What you need to know about inherited property abroad

In such cases, the surviving family in India may have to take a number of steps aimed at transferring the ownership of the property from the deceased to his/her next of kin. A lot will depend on factors such as the country where the property is located and whether the deceased left a will. In the absence of a will, the transfer of any movable and immovable property (immovable property property) can be treated differently.

Mint reached out to experts to understand what an Indian needs to know about inheriting a property in a foreign country. In this article, we have highlighted some details related to four countries- US, UK, UAE and Singapore which are more relevant for Indians.

So, are you going to be governed by foreign or Indian laws in such matters? According to Sonali Pradhan, Head of Wealth Planning, Julius Baer India, when an Indian inherits a foreign asset, generally the laws of the foreign country will apply, and Indian laws will not apply.

passing on property

“In countries that have estate fees or inheritance taxes, we have seen clients set up a trust for their estate plan. This is clearly assuming that their assets exceed the exemption limit,” says Pradhan . According to him, owning a trust also ensures that the beneficiaries do not face any difficulty in going through the court process, which makes it easier to inherit assets. “If a country doesn’t have an inheritance tax, most people simply transfer their assets by writing a will.”

The US imposes an estate duty and the UK has an inheritance tax on the estate of the deceased. These taxes have to be paid before the decedent’s assets can be transferred to the beneficiaries.

In the UK, an inheritance tax of 40% applies when the value of the decedent’s estate exceeds £325,000.

In the US, estate fees can be 40-50%, including federal and state estate fees. For a US individual (such as a US citizen or green card holder, for example), the estate fee applies when the decedent’s estate exceeds $12.06 million. For someone who is not a US person but owns property in that country, the limit is set at $60,000. Note that, in the US, no estate duty applies when property is transferred between a spouse upon the death of either of them.

There is no such tax in Singapore and UAE. In India, you do not have to pay tax on any inherited property (whether located in India or elsewhere), but you must disclose them in your tax return. Thereafter, any income from these assets will be clubbed with your income and taxed as such.

So, what is the procedure for transfer of property under these cases? Also, what happens when one makes a testament without leaving a will or creating a trust?

wherever there is a will

According to Pradhan, if the deceased has left a will, the court process (obtaining probate) may take at least a year or more. First, the executor must establish the identity of the beneficiaries, and then apply for probate in a court in that country. Once probate is done, the executor has to pay taxes from the estate and only then distribute the assets to the people named in the will.

But, to be able to pay tax in the US, for example, the executor or administrator must apply for a TIN, or tax identification number (similar to PAN in India), if the person does not already have one. Is. “You can apply for TIN online, but it may take some time if you don’t understand some of the terminology and what documents are being asked for,” says Pradhan.

If the deceased has not designated any person as executor, the next of kin will have to approach the court to be classified as an executor/administrator before proceeding with the transmission.

“In case of trust, transmission is a straightforward process. Transfer of assets can begin after the identity of the beneficiaries of the trust is established by the trustee,” says Pradhan.

In the case of the UAE which follows Sharia law, the situation is completely different.

“Those who do not wish to be governed by Sharia laws can give their assets through a trust. Alternatively, a legally valid will (non-Arabic, written in English) can be created by registering at DIFC,” suggests Pradhan. DIFC or Dubai International Financial Center is a separate financial center in Dubai that operates under the common law system. follows.

According to Bijal Ajinkya, partner at Khaitan & Co., the process of probate with DIFC courts is simpler and more cost-effective than with Sharia courts, as legal heirs can approach the authorities on their own and do not require a lawyer. to represent them. Probate for a DIFC-registered will can take less than a month.

Having a legally valid will, or a trust, ensures that the succession runs smoothly as a document, replacing the succession laws of the country where the decedent lived. However, this is not the case in the case of willful succession.

Where there is no will, the way is not easy

In such a case, according to the head, the law of the country in which the property (property) is located will apply for immovable property. In the case of movable property, the courts will follow the succession law of that country and in the absence thereof, the law of the country of the deceased’s domicile.

Ajinkya explains how domicile status can be determined. There are countries that have a domicile status, based on which if someone has lived there for a certain number of years, they are considered domiciled in that country.

In other countries where there is no domestic law on the matter, the domicile of that country wherever one intends to permanently reside, in accordance with international law.

For example, someone who has lived and worked in Britain for a long time, but still has economic and cultural ties with India, may be considered a domicile of India. Pradhan gives another example—if the deceased was a resident of the United Arab Emirates, but was a citizen of India or had a permanent establishment in India, the court would distribute movable property in accordance with the law of the country of the deceased’s domicile, in which case India of can be.

Therefore, the distribution of assets is determined according to the laws of the country concerned in the absence of a will. This can add a lot of complexity to the whole process. Not only that, before it becomes law, heirs must first find out what assets they own, where they are located and what their value is.

other challenges

Also, what are some other challenges that one may face while acquiring an inherited property? Ajinkya sheds some light on something.

Recalling a recent case where the deceased had assets in both the US and India (Mumbai), she says that in such cases probate would be required in both the countries or one country’s probate would be honored or not. There is no clarity. other counties as well.

Another practical issue that may come up is related to payment of inheritance tax/property fee for assets abroad. “Under Indian law, there is a limit to the amount of foreign exchange that can be sent. In one case, a family in India had to seek RBI approval for remittances in excess of what was permitted for payment of such taxes.” The assets are distributed.

While not all obstacles can be anticipated or resolved, writing a will can make the process of transmission easier for next of kin.

Therefore, writing a will is necessary, and therefore when it includes assets that are located in a country where your potential heirs reside.

However, you must ensure that it is a legally valid will in respect of that country. For example, in India, for a will to be valid, it must be signed by the testator and also signed by two witnesses.