With increasing globalization, more and more people are finding themselves travelling in their personal and professional capacities to various countries, becoming global citizens with investments, business dealings, property and even family across geographies.
In this article, Hanisha Amesur, Director, Business & Family Solutions at Lighthouse Canton analyzes the legal recognition, enforcement and various conflicts of laws that can impact Wills when such individuals consider succession planning. Want a PDF copy of the following Wealth Insights article? Contact us for your copy.
Taking the decision of drawing up a Will is a milestone achievement in anyone's life. It is the testament that one has created tangible value in terms of assets and which, in the act of selflessness, should be enjoyed by their loved ones after the person is gone.
Come to think of it, most people believe that a Will requires one to draw up a list of their assets, a list of their beneficiaries and allocate those assets to those beneficiaries in an order prescribed.
In an ideal world, the response would be yes. Create a Will, in your words in a language familiar to you, appoint a few people and you are done.
However, can this simplicity be achieved in the case of an international family or persons?
Globalization & the Rise of the Expatriate
The idea of an expatriate life has been around for the past 80 years. It initially began with merchants and traders traveling on ships, making new shores their homes, setting up businesses, and having assets in their home country as well as the new country of their choice. With many expatriates choosing to marry locally, this also led to the rise of bi-national cultural families. Today, the expatriate life may no longer be just limited to one locality. With increasing globalization, travelling and relocating for work is no longer limited to a single location for some. Many also end up starting businesses or investing in these countries, purchasing properties, raising multinational and multicultural families across geographies.
Succession Planning for International Families
As such, most high net worth families today qualify as "global investor families" with either
- The family living in one country with business interests and/or asset holdings across the globe; or
- Family members in different parts of the world with majority of the business and/or asset holdings is in the home country; or
- A combination of both.
Add to this a portfolio of crypto and digital assets which lack precedent with succession, thus creating newer challenges.
While a family may consider other succession planning structures such as trusts and foundations, the quintessential question of Wills eventually arises for assets that cannot be bought under or transferred to such trusts and foundations.
Questions such as:
- Can I just make one simple Will?
- Should I make one Will that covers all my global assets, or make a Will for each country that I have asset(s) in?
- What are the laws in these different countries? Would there be a conflict in the laws?
- What if one country does not recognise the Will probated in another? Does the law of the country where you have an asset allow you to probate a foreign Will? For example: A Singapore Will can be probated in India since the succession law of India provides for the re-sealing of the probate of a Will from a competent jurisdiction.1
- What are the risks of the Will being contested? Should I gift some of these assets in my lifetime?
- Is an International Will recognized in the country where I have assets, i.e., are all these countries signatory to the Wills Convention of 1973?
- In case of having minor kids, where should the appointed guardians be located? What are the local laws around recognition of legal guardians? Do the guardians have the capability of managing the assets?
Despite the many considerations, it has been observed that most may choose to draw multiple Wills rather than a single International Will, mostly because
- Unknown Concept: International Wills, as a concept, are quite unknown. Advisors in various countries understand the local law but may not be well-versed with the laws of other countries.
- Limited Signatories: the signatories to the International Wills Convention are limited in number. Accordingly, the recognition of the Will and its execution is limited only to those countries.
Under the circumstances that the country is not a signatory to the Convention and is still willing to recognize an international Will and do the Probate, there are several other challenges to consider such as:
- Inheritance Tax: Countries impose tax on an inheritance at rates based on who is inheriting the assets. For example, a gift to your spouse might be tax free; a gift to your children might be taxed at a very low rate but a gift to someone to whom you're not related to could be taxed at 40, 50 or 60%. Again, the form of your international Will might be valid, but it could give rise to enormous and distressing tax liabilities.
- Forced Heirship and Community Property Law and Shariah issues: In many countries, local inheritance laws limit the people to whom you can pass on your assets when you die. The law may say, for example, that if you have children a fixed percentage of your assets must go to those children. If your Will, though in valid international form, does not comply with those rules, it will be invalid.
- Cost inefficient: Since it is one Will dealing with properties across various countries, the local transmission rules/ income/ compliant asset rules may not have been adhered to, which may result in unnecessary asset conversion/ transfer costs in that specific country. This can render the Will grossly tax-inefficient or very expensive to implement.
- Different Types of Wills within the same country: Wills do not just vary between country and country €“ their content can sometimes be interpreted differently in different parts of the same country: for example, in the different states of the United States or in the different regions of Spain. Accordingly, a Will made in one State/ Canton may be interpreted/ applied differently in another State/ Canton thus resulting in the execution not being in line with the original intent of the Will maker.
- Time inefficient:
- Most countries will want to have the original signed Will as the basis for execution. They will not be satisfied with the certificate signed by the Notary, especially if this is not how Wills are dealt with in their jurisdiction. Again, this can impose significant delay on the whole process.
- If the international Will is written in a language that is different to the language of the country where it is being probated, it can pose huge problems while trying to execute it. Such as an example would be a Will in a non-English language from a developing nation, that has been probated and has come to the Singapore Court for validation. Such a Will may come under close scrutiny by the court/ authorities and would be need to be examined thoroughly. The translation itself will cause huge delays because it needs to be carried out by licensed persons, which may be expensive to carry out.
While it may seem easier or tempting to simply find a template online to create a Will, there are many considerations that need to be kept in mind for a Will to be drafted and finalized.
With complexities around international holdings and asset holdings growing more diverse, succession planning goes far beyond just drawing up a "simple" Will and requires sophisticated and finely tuned structuring.
So where there is a Will, it is best to make sure you do it the correct way!
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