English and Welsh Expats warned their Wills and IHT liabilities are seriously affected now the UK has left the EU

Inheritance Tax (IHT), succession and Will laws have impacted British people living abroad now the UK has left the EU and most expats are totally unaware of the problems they are now facing and what they need to do in order to rectify their estate planning.

In the UK, Inheritance tax is charged on the estate of someone who has died and is passing on their assets, so long as the estate’s total value is above £325,000. Where IHT is due, it is usually charged at 40 percent.

Expats will find IHT a difficult issue as it is charged on transfers of worldwide assets by people domiciled in the UK, and transfers of UK assets by people not domiciled in the UK.

Tracy Storer, a Senior Partner at Chorus Financial addressed some of these issues where she explained how IHT rules tend to work in Spain. She explained:

“Inheritance tax in the UK is based on the person’s estate and has a tax-free threshold of £325,000, plus generous allowances for your primary residence.

“In Spain, this is very different and works on a beneficiary-based system, where the tax-free amounts differ depending upon the relationship between the deceased and their beneficiaries – i.e., husband and wife, parent and child.

“It is much harder to mitigate against IHT in Spain, but there are ways to structure your assets within a Will to reduce the tax liabilities on death.”

Expats will need to be aware of both UK and EU inheritance rules. The UK Government confirms that if a person’s permanent home (domicile) is abroad, IHT will only be paid on their UK assets, for example, property or bank accounts held in the UK.

“Ex pats must look at the differences between succession laws between different countries.

“In England and Wales, we can leave what we want to whom we want and exclude anyone we wish in our Wills.

“This is subject to rules on capacity and some other technical considerations. But the general rule is that we can do what we want with our Wills in the UK.

“This is in stark contrast with Spain’’.

The EU has a succession regulation (Brussels 4 clause) so a Spanish person living in Germany owning property there can elect that Spanish rules apply to their succession in Germany.

“With the UK now out of the EU, English expats must now write a separate English Will to cover their English assets as they can no longer rely on this application, currently in their Spanish Wills, covering their English estate, but the clause will still enable them to leave their Spanish estate under UK succession law.

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