Estate planning questions to ask your financial advisor
Estate planning and inheritance tax are often areas of personal finance relegated to the bottom of the list.
Often people don’t want to think about what will happen to their property after they die. However, if you are an expat residing in Portugal, you should carefully consider your approach to estate tax planning. Ask your financial advisor the following questions.
Which estate jurisdiction should I use?
Since the introduction of European regulation 650/2012, you can use your will to designate the law of the country which must govern the management of your assets. In Portugal, if you are intestate (without a will) or if your will is considered invalid, the laws on âforced heirsâ may apply. The government will decide on the distribution of your estate and will distribute a minimum of 50% of your estate to your legitimate heirs – spouse, biological and adopted children, parents and grandparents. If there is more than one legitimate heir, the percentage will be at least 60%. This affects not only Portuguese property, but all of your assets in the world, excluding non-Portuguese real estate. Under UK law, for example, the rules are quite different, so you need to decide which estate jurisdiction to use.
Do I have to have 2 wills?
If you make a will but already have a will in another country, it could invalidate the first will. If you are moving to Portugal, it is a good idea to seek the advice of a will specialist to be sure that the desired result for your estate can be achieved. Although British Wills are valid in Portugal, keep in mind that managing probate cross-border can make the process longer and more complicated. You may find that it is cheaper to make a will in Portugal rather than having your British will translated into Portuguese. Any Portuguese resident foreign national can make a Portuguese will leaving their property to the person of their choice. This will must be accepted by the Central Register of Wills (Registos Centrais) in Portugal.
How to reduce inheritance tax?
Talking to a financial advisor can help you lower the tax bill when planning what to do with your assets. Instead of inheritance or inheritance tax, Portugal imposes a “stamp duty” of 10%. This only applies to Portuguese property, mainly property, transmitted as an inheritance or as a life gift, regardless of the place of residence of the donor or the beneficiary. Although the spouses and the direct family – the legitimate heirs – are exempt from paying this stamp duty, partners who are neither married nor in a civil partnership will be liable for stamp duty on Portuguese property inherited or donated between them, likewise than the in-laws. and stepchildren. However, after two years of living together, a couple can be considered fiscally married if they have informed the Portuguese authorities. Children legally adopted will also be recognized as a direct family. Be aware that donations of property may still result in UK inheritance tax depending on how long you stay outside the UK.
Another option to protect your assets may be to form a corporation to mitigate inheritance and inheritance taxes. It can be quite complex, and you will need to understand the intricacies of both capital gains tax and corporate tax, so be sure to get the advice of your trusted financial advisor and tax accountant.
Advice from Blacktower Financial Management
Minimizing the tax bill of your loved ones allows them to get the most out of the precious possessions you bequeath to them. Blacktower Financial Management’s estate advisers can assess your situation, helping you identify the best way to structure your estate and will to minimize inheritance tax and Portuguese stamp duty. We will regularly review your position to ensure that your wishes can be achieved and you will stay informed of the impact of any changes in laws or regulations. Contact one of our Lisbon office representatives today for your free, no-obligation discussion.
Black tower in Portugal
Blacktower’s offices in Portugal can help you manage your wealth to your best advantage. For more information, contact your local office.
Antonio Rosa is the associate director of Blacktower in Lisbon, Portugal.
Blacktower Financial Management has been providing specialist and localized wealth management advice in Portugal for 20 years. We can help you with expert, independent advice on securing your financial future. Contact us at (+351) 214 648 220 or write to us at [email protected].
This communication is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional advisor before embarking on any financial planning activity.