and determine if everything has been handled appropriately under the corresponding country’s laws. From there, they can work through the estates to ensure that everyone gets what they are entitled to without any problems from the respective government.
Problem two: distinguishing between succession and tax law
The reason these cross-border estates need dealing with as one is so that the succession laws and tax laws of each district are distinct from each other. Tax laws are obviously going to be a big part of the conversation, as UK inheritance tax needs to be applied, but where would it go? To the UK or to Scotland? If you are living in Scotland, you are still subject to the UK inheritance tax on a foreign will.
It’s important to note that the succession to the relevant assets is distinct from the tax law of the estate, as this can get lost while analysing the estate. This is all particularly important when it comes to worldwide estates, where things can get even muddier.
Problem three: the court process
If the value of the estate is big enough or extensive enough, chances are it might need to go to the courts to be untangled. However, that presents an issue: Scottish courts cannot grant confirmation to foreign estates, which an English, Welsh or Northern Irish estate would be considered. As such, the courts in the relevant jurisdiction would have to be involved.
In this instance, Scots lawyers will have to liaise with British counterparts in order to establish what is needed to move forward with the estate. Typically, this problem is solved with the Scottish court granting a resealing of the estate, but that isn’t always the most cost-effective approach. Your lawyer might instead suggest that you have the foreign court assign someone to legally handle the foreign asset.
Problem four: double taxation
Going even further, there is the idea of international estates to think about, and that’s where double taxation comes in. When it comes to cross-border estates, it’s not uncommon for both the UK and foreign estates to charge their own death tax on assets. This will likely involve the jurisdiction’s court system to settle since typically there is no scope for Scots lawyers to access UK assets without court approval.
Double taxation is a problem that has persisted for a while, with various countries and states creating treaties to settle the matter when it comes up, including UK treaties with Italy, France, Pakistan and India.
Take advantage of DTT, or Double Taxation Treaties, relief in order to avoid being taxed twice, if it is a substantial amount. If the amount taxed is modest, your lawyer might advise you not to use relief as it will take up as much money.
The main challenge of cross-border estates is understanding them. This is why it’s appropriate and even necessary to hire a lawyer to handle your estate. It could, in fact, save you a lot of money to avoid mistakes that might cost. MM Legal has an expert team ready to help you with your estate planning for the future, or alternatively to untangle any cross-border estates.