Making or Updating a Will – Expatriate Issues
Commencing an overseas assignment is one of those occasions, just like marriage and the birth of children, when you should review your current will, or the making of a will if you do not currently have one. The penalty for not doing so is the prospect of having your estate (very slowly) distributed under often strict and inflexible statutory guidelines that may be contrary to your own preferences and incur taxes at a higher than necessary level.
Some issues to consider when making or updating a will:
- Generally, if you have substantial assets within Australia, you should not leave the assets to one of more beneficiaries absolutely without considering the taxation consequences to your beneficiaries. Your circumstances may require the Will to be as flexible as possible, with perhaps most assets left to the trustee of a testamentary trust - this is a discretionary trust which is established by a Will. Under the will the trustee will have the power to distribute income and assets in the most tax effective fashion, having regard to the personal circumstances of the beneficiaries. In this context, the Will can contain guidelines for the trustee to follow on the allocation of income and assets and you may leave a letter expressing your wishes with your trustee. This letter will not be binding on the Trustee. Your legal and financial advisor can assist you in obtaining the best structure for your personal circumstances.
- In terms of the trustee, this can be a professional organisation or solicitor, but may also be your spouse or any other trusted individual, or individuals. Note that the role of trustee can be onerous on occasions, particular if the estate's circumstances are complicated, and the trustee should be chosen with this in mind. Also, trustees are entitled to compensation for their activities and you should familiarise yourself with the fees of any professional organisation this is particularly the case if the fees are a percentage of estate assets and these are reasonably substantial. Note that we do not generally support the use of Trustee companies in the preparation of will and provision of executor service - they generally lack the experience to address expatriate issues and can be unduly expensive if the estate is complicated.
- Within a Will you have the right to nominate the guardians of any of your children who are minors, if both your spouse and you should die. Whilst there are some circumstances in which this nomination might be overturned by a court this is relatively uncommon.
- It might seem logical that having one will covering all your assets - wherever they might be – is the tidy, preferred option. In fact, if you have reasonably substantial foreign assets, having one will in Australia or elsewhere attempting to cover all your assets is generally not the preferred approach. Instead, you should consider making a separate will in each country in which you have assets/income, and obtain appropriate legal advice in each country. The structure of your will in each country will be a reflection of the estate and tax laws applying in that country. Any attempt to put in place one over-arching will applying to all assets, wherever they might be, will almost inevitably lead to higher tax or estate duties across the entire estate.
- You should also be wary of making provision or direction for assets to be transferred into Australia or to an Australian resident, or applied in favour of a resident beneficiary without the benefit of professional advice, in case it has an adverse tax impact. Expatriates with assets in a number of countries are advised to seek appropriate legal, and other professional advice such as tax, regarding the proposed disposition of any estate.