Interstate and international estate planning

31 March 2020

Introduction

A nation of people on the move

That Australia is a country of immigrants is not news to anyone. The 2016 census found that 28% (or approximately 6.7 million) of Australians were born overseas, and the number of Australians with at least one parent born overseas is greater again.

Conversely, it is thought that about 1 million Australians are living abroad. The most popular destinations for Australians living abroad are believed to include the United Kingdom, Greece, the United States of America, New Zealand and China.

Movement within Australia is also common. For example, the 2016 Census found that a net number of people had left Sydney since the 2011 Census to move either to regional NSW or interstate. Therefore, Sydney’s net population increase was a result of births and of immigration from overseas.

Implications for estate planning

The estate planning implications are significant for a person living in one state whilst owning assets interstate or overseas. There are a number of issues to consider for a cross-border estate including determining:

  • Where the person is domiciled;
  • Where the person’s assets are located;
  • How the rules of succession will affect the transfer of assets both within Australia and abroad;
  • Who will have authority to represent a deceased estate in each jurisdiction;
  • The extent to which the estate will be subject to family provision claims; and
  • The tax implications for the estate.

In the coming series we will look at each of these areas – estate planning (before death), estate administration (after death) and estate litigation (when someone wants to contest an estate) – when there are cross-border issues to consider.

Domicile

What is domicile?

Domicile is key to cross-border estate planning because it will help determine in which jurisdiction it is necessary to apply for a grant of probate or administration and who is entitled to apply for a grant in that jurisdiction.

Every person must have a domicile but cannot have more than one domicile at a time. Domicile is not the same as tax residency. The applicable law is determined in common law countries (such as Australia, UK and New Zealand) by reference to where the deceased lived. However, many non-common law countries frequently use the deceased’s nationality or religion as the basis for determining domicile.

There are three types of domicile:

  1. Domicile by origin
    The place where the person was born.
  2. Domicile by dependence
    The place of domicile for a person who lacks ability to acquire a domicile for themselves and whose domicile is determined by another person. For example, a person under 18 will normally acquire the domicile of a parent.
  3. Domicile by choice
    The place where the person voluntarily made his or her habitual residence, demonstrated by physical presence in a location and intention to reside in that location. As long as the intention to reside in a location is shown, the duration of presence in the location does not matter.

No one factor alone is determinative as to the question of a chosen domicile but it is summed up in the Domicile Act 1982 (Cth):

“The intention that a person must have in order to acquire a domicile of choice in a country is the intention to make his or her home indefinitely in that country.”

How the Court determines domicile

A good illustration of this can be seen in the English case concerning the estate of Anthony Shaffer (Morgan v Cilento [2004] EWHC 188 (CH)).

Mr Shaffer was born in England in 1926. In 1975 he moved to Queensland to live with an actress, Diane Cilento whom he married in 1985.

Mr Shaffer continued to visit England for about three weeks a year, but from about 1997 onwards, the visits were for longer durations. Mr Shaffer had also commenced having an affair with a woman in England.

Mr Shaffer signed his last will in 1999 and died in 2001. A dispute arose over the estate’s potential tax liabilities and there was the possibility of a family provision claim. The High Court of England and Wales had to determine whether Mr Shaffer was domiciled in England and Wales or in Queensland. The Court considered a multitude of factors and came to the conclusion that Mr Shaffer was a Queenslander at his date of death. Some of the determining factors included that Mr Shaffer:

  • Had followed Ms Cilento when she decided to return to live in Australia, where they married and made their matrimonial home;
  • Shipped most of his personal possessions to Queensland, where they remained at his date of death;
  • Designed and built a theatre in Queensland with Ms Cilento, largely financed by him;
  • Had sold almost all his assets in England by 1985, and for the best part of a decade owned no home there either directly or indirectly;
  • Deliberately acquired residence in Australia for tax purposes, and part of his desire to do so was the abolition of death duties in Queensland;
  • Had an Australian bank account and credit card, and his English company was reincorporated in Australia;
  • Stated on official papers that he intended to live permanently or indefinitely in Australia and until the mid-1990s spent the majority of his time in Australia;
  • Exercised the right to vote in Queensland and never stopped talking of Queensland as his home;
  • Made a will in Queensland in 1999, and the only chattels he thought significant enough to mention were all in Queensland.

Location of assets: movables and immovables

Along with domicile, the other key factor in cross border estates is the location of the deceased’s assets. The location of the asset will help determine in which jurisdiction it is necessary to apply for a grant of probate or administration.

Title to immovable assets (such as land) will be determined by the law of the jurisdiction where the asset is located. Therefore, in the case where a person dies without a valid will, entitlement to a parcel of land will be determined by the intestacy laws where that land is located, regardless of the intestacy laws of the deceased person’s domicile.

Title to movable assets (such as shares and personal effects) will be determined by the deceased’s domicile at the date of death. For example, in the case where a person dies without a valid Will, entitlement to a bank account located in a jurisdiction outside of the deceased’s domicile will be determined by the intestacy laws of the deceased’s domicile.

How to construe the Will

Having determined the deceased’s domicile and the location of the assets, questions may arise about the Will itself:

  • The validity of a Will (such as whether it was signed correctly, or was procured by fraud or undue influence) as it affects movable assets is determined by the law of the testator’s domicile as at the date of death;
  • The validity of a Will as it affects immovable assets is governed by the law where the property is located;
  • The interpretation of a Will is presumed to be governed by the law of the testator’s domicile at the time of making the Will unless he or she has shown a contrary intention.

Next issue: Overseas Wills in Australia and Australian Wills overseas

This article was written by Michael Henley, Partner and Philip Davis, Special Counsel.

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