Key Considerations for a Swiss Executor Dealing with UK Assets
The opportunities afforded by international mobility and cross-border investment today have obvious attractions, but they raise a number of succession and tax considerations.
UK assets can create complexities when navigating through the administration process. Be it financial assets banked in the UK, investment assets held through a UK entity or within a UK situated financial portfolio, or UK situs real estate, some initial factors should always be considered when faced with this situation, regardless of whether the UK estate is being dealt with in tandem with the non-UK estate (e.g. Swiss succession), or some time afterwards.
What should a Swiss based executor dealing with assets in the UK be thinking about?
1. Where are the assets?
The UK is not a sole legal jurisdiction. The succession rules and taxes governing assets situated in England may differ to those in Scotland, and although assets located in Crown Dependencies (such as, eg, the Channel Islands or the Isle of Man) may be denominated in GBP, the succession rules and taxes of these jurisdictions again need to be considered independently. This note considers the general approach in England.
2. Is there a Will?
Not everyone leaves a Will. And even if there is one, there may be one Will purporting to deal with global assets, or there may be several Wills, each limited to a specific jurisdiction or each excluding certain jurisdictions. Careful consideration needs to be given to ensure that, for example, (i) the Will effectively deals with the UK assets, (ii) multiple Wills have not inadvertently revoked one another, and (iii) the Will is valid in all relevant jurisdictions and covers all assets worldwide / within the particular jurisdiction.
If there is no Will (or no Will dealing with the UK assets), intestacy rules would come into play – whether these are the intestacy rules of the jurisdiction of the deceased’s domicile (using the English sense of the word) or the rules of the jurisdiction of where the assets are located would need to be considered.
3. Was an election for English law made in a Swiss Will?
If the deceased left a Will, consideration needs to be given to the effect of an election for English law made in accordance with Swiss law. This will determine, from a Swiss law perspective, the applicable law to the succession of the assets in the estate, which is of particular relevance if the deceased died in Switzerland or held assets here. As a matter of English law, a choice of law election does not override otherwise applicable English private international law rules of succession..
A valid choice of law election for English law in a Swiss Will may mean that English substantive law applies to the succession of certain assets, however it may be that Swiss substantive law still applies to others. A common example where a detailed analysis is required is in relation to UK and Swiss real estate. A UK national with a closer connection to England who dies owning a chalet in Switzerland who has made a choice of law election for English law is seemingly able to avoid the forced heirship provisions of Swiss law, since the choice of law is deemed to be referring to domestic law and therefore English rules (giving testamentary freedom) will apply. However, a UK national with a closer connection to England who owns a chalet in Switzerland but dies domiciled in England (Swiss sense) is subject to Swiss forced heirship rules, since English law refers the question back to Swiss domestic law, as the law of the place of location of the chalet. Expert Anglo-Swiss succession advice is likely to be needed to confirm who are the heirs.
4. Who can/should deal with the administration of the UK assets?
If there is a valid Will, there is usually the appointment of a testamentary executor who would be responsible for dealing with the administration of the UK assets. Not all appointed executors need to act, however, and in certain circumstances it may be beneficial for just one to take this forward in England. Powers of the other executors can be reserved or removed. Careful consideration will need to be given to mitigating the exposure of an executor in dealing with the UK assets. As a general rule, no UK asset of the estate can be transferred, sold or dealt with until UK probate has been granted.
If there is no Will, an administrator would need to be appointed to deal with the UK assets as part of the court process in the UK. Who this can be will depend on the personal circumstances of the deceased, and it is generally beneficial for the appointment to be discussed in advance by the intended heir(s).
5. What needs to be done?
(i) Practical steps
One of the first steps for the executor/administrator to take is to understand (i) what assets are comprised in the estate, and (ii) what documentation needs to be collected to assist with the administration process.
As part of the probate / administration process in the UK, in almost all cases, a certified copy of the Will will be needed, as well as an official translation into English if it is in another language. Similarly with the death certificate and any formal succession certificate (such as the Swiss Certificate of Heirs) – an official transition should be obtained if it is not in English.
Valuations of the assets comprised in the estate as at the date of death (and also updated as at the time of administration, if significantly later) also need to be obtained. Typically, the executor can send a valuation request to the asset provider at the same time as notifying them of the death. Updated valuations will be required if the administration process continues over several months, particularly in relation to portfolio investments where there could be significant fluctuations. The valuations are needed for the UK tax filings and probate applications (see below), and also for clarity on the eventual transfer to the heir(s).
(ii) UK inheritance tax
After determining the location and value of the UK assets, the executor/appointed administrator would need to consider whether there is an inheritance tax liability in the UK as a result of the UK assets (and possibly also other assets of the estate, depending on the personal circumstances of the deceased). Even if no UK inheritance tax is due, an inheritance tax reporting account may nevertheless need to be filed. In some circumstances, payment of inheritance tax can be made directly from the UK assets which may be beneficial where, for example, the administration of the remaining non-UK estate has been completed.
(iii) Grant of Probate / Letters of Administration
Probate confirms the executor / administrator’s title to administer the estate – as noted above, generally no UK asset of the estate can be transferred, sold or dealt with until UK probate has been granted. In certain limited circumstances, however, probate will not be required to release the UK assets to the executor / administrator (although an inheritance tax account may still need to be filed). Similarly, in certain circumstances, if an equivalent to UK Grant of Probate / Letters of Administration has been granted elsewhere, it may be acceptable to ‘re-seal’ this document in the UK to avoid the need of applying separately for UK probate. Each asset provider will be able to confirm their position.
In most circumstances, however, UK probate is needed. If there is a Will (be it a ‘UK Will’ or a ‘foreign Will’), a Grant of Probate can be applied for. The executor or administrator of the estate needs to make a formal application to one of the Probate Registries in the UK, submitting all the relevant documentation to confirm their appointment. This includes a certified copy of the Will (and official translations, if necessary) and confirmation from the UK tax authorities that an inheritance tax account has been filed and all liabilities settled, if applicable.
If there is no Will, a Grant of Letters of Administration can be applied for instead. A formal application to one of the Probate Registries in the UK is again needed, and the relevant accompanying documentation will also include an affidavit explaining why the administrator is entitled to obtain a UK grant in accordance with the law of the jurisdiction in which the deceased died domiciled. For example, a Swiss Certificate of Heirs could be submitted as evidence of (one or more of) the heirs’ entitlement to step forward as administrator.
(iv) Release of assets
Once an inheritance tax account is filed and probate obtained, the executor / administrator will be able to coordinate the release of the UK assets for onward distribution to the heir(s).
6. What is the timeframe?
Depending on the complexity of the UK assets, the timeframe from identification to distribution to the heir(s) can take 12 weeks or up to a year or more, if a detailed inheritance tax account needs to be prepared and filed followed by an application for probate.
At Charles Russell Speechlys in Geneva and Zurich we have a dedicated UK team to assist with the administration of UK assets either as part of a wider non-UK estate administration exercise, or as an independent engagement advising executors, administrators or heirs. Please contact Sophie Hart on Sophie.firstname.lastname@example.org (+41 (0)22 591 1854) or Michael Wells-Greco on Michael.email@example.com (+41 (0)22 591 1880) for further information.