Cryptoassets and divorcing a ‘Cryptoqueen’: Part l - Identification, valuation and preservation
In England and Wales, you have the right to leave your estate to whomever you choose, as in the case of Sting who is choosing not to pass on his £180 million fortune to his children. But things become more complicated if you have assets in other countries.
The musician Sting recently gave an interview in which he declared that his six children would not inherit his purported £180 million fortune, believing that such huge wealth would be a burden to them.
While it may seem surprising that a parent would wish to exclude their children from their will, recent press reports have suggested that such bequests are more common than one might suppose, particularly among the rich and famous. A survey by Skipton Financial Services of 2,000 UK adults also suggested that more than one in five parents believe their children have already had their share of inheritance via other means.
In England and Wales, you have the right to leave your estate to whomever you choose - and were an individual to decide not to leave their children anything at all in their will, the general expectation is that the deceased's wishes would be largely upheld. That said, disgruntled children who were financially dependent on their parent prior to death would be likely to have a good claim for reasonable financial provision under the Inheritance (Provision for Family and Dependants) Act 1975.
Forced heirship affecting international families
However, should the estate comprise international assets in other countries, the position becomes considerably more complicated. In France, for example, children are protected heirs and have a fixed right to at least a minimum interest in their parents' estate, which means that individuals are not able to cut their children out of their estate.
Similar succession regimes in varying forms apply in numerous other jurisdictions around the world including Germany, Italy, Spain, Switzerland, Brazil, Cyprus, Turkey, Luxembourg and Japan. An individual with international assets seeking to exclude their children (or indeed a spouse or civil partner) therefore needs to ensure that they are well versed in the laws of succession in the applicable country. Cross-border inheritance disputes are increasingly commonplace where the deceased held assets in different jurisdictions.
The issues arising from these types of disputes can be complex, not least because retaining control and coordinating competing claims can be difficult when it becomes necessary to run several sets of proceedings concurrently. Connecting factor tests are often critical. For example, an Inheritance Act claim depends upon passing the England and Wales connecting factor test that the deceased was domiciled in this jurisdiction.
Consider separate Wills for assets in different countries
It is usually advisable for an individual with international assets to consider making a separate will for each jurisdiction where they are held. Trying to prove an English will in a different jurisdiction can be difficult and expensive and vice versa for wills prepared elsewhere.
Such difficulties arise not only because of the language barrier and need for translation of all relevant documents but also because some legal concepts are country specific. For example, the requirement to obtain probate does not exist in French law with property passing automatically on death to the prescribed heirs. Furthermore, some civil law jurisdictions may not recognise the English law concept of a trust although similarities can be drawn with the civil law concept of a foundation (also used to hold assets and for succession planning but as a separate legal entity).
When the wills are prepared, it is vital to ensure that they do not overlap and that one does not revoke the other. Moreover, thought should be given to the validity requirements for each jurisdiction, including their form and the way in which they are prepared (in particular how they are witnessed and where) in order to minimise any possible issues that may arise.
We are increasingly experiencing cases of disputed inheritance involving multiple jurisdictions and consider that the types of issues arising are only going to increase as people continue to move around the world more freely.
It is of note that the EU regulation known as Brussels IV, which was adopted in 2012 and applies to the succession of persons who die on or after 17 August 2015, attempts to (i) provide certainty for EU citizens on which law will apply in governing a succession and (ii) impose as far as possible just one jurisdiction's succession law on an international estate. The basic connecting factor test will be habitual residence but it also enables persons to choose the law of their nationality to govern their succession.
Brussels IV will be binding on all 27 EU member states with the exception of the UK, Ireland and Denmark, but there is uncertainty on our exact status as compared with non-EU states (so called 'third states'). The UK government opted out of the regulation due to uncertainty in relation to lifetime gifts but we do have the possibility of a future opt in.
That said, there should be planning opportunities for UK nationals who are habitually resident in, say, France to elect for English and Welsh or Scottish or Northern Irish succession law (depending upon which part of the UK they connect to) to apply to their whole estate and override French succession law which would otherwise apply. It is possible for these nationality elections now to come into effect from 17 August 2015.
The position remains complicated and untested and without increased awareness of the difficulties that can ensue, and individuals will continue to pass away oblivious to the chaos that they may have left behind for their loved ones to unravel.
First published in Spear's Wealth Management online on 16 July 2014.
Should you have any questions about these issues, please contact Katherine Pymont at email@example.com or find out more about our inheritance planning and disputed Wills, Trusts and inheritance services.
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