Inheriting property overseas: a dream come true, but don’t forget the challenges
By Nikola Tomašević, CBSA president
By 2030, Millennials will possess five times more wealth than they have today with forecasts suggesting that, in the USA alone, they are on the verge of inheriting over $68 trillion from their Baby Boomer parents.
Data is not available for the rest of the world but the greatest wealth transfer in history is drawing near.
This will undoubtedly give rise to a plethora of international inheritance cases given the global-scope of the investments and properties.
Persons who inherit assets abroad are usually at a loss as to what to do and whom to contact, and end up wandering from one adviser to another, looking for solutions and ways to understand what is ahead of them. This is often followed by significant travel (made all the more troublesome by Covid-19) and other costs and uncertainty in terms of how the process will unfold.
The inheritance process is complex, and dealing with an overseas inheritance adds to the complexity due to language, cultural and legislative barriers.
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When a French national inherits overseas property from a grandmother in Poland or a cousin in Portugal, that property is subject to foreign legislation.
A crucial step in the process is determining which law is applicable as it may be different from the law of the heir’s country of residence. This can sometimes mean that one inherits less due to different rules or is liable to higher taxes than expected.
Although tax is usually payable in the country where the assets are inherited, some legal systems stipulate that inheritance is taxable also in the heir’s country of residence. This may lead to double taxation in the absence of relevant treaties.
In addition, tax rates significantly vary. For example, in Eastern Europe they range from 0 to 3% regardless of the relationship of the deceased and the heirs (immediate family or just cousins) but in Western Europe it can be as high as 50% depending on the relationship and the value of the inheritance.
To prove the relationship between the heir and the deceased the relevant documents or certificates must be collected in various countries. Particular attention should be paid to this as not having complete documentation may lead to complications further down the line.
Documents usually must bear an apostille or undergo a “recognition” process if there are no treaties between the countries concerned.
Additional problems may arise due to the way the same names are spelt or written in different languages. All of this should be taken care of timely in order to avoid additional costs and wasted time.
Who handles probate?
In most European countries it is common practice for notaries public to handle probate but the courts can also fill this role. In some countries there are no formal proceedings as the process is automatic between the spouses, while the children are entitled to claim their shares from the surviving spouse. Why does it matter? Well, if there is no probate and no inheritance certificate, inheritance can not be claimed in other country unless a whole new process is initiated in that other country.
Having in mind all the differences in practices and legislation from country to country, or even regions, there could be dozens of different scenarios with a unique outcome.
No one knows everything and that’s a fact.
But together we know more.
That is the driving force behind CBSA, a client-centered global service providing comprehensive cross-border succession* solutions.
We support our clients around the globe for the journey that lies ahead. We are committed to providing our clients with sound and sustainable solutions for handing down their wealth to future generations and ensure that clients receive their inheritance with the minimum of effort.
* The long standing practice of and cooperation between the network partners allows CBSA to provide tailor-made solutions for each client with multijurisdictional coverage managed through a single point of contact, guaranteeing, full time, around-the-clock availability, efficiency and flexibility.