The perils of financial globetrotting
The potential legal tangle left behind by rock star Johnny Hallyday highlights a problem facing many ‘financial globetrotters’ who spread their lives and assets across different countries.
A sure-fire headache for his lawyers, Hallyday’s will, effectively leaving everything to his fourth wife, was composed and held in California but impacts his children living in France, who are protected from disinheritance under French law and will likely challenge the outcome.
Private Client lawyer Ian Lane from London law firm Hodge Jones & Allen says that anyone leaving behind assets invested in different countries, knowingly or unknowingly through a portfolio, risks creating huge problems for their families should they die.
“Assets invested in different EU countries are subject to a wide range of different succession and taxation laws which can generate very odd tax effects.
“I had a very wealthy Scandinavian client whose estate when he died was worth more than 100 million Euro. In his home country, he would be liable for a relatively low rate of tax (less than 20%) on his estate.
“Naturally as a person of some wealth his investment advisers had recommended diversifying his investments internationally. As a result, part of his portfolio had been invested directly in the UK, somewhere he had never worked or even been to, but this left his estate liable to 40 per cent UK tax on his UK assets on his death.”
In a similar case, another lawyer at the firm had an Italian client, living in Monaco but who died in Spain, leaving some of his assets in England from when he had worked here.
“His family looked to release the shares of capital he had in a bank here but the legal fees to issue probate, which would include completing a UK tax return, virtually cancelled out the value of the shares so they simply decided not to bother.”
HJA family lawyer Melanie Bataillard-Samuel adds that it’s not just probate that can cause problems – legal situations such as divorce can also be hugely complicated for financial tourists.
“For example, the relatively new act of Divorce by Mutual Consent – a quickie, cheap way of divorcing in France – deals with basic act of separation that does not need court approval,” Melanie says.
“Despite pressure on the UK Government to offer “no blame” divorce, under English law, a couple must still apply to the court for permission to divorce, even in the most straightforward cases.
“This begs the question whether the financial agreements of a French couple divorcing in France but currently living and working in England are enforceable.
“It might not seem like a huge issue, but around 300,000 French people are currently registered in England and, if their assets are held outside of France and they’re paid by a company in the UK, although they could sell their joint property without problem, one partner’s right to a split of an ex-partner’s pension and assets could be severely in dispute.”
And as if it wasn’t enough to try to understand the laws of more than one country, Brexit could well bring yet more legal uncertain for the European community who move around different jurisdictions when it comes to things like divorce and probate.
“My advice is to understand the law in both the jurisdiction you live and where you are looking to start proceedings if you’re thinking of divorce or investing assets,” Melanie says.
“Above all, make sure you know what is needed to implement any decision in both countries before you start the process.”
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Notes for Editors
Hodge Jones and Allen
- Hodge Jones and Allen is one of the UK’s most progressive law firms, renowned for doing things differently and fighting injustice. Its managing partner is Patrick Allen, recently awarded a lifetime achievement award by Solicitors Journal.
- For 40 years’ the firm has been at the centre of many of the UK’s landmark legal cases that have changed the lives and rights of many people.
- The firm’s team of specialists have been operating across: Personal Injury, Medical Negligence, Industrial Disease, Civil Liberties, Criminal Defence, Court of Protection, Dispute Resolution, Employment, Family Law, Military Claims, Serious Fraud, Social Housing, Wills & Probate and Property Disputes.
- In 2016, the firm launched Hearing their voices – a campaign to raise awareness and build conversations around the issues and the injustices we might all face.