Once upon a time, in a quaint English village, there lived a retired couple named George and Mildred. They had spent their entire lives in the same charming countryside hamlet, raising their children, tending to their gardens, and befriending the local sheep.

One fateful day, George was out for his usual morning stroll when he stumbled upon a mysterious-looking antique shop. Intrigued, he ventured inside and discovered a dusty old lamp that caught his eye. He decided to purchase it and bring it home to Mildred as a gift.

Upon presenting the lamp to his wife, George couldn’t help but give it a rub, much like Aladdin would have done with his magic lamp. Suddenly, a genie emerged in a puff of smoke and granted

George and Mildred three wishes. The couple decided on their first two wishes: eternal health and a winning lottery ticket.

For their final wish, they decided to fulfil their lifelong dream of retiring in the sunny climes of Spain. And so, with a flick of the genie’s wrist, the couple found themselves transported to a luxurious villa in Marbella, overlooking the Mediterranean Sea. They had everything they could have ever wanted – except for one thing: they hadn’t considered estate planning for British expats and how their assets would be distributed to their heirs…

Estate planning is crucial for everyone, but it’s especially essential for British expats like George and Mildred. It ensures that their assets are distributed according to their wishes and helps to minimise any potential inheritance tax liability. As a British expat, proper estate planning can be more complex due to factors such as foreign laws, tax treaties, and property ownership. To ensure that George and Mildred’s new Mediterranean dream doesn’t turn into a nightmare, they’ll need to consider the following aspects of estate planning for British expats:

Wills: Drafting a will is the cornerstone of any estate plan. As British expats, George and Mildred should have two separate wills: one for their assets in the UK and another for their assets in Spain. This is important because different jurisdictions may have different inheritance laws, and having separate wills can prevent conflicts between the two legal systems. Additionally, the couple should consult a local lawyer to ensure that their Spanish will complies with local inheritance laws.

Inheritance Tax: British expats may be liable for inheritance tax in both the UK and their country of residence. In George and Mildred’s case, they need to be aware of both the UK inheritance tax and the Spanish succession tax. These taxes can be complex, and the couple should seek advice from tax professionals to understand their liabilities and identify any available exemptions or reliefs.

Property Ownership: Owning property abroad can complicate estate planning. George and Mildred should consider the most appropriate form of property ownership in Spain, taking into account tax implications, inheritance laws, and their specific circumstances. Options may include joint ownership, tenancy in common, or establishing a company to hold the property.

Domicile and Residency: George and Mildred’s domicile and residency status will impact their estate planning. They must determine their domicile status, which is generally the country they consider their permanent home. This can affect their tax liabilities and how their estate is distributed. Residency, on the other hand, is based on where they spend most of their time. Understanding their domicile and residency status can help George and Mildred take advantage of available tax reliefs and exemptions. They may also wish to consider how they can go about losing their UK domicle status: Losing UK Domicile – A How To Guide

Trusts: Establishing trusts can be an effective way for British expats to manage and distribute their assets. Trusts provide a legal structure to hold and protect assets, and they can be tailored to meet George and Mildred’s specific needs. Trusts can also offer tax benefits, but the couple must consult with professionals to ensure they are compliant with both UK and Spanish laws.

Powers of Attorney: George and Mildred should consider appointing someone to act on their behalf if they become incapacitated. This can be done through a Lasting Power of Attorney (LPA) in the UK or an equivalent document in Spain. Having an LPA or its equivalent in place ensures that the couple’s financial affairs and healthcare decisions are managed according to their wishes, even if they are unable to make those decisions themselves.

Estate Administration: Administering an estate that spans multiple jurisdictions can be complex. George and Mildred should ensure they appoint an executor who is familiar with both UK and Spanish laws and can navigate the estate administration process in both countries. This may involve appointing a professional executor, such as a solicitor or a trust company, to handle the intricacies of cross-border estate administration.

Regular Reviews: Estate planning is not a one-time event. George and Mildred should review and update their estate plan regularly, particularly if there are changes in their personal circumstances, such as the birth of a grandchild or the acquisition of new assets. Additionally, they should be aware of any changes in UK or Spanish laws that may impact their estate plan.

Life Insurance: British expats like George and Mildred should consider taking out life insurance policies to help provide financial security for their loved ones in the event of their untimely passing. Life insurance can help cover funeral expenses, pay off debts, pay any IHT due and provide a financial cushion for surviving family members. It is essential to review the terms of the policy and ensure that it adequately covers the needs of the beneficiaries, even across different jurisdictions.

Gifting and Estate Freezing: To reduce their inheritance tax liability, George and Mildred may consider gifting assets to their children or grandchildren during their lifetime or using estate freezing techniques. Gifting can help reduce the value of their taxable estate, but it’s crucial to understand the rules and regulations surrounding gifts in both the UK and Spain. Estate freezing techniques, such as transferring assets into a trust or a company, can help limit the growth of their estate, potentially reducing future inheritance tax liabilities.

Pensions and Retirement Savings: British expats often have pension schemes and retirement savings in the UK. George and Mildred should review their pension arrangements and consider transferring their pensions to a Qualifying Recognised Overseas Pension Scheme (QROPS). A QROPS can provide greater flexibility in managing their pensions, help reduce tax liabilities, and ensure their pension funds are accessible while living abroad.

Digital Assets: In today’s digital age, estate planning should also address digital assets such as social media accounts, online banking, and digital currencies. George and Mildred should create an inventory of their digital assets, including usernames, passwords, and recovery information. They must include instructions in their estate plan on how they want these assets managed and distributed.

In conclusion, estate planning for British expats like George and Mildred can be complex, involving a multitude of factors that span across different jurisdictions. By addressing these aspects and seeking professional advice, expats can create an effective estate plan that protects their assets and ensures their wishes are carried out. So, as George and Mildred bask in the Mediterranean sun, they can rest easy knowing they’ve taken care of their estate planning needs, allowing them to enjoy their well-earned retirement to the fullest.

Contact us today for a fee-free initial meeting with a UK qualified Chartered Financial Planner – expert at helping expatriates with all matters related to UK Estate Planning.


About AES Adviser

AES Adviser advises expatriate clients worldwide on all financial planning matters including wealth management, estate planning, offshore bank accounts, savings and investment, insurance, multi-generational wealth transfer and generating income, from wealth accumulated, to support retirement.