Holiday Home Heaven or Hell?
6th June, 2024
How your Holiday Home Heaven could turn out to be Hell for your family. If, like me, you finish all holidays longingly looking out of a plane window thinking about how wonderful it would be just to have that little place in the sun where you can escape to several times a year, enjoy with the family, spend your retirement...
Maybe you imagine wholesale emigrating in your more adventurous moments – well, you’re not alone.
A quick google on buying homes abroad will warn you of the disasters faced by others before you. Lack of planning permission, no utilities, endless paperwork. You may feel savvy enough to avoid these pitfalls. What they often leave out however is what happens when you die.
How a holiday home abroad will be taxed on your death, whether you are free to give it away in your lifetime and whether you are free to leave it to whomever you wish in your Will are not straightforward questions.
Currently, if you are domiciled in the UK your estate on death will include your worldwide assets for inheritance tax purposes. Determining domicile can be a complicated matter and, as there are plans to change it to a residence test, these matters will sit outside the scope of this article for now. The important point to note however is the country in which you own your ‘Holiday Home Heaven’ almost certainly has different rules in determining how they charge inheritance tax. This risks overlap and your bereaved relatives being faced with the headache of double taxation.
You may also assume that you can leave your Holiday Home Heaven to whom you wish on death or that it will automatically go to your spouse or civil partner. Forced heirship rules (sometimes known as automatic entitlement rules) in many countries mean this is not the case. Forced heirship rules in some European countries can mean descendants (children and grandchildren) of the deceased are higher up the priority order than the spouse. This may not only lead to an undesirable position in terms of ownership but it can mean you cannot make use of inheritance tax exemptions available.
Forced heirship rules can also include clawback powers to bring back into an estate of the deceased assets that have been given away during their lifetime. This means that a gift of property you make during your lifetime may later be claimed back from the recipient.
There are often workable solutions to all the above outlined issues and at Ward Hadaway we can help you navigate the complexities of owning assets abroad and, working alongside our network of professionals in foreign jurisdictions, ensure you are fully appraised of your position, options and exposure.
If you have any question about these matters or any other matters relating to Succession Planning or Wills and Probate, please don’t hesitate to get in touch with Suzanne Jaconelli or another of our Expert Private Client Solicitors.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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