Wills & Living Trusts

In the context of Last Will and Testaments and governing law, there are 3 different interpretations of the term domicile, called domicile of origin, domicile of acquisition and domicile of choice.

• Domicile of origin means where you were born, and cannot change. There are of course grey areas, such as children born abroad to parents working on contract or in the armed forces. For British passport holders, if the third generation is born outside the UK then it is possible that those children would not be eligible for British Nationality. If you are a British passport holder and not born in the UK (because perhaps your parents were overseas on business at the time), then it is a good idea to make sure your children are born in the UK if you want them and their children to have full British Nationality. People in the armed forces or the diplomatic service will have a different status. If you are working for a private company, such as one of the multinationals, then the concessions given to diplomats and soldiers might not apply. Being educated in the UK will not make any difference to your rights to a passport if you were born elsewhere. A child takes the domicile of its father where the father was legally married to its mother. An illegitimate child takes the domicile of its’ mother.
• Domicile of Acquisition means that you have taken up the nationality of someone else, such as a legal spouse, or your mother has married and the new step-father who is not domiciled in your country has adopted you in infancy. Your mother may then acquire a new nationality by marriage. Your domicile as well as hers will change by acquisition (if she was never married to your father).
• Domicile of choice. This means that you have given up all thoughts of ever going back to your original home and have established your home somewhere else, by choice. Your domicile of choice dictates which country is the governing law for all your legal matters, such as inheritance and divorce.

You may be taxed by the government in your country of domicile of origin unless it can be proved that you have made a complete break with your former home. This is full of pitfalls for the unwary, and little things can mean the difference between paying tax and not paying tax. The following items would give the UK government in particular plenty of ammunition if the Inland Revenue Department decided to pursue you for inheritance tax on your world-wide assets, meaning real estate, cash, investments, chattels and everything else that you own.

• Membership of a club, such as AA or RAC
• Retention of a ‘base’ for use when you are in the country
• Keeping a car taxed and insured for your use
• Maintaining an active bank account
• Owning real estate
• Leaving instructions in your Will, or even verbally, that you wish your mortal remains to be repatriated to your former home
• Having a pre-paid funeral plan that includes repatriation

You absolutely must seek professional advice on these matters, it is a very complicated subject and fraught with hazards, get it wrong and you could be paying large amounts of tax which could be avoided. The rules change all the time, the government web-sites should give you the most up-to-date information. You should see a tax specialist in plenty of time to make the necessary changes to your affairs.

One last topic, and this will be news to many readers. If you move to another country, say for work, acquire a domicile of choice and then move on when you retire, or simply change jobs, then for a 3 year period after the move your domicile of choice reverts to your domicile of origin. Even if you move within a country, say from one state to another in Australia, Canada or the US then this rule applies. Your domicile is not a country but a particular part of it. So, your domicile would be England, Scotland, Wales, Northern Ireland or the Irish Republic, not the United Kingdom, depending where you were born, or Victoria, ACT, Queensland, Western Australia, Southern Australia, Northern Territory or Tasmania if you were born in Australia. The same principal would apply to Canada and the US.

A very good example of the impact this can have on inheritance is given below, and is a true story.

An Australian (we will call him Bruce!) was born in New South Wales and went to Hong Kong when he was 30 something. He remained unmarried, although he had a long-term relationship with a Chinese lady, and they had lived together as man and wife for 25 years. Bruce died in Hong Kong and did not have a Will. Under Hong Kong law his common law wife would get nothing, as at the time of his death Hong Kong did not give any legal status to her. However, because he was born in Sydney it was deemed that his domicile had not changed from his domicile of origin. He had a flat in Sydney still and went there regularly. The law of NSW applied to Bruce and his estate, and under NSW law his lifelong companion was entitled under the Rules of Intestacy in the New South Wales statutes. If the estate had been administered according to HK law she would have received nothing.  

In this instance the law worked to Bruce’s partner’s advantage, however, it is a good idea to make a Will for clarity; the legal fees in sorting this one out made a considerable dent in the amount his companion actually received. 

Don’t make assumptions about domicile based on hearsay or rumour, check it out with the right person and take action if necessary to clarify your status.