Considerations for holistic estate planning and Will drafting for clients with assets in multiple jurisdictions

Chairperson of the Fiduciary Institute of South Africa, Dr Eben Nel, recently penned this highly informative piece.

Estate and succession planning requires a balancing act between the person who plans the inheritance (the testator or testatrix), the person who is ‘in the waiting room’ (the legatee or heir), and the estate creditor. 

Testators are often oblivious to the potential complexities and pitfalls when their assets, heirs and creditors are situated in different jurisdictions. The process should not be underestimated when one or more Wills are drafted for a client with his or her asset base in more than one country.

Expert advice is essential

 Legal jurisdictions recognise different concepts and connecting factors, such as your domicile (permanent home), your habitual residence (where you must have a regular physical presence which must endure for some time), your nationality, situs (the place where the assets are situated), the place of your marriage celebration, as well as different laws of succession, estate administration and tax dispensations. There may also be differences in interpreting these various factors.

Many legal systems also have a form of forced heirship, of whose nature and extent the testator should be aware. This may include certain classes of heirs with particular rights to inherit a prescribed portion of the estate. While some jurisdictions apply an estate duty regime, like South Africa, others use an inheritance tax system.

Given these variables, it is easy to see that estate and succession planning with an international element can become complex.  
 
When dealing with an estate exposed to multiple jurisdictions, different requirements of the applicable domestic systems must be considered, including the different locations of the assets, the nature of the assets, the domicile, the tax residence of the testator, the applicable matrimonial property regime, the law the will is designed to be in compliance with and the applicable succession laws.

Other aspects to consider are respective rules regarding cohabitation, divorce, maintenance claims, ownership by minors, the rules of probate and the prescribed process of estate administration.

To ensure a holistic estate-planning and Will-drafting process, the following may be helpful as a checklist for clients to go through with their adviser:

• Identify all connecting factors that may impact your estate and testamentary disposition.
• Familiarise yourself with the applicable jurisdictions and their potential impact.
• Consider the relevant documentation within a particular jurisdiction, including any prenuptial or post-nuptial agreements, divorce orders, etcetera.
• Decide whether a worldwide last Will and testament is suitable, or whether a separate Will for each jurisdiction representing one or more connecting factors, as listed above, would be better.
• Decide whether different advisers are needed for each jurisdiction.
• Ensure the applicability of each separate will is clearly defined, as well as the scope and the execution date.
• Ensure all jurisdictional requirements for different Wills are adhered to.
• Make sure that one will does not unintentionally revoke another and address any inconsistencies between different Wills.
• In case of an EU connecting factor, be aware of the contents and workings of the EU Succession Regulation and its applicability in a particular jurisdiction.
• Familiarise yourself with potential tax consequences, forced-heirship rules, double tax agreements, binary agreements and the legal requirements and consequences of the various jurisdictions.
• Ensure cash will be readily available at death in each jurisdiction.
• Consider the need for a separate debts-and-taxes clause in each Will to address the respective tax liabilities.
• Consider whether any living trusts are involved and their impact on the estate and succession planning process.
• Determine whether it would be advisable to use a testamentary trust for minors in a particular jurisdiction.
• Familiarise yourself with the applicable probate and administrative requirements, including the role and powers of such an appointee.
• Consider the applicable matrimonial property regime.
• If possible, align the property regime with the succession jurisdiction.
• Consider the property rules of each lex situs (the law of the place where the property is located) in relation to the client’s wishes.
• State the limitation of revocation or variation intended by the Will.
• Nominate substitutes as intestate rules may differ between jurisdictions (intestate implies there is no valid Will).
• Elect domicile, habitual residence and particular laws to be applicable for validity and interpretive purposes.
• Nominate an executor in each Will, with reference to security requirements.
• Specify which debts, costs and expenses may be discharged from respective estates.
• Indicate on each will in which jurisdiction it was signed and the identities of the witnesses.

It will be clear from the above that the prudent estate planner should consult a professional fiduciary practitioner, preferably with the designation of a fiduciary practitioner of South Africa (FPSA), to assist in the effective facilitation of the process.

Eben Nel is the national chairperson of the Fiduciary Institute of Southern Africa. The original article was published in City Wire https://citywire.com/za/news/eben-nel-the-potentially-complex-maze-of-international-wills/a2454043.