As people become increasingly globally mobile, more and more lawyers are faced with probate cases involving international estates.

International travel has never been easier, and people are moving around the globe for reasons other than just holidaymaking – with many UK citizens now setting up home outside of the UK. UK domiciled clients are living abroad, non-UK domiciled clients are living in the UK and they are marrying or entering civil partnership arrangements with partners who may or may not share their domicile.  These clients are a challenge. 

The rules of domicile

It’s not surprising then, that domicile can be described as somewhat ‘nebulous’.  The rules may seem simple, but once you start applying them to clients’ complicated lives, then things can get tricky.

A client’s domicile under the ‘general’, i.e. non-tax, law is based on case law. Everyone has a domicile, but you cannot have more than one. A child acquires a domicile of origin at birth. The domicile of the father determines the domicile at the time of birth of a legitimate child. An illegitimate child or one born after the death of the child's father takes the domicile of the child's mother at the time of the child's birth.

A domicile of origin can be replaced by a domicile of choice. This occurs when someone resides in a country with the intention of remaining there permanently or indefinitely. While the issue of residence is a question of fact, the need to prove an intention to remain somewhere permanently or indefinitely may require a remarkably detailed examination of the client's actions and statements.  Length of residence is not sufficient.  A domicile of choice can arise the moment someone arrives in a new country, but someone can also live somewhere for many years without that country becoming his or her domicile of choice.

Someone may lose their domicile of choice if the fact of residence or the intention permanently or indefinitely to reside there ends. If a new domicile of choice is not acquired, that can lead to the domicile of origin reviving, which can have unforeseen results. It is harder to lose one’s domicile of origin in favour of a domicile of choice than it is to change a domicile of choice, hence case law references to the ‘sticky’ nature of one’s domicile of origin.

Someone’s intentions are critical in working out where they are domiciled. No-one can choose where they are domiciled, because it is a factual matter that must be decided by examining the evidence in a particular case.

A non-UK domiciled person may nevertheless become deemed to be domiciled in the UK for Inheritance Tax if he or she were resident in the UK in not less than 17 of the last 20 years of assessment (known as the ‘relevant time’). If that person were also UK domiciled under the general law within 3 years preceding the ‘relevant time’, they may find themselves to have become deemed domiciled for UK Inheritance Tax earlier than first thought. (The residence test here is that for income tax; the forthcoming Statutory Residence Test will change the test.) This can lead to someone being caught by UK Inheritance Tax after living in the UK for as little as 15 years and 2 days.

These domicile ‘rules’ prevent someone from acquiring a new domicile immediately on changing his or her country of residence. This means that gifts or deaths in the years immediately after an emigration can still result in UK Inheritance Tax on the assets, wherever they are located.

Administering an international estate

On a death, the legal systems where the assets of the deceased are situated provide the mechanism for 'administering the estate' in that place – including deciding who is to inherit the assets if that is being disputed.

However, the question of succession may be decided in one country by applying the rules of another country.

English private international law

Whether an English court should apply English law, or a foreign law, is a question of English private international law (sometimes called conflicts of law).

English private international law depends heavily on the domicile of the deceased. In England, succession to movable assets (everything except land) is decided by applying the law of the country of the domicile of the deceased.

Forced heirship

According to ‘forced heirship’, which is applied in Scotland and is common across Europe, if the deceased leaves certain family members (spouse, or children), they are entitled to inherit a certain portion of the assets, and the remainder is allocated according to the will. 

Applying foreign law

When English law applies foreign law to decide who is to inherit an estate, English law looks at the whole legal system in that country, and not just the foreign law rules of inheritance.  For example, if English law was to apply French rules of inheritance, then it would look at the whole of the French legal system. This means that if French law would apply Italian law in a case (because of the rules of the French private international law), then English law applies Italian law.  More commonly, French law may state that English law applies. This 'referring back' is known as renvoi.  Its exact application is controversial and disputed in case-law and textbooks.

The rules of private international law vary from country to country.  The result is that many different rules of succession may apply in an estate. The question of who succeeds to particular assets may affect who can get a grant of probate and what personal representatives in England must do with the assets. It could also have an impact on UK Inheritance Tax liability.

As more and more people lead internationally complex lives, then the rules of domicile and the challenges of administering an international estate will becoming ever more common to probate professionals.

About the authors

Philip Allen, David Bunn and Alison Craggs are solicitors at Blake Lapthorn in Oxford.