With a Power of Attorney, updated wills and tax planning in place, you can make things easier for your family, before and after your death.
By securing a Power of Attorney, updating wills and pensions paperwork and putting suitable tax planning in place, you can make things easier for your family, before and after your death.
Understandably, many people avoid discussing the practical implications of their death with family. But if your affairs are not in order, your loved ones may face unnecessary costs and delays during that difficult time.
What should you consider to make things as easy for them as possible?
Power of Attorney
Although a sensitive subject, you should think about this before it is needed, while you are of sound mind.
Granting a Lasting Power of Attorney legally enables someone to make decisions about your property, finances and/or health and welfare if you are unable to do so, for example through illness or following a serious accident. It is particularly important to consider in the case of a deteriorating mental state.
The person or persons you appoint can help manage your bank accounts, property, investments and pensions, as well as decisions about your health, like changing your doctor. This could be a temporary situation, such as during a hospital stay when everyday bills need paying, or a permanent arrangement, for example, following a dementia diagnosis.
It is a good idea to discuss your intentions with the person you wish to appoint – usually a family member or trusted friend – to make them aware of your wishes. Once registered, a Lasting Power of Attorney for finance and property becomes effective immediately when you no longer want to make decisions for yourself; a health and welfare one becomes effective only when you are unable to make your own decisions.
If you become mentally incapacitated without a Lasting Power of Attorney in force, the Court of Protection will take control of your assets. Each time anything needs to be decided, an application to the Court would have to be made – a costly and time-consuming process for your loved ones.
A key consideration is making sure your will – in which you outline how your estate should be passed on – is up-to-date. It needs to keep up with any major life events like moving house, getting married or divorced, and welcoming new family members such as grandchildren or stepchildren.
For expatriates and Britons with overseas property, it can be beneficial to have two wills – one for assets in your country of residence and a UK one for British-based assets. These should align and cross-reference each other to avoid conflict and the potential for one will to invalidate the other.
While a UK Will can be effective in Portugal, Spain, France, Cyprus, Malta or another country of residence, after going through the UK probate process it needs to be translated and notarised before going through probate there. Separate wills can therefore prevent considerable delays and expense for your heirs.
Note that UK wills usually include a provision to automatically revoke all earlier versions. If you make a foreign will and then change your UK one, ensure your solicitor knows about both so it is not unintentionally invalidated.
Also be aware that the EU regulation ‘Brussels IV’ lets you nominate in your will for the relevant UK law to override local succession law. This enables you to distribute your estate in line with your written wishes instead of according to your bloodline as defined by the local ‘forced heirship’ rules. However, take advice on your options as Brussels IV can have unforeseen implications.
Learn more about Brussels IV and estate planning in Portugal
Remember to update other relevant paperwork as necessary, especially for your pensions, which are often very valuable. When you first set up your pension, you specify who will inherit your benefits through ‘expression of wish’ or ‘nominated beneficiary’ forms. However, many people forget to update these if their family situation changes.
If your documents are not up-to-date and there is confusion or a dispute over who should receive your benefits, usually the Trustee of your pension will make the final decision. Avoid this scenario by ensuring both your pensions paperwork and Will are current and aligned with each other.
For UK nationals, even if you have lived abroad for years, you could still be considered UK-domiciled. This brings you into line for 40% UK inheritance tax on worldwide assets, potentially in addition to local succession taxes.
See five things you may not know about UK inheritance tax
An extra gift you can leave heirs is structuring your estate to protect them from losing too much of their inheritance to taxation. Explore locally-compliant opportunities that provide tax advantages during your lifetime as well as for your future heirs. A trust structure, for example, can be very tax-efficient for estate planning purposes, but take personalised advice for the best results.
Estate planning is a complex area and every family is different, so your approach should be tailored to meet your personal objectives and unique situation. With careful planning, you can have peace of mind that your legacy will end up in the right hands at the right time with minimum fuss and expense for your heirs.
Blevins Franks has decades of experience advising British expatriates on their estate planning. Our ‘My legacy’ resource helps you keep all relevant information in one place so your family can easily access what they need, together with your personal wishes, when the time comes. We can also guide you through the various legal issues and how best to structure your estate to fulfil your wishes in the most tax-efficient way possible.
Contact us for an estate planning healthcheck
This article should not be construed as providing any personalised investment advice. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change; individuals should seek personalised advice.