Succession Planning with Multi-Jurisdictional Assets – The Role of Beneficiary Trust Structures

Succession or inheritance planning can be a daunting task for anyone, but it becomes exponentially more complicated when your assets are spread across multiple jurisdictions. Whether it’s properties, investments, or bank accounts, having assets in different countries introduces a host of legal, tax, and administrative challenges that can significantly delay the distribution of your estate and increase the burden on your loved ones.

The Challenges of Multi-Jurisdictional Succession Planning

When dealing with assets in multiple countries, the first major hurdle is navigating the various legal systems. Here are some of the most significant challenges:

1. Differing Legal Systems:

• Recognition of Wills: Not every country recognises a will made in another jurisdiction. For example, a will that is valid in one country might not be automatically recognised in another, necessitating the creation of multiple wills. This can lead to inconsistencies and potential disputes if the wills conflict with one another. Learn more on why it is important to have a multi-jurisdiction will.

2. Forced Heirship Rules: In some civil law jurisdictions, such as France, forced heirship laws require that a portion of the estate must be allocated to certain relatives, such as children, regardless of the deceased’s wishes. This can conflict with common law jurisdictions where individuals generally have more freedom in how they distribute their assets.
   Taxation Complexities:

• Double Taxation: Some countries impose estate or inheritance taxes, while others do not. This can result in double taxation, where the estate is taxed both in the country where the assets are located and in the country of the deceased’s domicile. While international tax treaties may provide relief, not all countries have such agreements, leading to significant financial implications.

• Major countries that Malaysia has a Double Taxation Agreement with:

1. Australia

2. Canada

3. France

4. Germany

5. Japan

6. New Zealand

7. United Kingdom

• Varying Tax Rates: The rules governing estate and inheritance taxes can differ drastically between jurisdictions, creating uncertainty and potential liabilities that can erode the estate's value.

3. Probate Process:

• Multiple Probate Procedures: When assets are spread across different countries, the executor of the estate may be required to initiate separate probate processes in each jurisdiction. This can be time-consuming, costly, and administratively burdensome, with each country’s legal system imposing its own requirements.

• Asset Freezing: In some jurisdictions, assets may be frozen until the probate process is completed, delaying their distribution to beneficiaries and potentially causing financial hardship for dependents.

4. Currency and Economic Fluctuations:

• Currency Risk: The value of assets held in different currencies can fluctuate due to exchange rate changes, which can affect the overall value of the estate when converted into the beneficiaries' home currency, potentially leading to losses.

• Market Volatility: If the death occurs during a market downturn, liquidating assets could lock in losses. In jurisdictions where probate requires the sale of assets, this could significantly diminish the estate's value.

5. Administrative Challenges:

• Documentation and Compliance: Different countries require different documentation and compliance with various regulations, making the process administratively complex. Language barriers and differing legal terminologies can further complicate communication and documentation.

• High Costs: The cost of managing and administering an estate across multiple jurisdictions can be substantial. Legal fees, probate costs, and potential taxes in each jurisdiction add to the financial burden on the estate.

This case study highlights the complexities expatriates face when managing multi-jurisdictional assets. It explores the administration of a Swiss expatriate's estate with assets in both Singapore (a common law country) and multiple European civil law jurisdictions. The key challenges include navigating different legal systems, establishing domicile, and obtaining grants of letters of administration in common law countries while adhering to succession procedures in civil law countries. Collaboration with cross-border legal experts is essential to streamline the process and resolve conflicts in estate distribution.

For full details, refer here.  

The Role of a Beneficiary Trust in Streamlining Succession Planning

A Beneficiary Trust is a trust structure designed to alleviate the administrative and financial burdens of international probate. Given these challenges, expatriates with assets in multiple jurisdictions can benefit greatly from establishing a Beneficiary Trust. This legal structure offers a practical solution for managing global assets, ensuring smooth succession planning, and preserving the value of the estate.

• Centralised Asset Management: A Beneficiary Trust allows expatriates to consolidate their global assets under one legal structure. This simplifies the management of these assets, reducing administrative burdens and ensuring that they can be managed and distributed from a single jurisdiction.

• Avoidance of Probate: By holding assets within a Beneficiary Trust, the need for probate in multiple jurisdictions can often be bypassed. Trustees, as the legal owners of the trust, can immediately act to distribute the assets according to the deceased's wishes, without the delays and costs associated with the probate process.

• Flexibility and Control: During their lifetime, the account holder retains full control over the assets within the trust. They can amend the trust, change beneficiaries, or withdraw funds, ensuring the trust remains aligned with their wishes.

• Preservation of Asset Value: One of the critical benefits of a Beneficiary Trust is that investment assets do not necessarily need to be liquidated upon the account holder’s death. This is particularly advantageous during market downturns, as the trust structure allows assets to be retained rather than sold at a loss. By maintaining these assets until market conditions improve, the estate can preserve its value and potentially even grow, benefiting the beneficiaries in the long term.

• Simplified Succession Planning: By using a Beneficiary Trust, the complexities of managing multiple probate processes across different jurisdictions are effectively eliminated. This ensures that the estate is distributed quickly and in accordance with the deceased's wishes, minimising stress for the family during an already difficult time.

Conclusion

For expatriates with assets in multiple countries, a Beneficiary Trust is an essential tool for effective succession planning. It simplifies the management and distribution of global assets, avoids the complexities of international probate, and, crucially, preserves the value of the estate during turbulent market conditions. This makes it a vital component of any expatriate's estate planning strategy, providing peace of mind that their loved ones will be taken care of efficiently and without unnecessary financial losses.

At Melbourne Capital Group, we work closely with trusted partners to help set up Beneficiary Trust structures tailored to your needs. Reach out to Jake Mowson, Private Wealth Manager at jakemowson@melbournecapitalgroup.com to start securing your family’s financial future today.