Recently we assisted clients who, although on the surface were
Australian, had a past in the UK.
Their story was not unusual. Born in Australia, Australian
citizens, moved to the UK after university to enjoy London and
travel through Europe, 8 years later they returned back to
Australia and then 12 years after that they decided it was time to
sort their estate planning.
The alarm bells started to ring as they explained their
continued asset holding back in the UK.
The first ring: who will get the assets upon death (there was
no UK will)?
The second much louder ring: what assets will be left after UK
The final gong: can their Australian assets be clawed into the
UK inheritance tax regime?
United Kingdom considerations
The UK has a unified estate and gift tax called inheritance tax
(IHT). Key elements of IHT are:
it applies to the value of your estate (your property, money
and possessions) at the time of your death;
it is charged on your estate at the rate of 40%;
if you reside in the UK and are domiciled in the UK, IHT
applies to your worldwide assets;
if you reside outside of the UK, however, you are domiciled in
the UK, IHT applies to your worldwide assets; and
if you reside outside of the UK and you are not domiciled in
the UK, IHT applies to your UK assets only.
Even if you are not domiciled in the UK, you are deemed to be
domiciled in the UK for IHT purposes if you:
reside in the UK for 17 out of 20 years prior to your death;
you die within three years of ceasing to be domiciled in the
Fortunately for our client, they would not be
deemed domiciled in the UK. This would mean IHT would apply
only to their UK assets and not their worldwide
evaluate your asset holdings based on their location and the
death tax system (if any) of that location; and
write not only a will in Australia, but also write a will that
deals exclusively with assets held in that location.
It is possible to have more than one will however, it is
important that each will is drafted in accordance with the laws of
the country where it is to apply and that multiple wills do not
cancel each other out.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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