International perspectives on wills & probate
Estate planning is a complex and delicate operation, and cultural sensitivity is essential for advisors to handle this process with a practiced, professional hand. Citywealth speaks with experts from the UK, the Middle East & Singapore for insights on how this can be achieved.
United Kingdom
For an update on the wills & probate sector in the UK, Citywealth spoke to Simon Mitchell, Partner in the Wills, Estate & Tax Planning team at Thomson Snell & Passmore. In regards to what sets the will planning and probate process for UHNW clients apart from the average person, Mitchell said: “[T]heir estates are usually more complex, have a wider range of assets and are also more likely to include business or agricultural assets, assets in other countries or legal jurisdictions, and so on. As a result, there can be a wide range of issues that need to be drawn together, and where tax savings can be generated, they will typically be greater as well. This can also feed into the desire to protect the estate as well and to make sure that it can be passed down from generation to generation in suitable ways or using suitable structures that protect the estate at each step of the process.”
We asked if she has noticed any particular trends in the instructions of UHNW clients who are in the process of planning their succession. Mitchell answered: “With the general election in mind, a number of clients are becoming increasingly concerned about a possible rise in the CGT rate if a Labour government comes to power, and some have decided to go ahead and make lifetime gifts now so that they can be sure of being taxed at the current CGT rates. Assuming that Labour wins the general election, I suspect it will take a little time before they are able to call a Budget and there may be more immediate concerns for the new government to deal with rather than raising CGT from day one.”
He added: “Beyond that, the usual concern is to make sure that estates can be protected as far as possible, both from an IHT perspective and also from a family perspective as well. The larger the estate, the larger the concern about beneficiaries divorcing and making sure that there are appropriate structures in place (usually trusts) to ring fence and protect the estate. Given that these sorts of estates do not normally qualify for the residential tax allowances, there is usually no immediate tax disadvantage in transferring the funds into trust, although the tax regimes relating to trusts then also have to be considered as well. The fact that a trust can be wound up within two years of the date of death with virtually no tax consequences means that there is a helpful window of opportunity to decide whether assets stay in trust, are distributed, or a mixture of both.”
Have there been any recent legislative or regulatory changes that are set to impact this area? Mitchell said: “There have been various legislative changes that have been hinted at in recent years including the removal of the CGT uplift on death, the limiting or perhaps abolition of both business relief and agricultural relief, making further changes to pension pots so that they are subject to inheritance tax on the death of the pensioner, etc but so far none of these have actually translated into action. Given the financial position that the new government will inherit, it is not beyond the realms of possibility that some of these changes could be brought into play but equally, these could be politically unpopular so it remains to be seen what will actually happen. Another proposed change is the possible removal of business relief in relation to AIM shares which is something that HMRC rather than the government could trigger if it wanted to do so.”
Patience in probate
Probate practices have been playing catch up since 2020, and the average length of time to obtain a Grant of Probate has risen significantly over the years since. Families are facing up to 16 weeks of waiting following an application submission alone, and that is for straight forward cases. As Stewart mentioned, UHNW clients are more likely to have complex estates; this is currently equating to delays as long as 24 weeks for estates of this nature, or in cases where an individual other than the named executor is proving the Will.
Partner at Winckworth Sherwood, James Mabey, provides some insights into the cause and effect of these delays, and what he foresees going forward.
Causes of the delays
“An inquiry into the Probate Registry led by the Justice Committee is currently ongoing. The inquiry has brought to light a myriad of issues including deficiencies in staff training and teething issues with the new online probate service, which has been prone to displaying inaccuracies. The online service was only one aspect of The HM Courts and Tribunals Service (“HMCTS”) Reform Programme; however, its implementation has seemed to coincide with the decline of what was until recently considered a highly effective system. Other aspects of the Reform Programme included the centralisation of the probate service and the closing down of probate registries, resulting in the redeployment of trained probate staff to other areas of the courts and tribunals system.”
“The loss of experienced staff well-versed in the nuances of probate law has been a critical factor in the delays, with the number of full time Registrars in England & Wales reducing from thirty to three following the reforms. This has left inexperienced staff who are simply not yet equipped to deal with issues which may arise and has resulted in some applications being incorrectly categorised as complex estates.”
Effects of the delays
“Delays in obtaining probate can result in a plethora of difficulties for grieving families at an already stressful time, who, in many cases, will not be able to access the bank accounts and other assets of the deceased until they receive the Grant of Probate. Financial hardship is therefore a real concern for many. Additionally, the delays can impact on the value of estate assets once they are sold, particularly in recent years where markets have been particularly volatile. Where property is due to be sold, completion of the sale of property cannot take place until probate has been obtained.”
“Where inheritance tax is payable, some or all of this frequently needs to be paid by the end of the sixth month following the death (depending on what assets are in the estate), to avoid accruing interest and penalties. Banks can settle the tax due directly with HM Revenue & Customs before probate, but issues arise where the estate comprises predominately of illiquid assets needing probate for asset redemption. These delays can invariably result in additional interest accruing, which then depletes the assets available for beneficiaries.”
Going forward
“Recent statistics suggest that waiting times are beginning to come down slightly. However the Probate Registry has now implemented reduced hours for its telephone services to manage the backlog of applications, making it increasingly challenging to contact the Registry for updates. The Society of Trust and Estate Practitioners (STEP) have made a number of suggestions to HMCTS in order to reduce backlogs, including the outsourcing of complex cases to a limited number of experienced law firms; arranging for private practice probate practitioners to be seconded to the Probate Registry for a fixed period; and for Registry staff to be seconded to law firms to gain experience. As the inquiry progresses, we expect that the forthcoming report from the Justice Committee will likely welcome the recommendations put forth by STEP.”
Middle East
Citywealth recently published an article on sharia law, which impacts clients of the Islamic faith and is absolutely vital for advisors to have a grasp on. When working with clients from the Middle East, advisors must have an understanding of relevant cultural practices to ensure everything goes smoothly, during both the planning and eventual execution processes.
Citywealth spoke to Sunita Singh-Dalal, Partner at Hourani & Partners, to gain a better understanding of what wills & probate advisors working with Middle Eastern clients should be cognizant of when conducting themselves.
Singh-Dalal said: “Estate and succession planning is complex and takes time and commitment, both from clients and their trusted advisers. An investment of time and the proper consideration of relevant facts by competent professional advisers in the early stages, could so easily prevent subsequent disputes arising within a Family. Frequently witnessed courtroom battles between surviving heirs continue to remain a stark reminder of just how susceptible to legal challenges a badly drafted, ill prepared or incorrectly executed Will can be.”
“When advising clients in the Middle East on such matters, we must also be cognisant of the fact that the solutions available to Muslim and Non Muslims will differ significantly.
Non-Muslim clients will have a range of options to choose from, whereas for Muslim clients, the options available will be subject to ‘the principles of Sharia’h which clearly dictates that upon one’s death, all assets that they still own in their personal name, must be distributed in fixed ratios, (similarly to the forced heirship provisions of countries such as France). There are a few additional parameters to be taken into account, but again, one should seek professional advice.”
“Whilst a Will may work perfectly well in certain situations, for most HNWIs & UHNWIs, a Will is simply not a viable succession plan and neither should it be presented as one! Challenges in terms of validity, mental capacity, intent, uncertainty, conflicting jurisdiction, or in some cases the existence of more than one Will, are but a few examples of the many grounds often cited to lock an estate into protracted litigation. Whilst Wills may be seen as cost effective succession solutions, that ensure the fair distribution of assets, (another contentious issue in itself), the ensuing litigation or sometimes convoluted probate process certainly is not! We advise many clients in the region and see most families seeking to use corporate structures as an intrinsic part of their long term estate and succession plans due to the certainty, flexibility and tax efficiency that it gives them.”
Singapore
One of the fastest growing wealth markets anywhere in the world, Singapore has quickly become one of, if not the, top jurisdiction for UHNWIs with a base in Asia. Singapore itself is already a cultural melting pot, and finding the balance of differing cultures, religions, and native languages is a dance its been doing for decades. To understand how this is applied to wealth management work, Citywealth spoke to two experts from the region.
Tan Shen Kiat is the Managing Director of Kith & Kin, a private client and community law firm that specialises in estate planning solutions. We asked Manging Director Tan Shen Kiat about his approach to culturally-minded advice for clients in the region.
Wills & probate work operates in quite an emotionally sensitive area, and being aware of the cultural practices and customs of your clients is paramount to understanding their needs. What are some of the key things to be aware of when advising Singaporean / Asian clients in this area?
Home ownership was Tan’s first point of address: “Singaporeans believe in home ownership. It is a core Singaporean DNA – hard to phantom outside of Singapore whereby renting a quite common and socially acceptable. Despite being one of the world’s most expensive property markets, 89.3% of Singaporeans own their own homes as of 2022. With increasing income inequality and soaring property prices however, this ownership trend is being threatened. Estate planning clients want to ensure in their legacy planning, a portion of the gifts made in their wills is used towards their children beneficiaries’ purchase of a first residential property in Singapore (the first does not attract punitive additional buyer stamp duties).”
“The transfer of existing residential property from testators to their children is another issue of concern. It must be conducted in an orderly and meaningful manner, balancing the beneficiaries’ right to enjoy the fruits of their inheritance during their lifetimes while enabling them to purchase a property of their choice without incurring massive stamp duties due to the “property count” taxation system, which ranges between an additional 20% to 30% for Singaporeans buying their second and third property, versus 30% to 65% for permanent residents and foreigners buying their second property onwards.”
Tan also addressed the topic of cross-cultural marriages: “Singapore’s population is getting more cosmopolitan. According to government data, 1 in 6 citizen marriages in 2022 were inter-ethnic and a one-third of marriages are transnational in nature (i.e. marriages involving a citizen and a non-citizen (i.e. permanent resident or non-resident). That means greater exposure to cross-border estate planning issues. Most of Singapore’s geographical neighbours in South-east Asia except for Malaysia do not employ a common law system for inheritance and succession planning. Muslims domiciled in Singapore are also exposed to forced heirship rules under our own Singapore syariah law system. That means advisors need to be aware of such contexts when advising on cross-border wills and estate administration issues.”
For more information on probate practices, Citywealth spoke to Connie Yik Kong, Partner at Withers KhattarWong.
As we become more globalised, having cross-border clients becomes increasingly common. What are some of the key hurdles when dealing with probate matters for your international clients?
“For my international clients, such as Singapore clients with US children and/or US assets, they might understand the tax and probates issues in their home jurisdiction (e.g., Singapore), but might not be aware of the differing tax and probate matters in other jurisdictions. In Singapore, there is no more Singapore estate duty, and a grant of probate could be obtained in about 4- 6 months for a standard case. By contrast, the probate process in the US could take at least 12 months, especially for decedents who are not domiciled in the US. Additionally, if the Singapore client passed away with certain US situs assets (e.g. US real property or US equities held in his/her personal bank account, even if the bank account is based in Singapore), these US situs assets could be subject to substantial US estate tax liability, which is usually due 9 months within the date of death. For Singapore clients with US children, the family should consider the US children’s potential US tax exposure when preparing and executing the family’s succession plan.”
“Given these issues, when working with cross-border clients, our first step is to fully understand the clients’ assets, their family members’ residence and domicile, and their overall objectives. Once we have a clear understanding of these relevant facts, we would work with the suitable advisors in various jurisdictions to review the applicable tax and probate issues. To provide a holistic and seamless experience to our clients, my firm Withers KhattarWong in Singapore has tax lawyers qualified in Singapore, the UK, Malaysia, and the US (my team), This is addition to our APAC offices in Hong Kong and Japan, along with our offices in other major financial hubs around the world. Working with a single law firm that has various jurisdictional coverage helps reassure our clients that we could maintain confidentiality throughout the process, advise various cross-order issues in an efficient matter, and even if we don’t have a particular jurisdictional overage, we would be able to reach out to a reliable network of local advisors that my firm has worked with (e.g., Indonesian tax lawyers or Thai tax lawyers as Withers does not have these expertise).”
Top trends
We also asked our two experts whether, when working with UHNW clients to draft wills or plan succession, they are seeing any interesting trends or requests in their instructions. Could these trends be a result of turbulent political and economic times, or something else?
Tan answered: “Singapore has been revising annual property tax rates upwards, the last revision being in 2024. Property tax is a form of wealth tax in Singapore and raising tax revenues is a main goal of all governments, especially to make up for the funding short-fall from the Covid-related years. For UNHW clients who are looking to preserve their family home, usually a GCB or a bungalow with sentimental value, they are dedicating more financial reserves, post-death, for the preservation, maintenance and upkeep of these family homes.
He added: “Most people are dedicating more monies towards charitable and philanthropic work, and asking for advice on how they can formalise these mandates and ensure fidelity towards the founders’ vision. More clients are seeing the value of a foundation as securing and engaging the hearts and minds of next-generation members while other structures focus on securing the continuity of uninterrupted cashflow for the families activities and well-being.”
Kong said she is also seeing two interesting trends. The first: “Due to turbulent political and economic times, many clients are interested in acquiring another permanent residence (e.g., US green card) and/or citizenship (e.g. Malta passport). They are willing to do so despite the tax implications. For example, taking up the US green cards means the client would be subject to US income tax on a global basis. Many clients who are asking about the global mobility options tend to be from PRC China, Thailand, Vietnam, Myanmar, and India.”
The second: “Protection from their own potential divorce or their children’s potential divorce. Pre-nup and post-nup are becoming more popular – no longer a ‘taboo’. When parents are preparing their trust and estate plan, they often ask what they should do to protect the family assets from their children’s potential divorces. These are particularly relevant for clients with connections in community property jurisdictions, such as California USA, PRC China, France and other European countries.”
Key Takeaways
- Estate planning requires cultural sensitivity, especially for UHNW clients in diverse regions such as the UK, Middle East, and Singapore.
- In the UK, clients increasingly worry about potential rises in CGT and seek to protect estates through trusts amidst legislative uncertainties.
- Delays in probate processes, particularly for complex estates, can create financial hardships for families due to additional interest and taxes accruing.
- In the Middle East, advisors must navigate Sharia law and family dynamics, as poorly executed wills can lead to legal battles.
- Singapore sees trends like increased property tax concerns, growing interest in charitable foundations, and the desire to protect assets from divorce risks.
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