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Inheritance Planning & Tax Minimisation

The basic problem

Everybody is going to die. Very few of us prepare for this. As a result, most of us force our families to waste a lot of money and to pay ridiculous amounts of, usually, totally unecessary taxes.

If you operate internationally - for example, if you live in one country but work in another or you live temporarily in a country but intend to return to another, or if you have a holiday home or investment property in a foreign country - the need to plan your affairs becomes even greater.

In these situations, you - or your family after you have died - will end up having to deal with two (or possibly more) governments, tax offices and legal systems.

Each of them will be keen to grab hold of as much of your money as possible yet, with a little bit of planning, you may well find that you do not have to pay any of them anything.

Making sure that the right people inherit

Most of our clients assume that they can do what they want with their property when they die. They can leave it to their children, their mistress or the cats home. The choice is theirs.

They assume this because most of them come from the anglo-saxon world of the 'common law', where such freedom is a basic feature of our system.

Clients who come from mainland Europe or from much of the rest of the world, do not expect this freedom. In their countries - where the legal system is based on Roman law or Napoleonic law - it is taken for granted that there are restrictions on who can inherit your property when you die. Usually your estate, or at least a large part of it, must go to your children or certain other fixed categories of relative.

You are free to dispose as you wish of only the portion left over once the state rules have been carried through.

Significantly, in many countries the property passes to the children and not to the wife or husband. This is often not what our clients would like to happen.

Worse still, if you have married for a second time, your children of your first marriage will usually have priority over your second wife.

And if you are living with someone (of whichever sex) to whom you are not married, in many countries their rights will be almost non-existant.

These problems can effect you. In many of these countries they insist that their rules should apply also to foreigners even though those foreigners would, under their own law, have the freedom to deal with their estate as they wished.

These problems can, very often, be solved by the careful planning of your affairs. The sooner this is done the better, because it may well involve changing the way in which you own assets during your lifetime and it is far easier - and cheaper - to do this when you buy the assets rather than later on.

Minimising your tax liabilities

Everybody knows that tax law is complicated and contains loop holes which the seriously rich use to avoid paying tax. Fewer people understand that those same loop holes - and other intentional allowances within the tax systems - can be used by perfectly ordinary people to eliminate or greatly reduce their liability to tax when they die.

If you are operating internationally then the arrangements that you make must also be international. There is no point in saving tax, say, in France if it simply increases the amount of tax you have to pay in, say, the U.S. or England.

Do not underestimate the amounts that can be saved. Very simple changes can reduce tax bills by hundreds of thousands of £/€/$.

For example, one of the members of The International Law Partnership Ltd. recently advised a lady who was thinking of buying a house in France about how to save tax. By just changing a little the way in which she structured her purchase she saved over €200,000 of tax on a €700,000 property.

The need for specialist advice

Your local lawyer or accountant in unlikely to be able to help you save tax or arrange your affairs in these cirumstances. He or she maybe very good at saving tax in the country where you live but they are likely to know nothing about the tax systems - and therefore the threats and the opportunities - in the other countries where you have financial interests.

Similarly, the lawyer or accountant in the country where your holiday home is located may well be able to give you excellent advice about reducing the inheritance problems or tax bill in his country but he will know little or nothing about the tax rules or inheritance system in the country where you live or, indeed, in any of the other countries where you have financial interests.

So you need a specialist.

Finding the right solution in these multi-national cases involves balancing the opportunities and threats in each place involved. There is seldom a perfect solution that gives you the best possible outcome in each and every country. Instead, we are looking for solutions which avoid all of the worst problems and give you the benefit of as many of the good tax breaks as possible.

The International Law Partnership Ltd. has members who are lawyers and accountants experienced in dealing with these problems in their own country and familiar with the need to work internationally to meet their clients' needs.

We work by your having a preliminary discussion to establish your requirements, the potential legal obsticles in your path and any particular tax challenges that might arise. We then arrange for a conference call between as many people as may be necessary to deal with those issues. In a recent case where our clients were and English man married to a Swedish lady, both living in Germany and with investment property in France and the United States, the call involved tax lawyers in each of those countries and, of course, our clients. At the end of the call we had worked out a solution that met our clients needs and which did not give rise to any difficult tax or inheritance problems in any of the countries in question.

This was a particularly complicated case and involved far more people than would normally be necessary. Yet it was not very expensive. This is because the people involved in the call were all highly experienced in the field and knew both the way in which we work and the outline of what was needed internationally. The whole call took little more than half and hour.

Next steps

Please look at the Legal Guides, videos, MP3 seminars and other materials set out to the right of this page.

If you would like us to help you, please complete our Client Pack and send it back to us. We will contact you to clarify your requirements and then introduce you to the person most appropriate to deal with your case.

If you do not find the information that you need, please send us an email explaining your problem and we will contact you.

© The International Law Partnership Ltd. Page last revised 5 Feb 2010

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