Inheritance while living abroad
Receiving an inheritance can be complicated enough domestically.
When the beneficiary lives in another country, the planning can involve multiple tax systems, currencies, asset types and professional advisers.
The client may inherit cash, investments, property, pensions, business interests or trust distributions in a country where they no longer live.
Josh Clancey works alongside tax advisers, private-client lawyers, trustees and estate-planning professionals where an international inheritance needs to be integrated into the beneficiary's wider financial plan.
The inheritance is only one part of the client's wider financial position
The first question is not necessarily "How should this money be invested?"
Before investment decisions are made, the professional team may need to establish:
- what the client is actually receiving
- where the assets are situated
- whether tax is payable
- whether the assets can be transferred
- whether property should be retained or sold
- whether trusts are involved
- whether the beneficiary has reporting obligations
- what currency the assets are held in
- how the inheritance changes the client's existing financial plan
Once those issues are clear, financial planning can focus on what the inheritance should achieve.
Common planning areas when an inheritance crosses borders
Cash inheritance
A large cash inheritance may need to be divided between short-term reserves, debt repayment, investment and longer-term objectives.
Inherited investments
Existing investments may not be appropriate for the beneficiary's country of residence, tax position or risk profile.
Inherited property
Property may create decisions around retention, sale, rental income, local tax and currency.
Trust distributions
Where assets are inherited or distributed through a trust, separate tax and reporting considerations may apply.
Multiple currencies
The inherited assets may be denominated in a different currency from the client's future spending.
Estate and beneficiary planning
A significant inheritance can change the client's own estate-planning position.
Questions to ask when a client inherits while living abroad
What has the client inherited?
Cash, securities, property, pensions, trusts and private-company interests all require different analysis.
Where are the assets situated?
The location of the assets can affect administration, tax and transferability.
Has the estate administration completed?
Financial planning should not assume the client has access to assets before they are legally distributed.
Are tax liabilities still outstanding?
The relevant tax advisers should establish both estate-level and beneficiary-level consequences.
Are there embedded gains or illiquid assets?
These can affect whether the inheritance can be restructured immediately.
What does the client want the inheritance to achieve?
The money may support retirement, property, children, investment, philanthropy or wider family objectives.
Does the inheritance materially change the client's own estate?
A significant increase in wealth can create new estate, protection and beneficiary-planning needs.
Useful resources for advisers working with international inheritance cases
The Professional Adviser's Guide to Cross-Border Estate and Beneficiary Planning
A broad guide to coordinating assets, beneficiaries, trusts, pensions and estate-planning issues across jurisdictions.
Cross-Border Beneficiary and Estate Coordination
A focused technical brief covering the interaction between international assets, beneficiaries and financial planning.
International Estate Planning Coordination Checklist
A practical checklist for reviewing estate assets, beneficiaries, professional advisers and liquidity across jurisdictions.
Life Assurance and Estate Liquidity for International Families
A technical resource covering the role of accessible capital where estate liabilities or family needs may arise.
Cross-Border Referral Checklist
A practical checklist for identifying where specialist tax, legal and financial-planning input is required.
The Professional Adviser's Guide to Cross-Border Financial Planning
A wider guide to coordinating financial decisions where clients have assets, family and liabilities across jurisdictions.
The inheritance should not automatically remain in its existing form
A beneficiary may receive:
- an investment portfolio chosen by the deceased
- a property they never intended to own
- large cash balances
- concentrated shares
- assets in an unfamiliar jurisdiction
There can be a natural tendency to leave everything untouched because the assets formed part of someone else's estate.
That may not be appropriate.
The beneficiary's financial position may be completely different.
The review should consider:
- risk tolerance
- time horizon
- tax position
- investment costs
- diversification
- currency
- liquidity
- retirement objectives
- family needs
The appropriate strategy should be built around the beneficiary rather than inherited automatically from the previous owner.
Significant inheritances can change the entire financial plan
An inheritance can alter decisions that previously appeared settled.
A client may now be able to:
- retire earlier
- reduce working hours
- repay debt
- purchase property
- increase pension funding
- invest for children
- create a larger cash reserve
- support family members
- make lifetime gifts
- increase charitable giving
It can also increase the client's own estate exposure and make protection or beneficiary planning more important.
Cash-flow modelling can help establish which opportunities are genuinely affordable rather than making decisions simply because capital has become available.
When should the referral happen?
A referral can be useful where the client:
has received a substantial inheritance
lives in a different country from the estate
has inherited foreign property
has received investments they do not understand
expects a trust distribution
needs to invest inherited cash
wants to use part of the inheritance to retire
has beneficiaries in several countries
now has a materially larger estate
Have a client receiving an inheritance while living abroad?
If an inheritance needs to be coordinated with the client's investments, retirement planning, property, currencies or wider estate, an initial discussion can help establish where financial planning should sit alongside the legal and tax advice.