Estate planning is a crucial part of your broader financial planning strategy.

However, it is one that is often overlooked.

What will happen to your assets when you are gone? How can you reduce estate taxes to maximise how much you leave behind?

These are questions you need to ask yourself and plan for ahead of time. And just like making retirement plans, the earlier you start, the better.

This guide will provide a detailed breakdown of estate planning, its benefits and other key information.

Estate planning for expats

British expats are often liable for UK inheritance tax (IHT), even if they have not lived in the UK for some time.

That is because IHT is not based on residency status. Instead, IHT could be based on your domiciled status. This rule applies to UK tax but may differ in other jurisdictions.

According to the UK government, those who were UK residents for 15 of the 20 years before the relevant year will be deemed UK domiciled.

For formerly domiciled residents:

From 6 April 2017, there is a new category of deemed domicile.

You’re a formerly domiciled resident if you:

• Are born in the UK with a UK domicile of origin
• Have acquired another non-UK domicile of choice
• Are a resident in the UK and were resident in the UK in at least 1 of the 2 previous tax years

Formerly domiciled residents who added any property to a trust when they weren’t domiciled in the UK can’t exclude that property for the purposes of IHT.

However, this doesn’t apply if you’re only deemed domiciled under the new rules.

The new trust protection measures make sure an IHT charge doesn’t arise when you’re no longer:

• A resident of the UK
• A formerly domiciled resident

The Inheritance Tax Manual provides technical guidance and examples of these changes.

Those liable for IHT can take steps to reduce or, in some cases, avoid an IHT bill.

For example, joint investment policies and bank accounts can make a big difference. That is because there is no IHT between spouses in the UK. Therefore, in most cases, there is no probate required.

Setting up a trust may help expats reduce estate and inheritance taxes. They may also provide other benefits, such as making it easier to manage assets.

Understanding domicile status can be complex. It is advised that you speak with an expert to better understand your tax situation and the best approach for estate planning.

Core components of estate planning

Estate planning is a broad term. In fact, it is made up of various different services.

Some of the core components of estate planning services include:

Last Will and Testament

A will is a legal document that outlines a person’s final wishes. This can include the distribution of your assets, guardianship of minor children, and other important matters.

Seeking legal advice from a lawyer or legal expert is essential to ensure the will is legally binding. Financial service companies such as Holborn Assets work with relevant legal experts for services such as will writing.

Trusts

A trust is a legal structure that allows assets to be held and managed. Trusts can provide greater control over asset distribution, streamline the probate process and help with estate taxes.

There are different types of trusts. Speaking with a financial adviser is the best way to find the right trust for your needs.

Some of the more common types of trusts used in estate planning are:

• Revocable trust
• Irrevocable trusts
• Asset protection trust

Power of attorney

Power of attorney (POA) grants an appointed individual the authority to make decisions on your behalf. POAs can either be given general or limited power of attorney.

There are two main types of POA. They are:

• Financial power of attorney – those responsible for financial decisions
• Medical power of attorney – those responsible for healthcare decisions and other medical decisions

Advanced healthcare directive

An advance healthcare directive is another type of legal document. It provides guidance on an individual’s preferences for medical treatment and healthcare services.

Estate planning solutions with Holborn Assets

While estate planning is a vital component of any financial strategy, it’s one we often neglect.

It’s also important to remember that estate planning is an ongoing process. Regular reviews and updates to your estate plans are needed to reflect life changes.

Having a plan of action in place early is crucial, so don’t overlook the importance of estate planning. Speak to an expert and ensure your affairs are in order.

Holborn Assets is a leading, award-winning financial services provider. We specialise in the expat market, so we are well-equipped to help you overcome the unique challenges that come with living overseas.

Our financial specialists work with a team of legal experts, allowing us to offer a wide range of estate planning services.

Whatever tomorrow brings, make sure you are prepared. Contact Holborn Assets to book a free, no-obligation meeting and learn how we can help you.