Furthermore, although there is a requirement for executors to carry out their obligations dutifully and compliantly, they could become personally liable for distributing assets without the correct reporting.
HM Revenue and Customs and South Asian tax authorities now have more open lines of communication than they did in the past. If the director does not reconsider registering the farm in her name, and
declares it as an asset on probate forms, it could cause major problems.
As she is based in the UK, HMRC can legitimately ask questions about this asset when she dies - and make it subject to the UK’s inheritance tax laws. There may even be further penalties and interest to pay.
Suddenly, the unplanned estate starts to look more of a liability than a legacy. The money to pay tax and charges has to come from somewhere. That could put a big dent in her overall wealth.
It might necessitate the sale or liquidation of immovable assets, or the setting up of a probate loan, to settle the tax bill while the estate is administered.
A situation that could have been nipped in the bud at an earlier stage has become a costly oversight for the director and her beneficiaries. With the right advice, for instance, the director could have taken advantage of Double Taxation Agreements; applicable for India and Pakistan.
For example, this reciprocal agreement effectively states that if the law rules someone to be domiciled in India - supported by proof of residence and connection inter alia - and they have land and/or property in the country, Indian law outweighs UK law.
This protects estates from doubling up on inheritance tax in both countries.
This is an important instrument for the growing number of India-based wealth being passed from the country to UK residents, as it rules them out of paying UK inheritance tax on immovable assets situated in India, which can quickly amount to vast sums.
Advice is needed in both jurisdictions, although you need one party at least who is conversant with these issues.
Where there’s a will there’s a way - to be wrong
Specific assets are one issue that appears on the table in estate planning. More generally, there are key considerations around putting in place a will when business concerns and beneficiaries are based in different parts of the world.
One trap people fall into is ‘conflicting intentions’. For example, a UK-domiciled director may have assets and beneficiaries in Australia. Understandably, they might draft a will in that country which is perfectly valid for distributing the assets to family members who are based there.
