Is it necessary to have a Cypriot Will?
The purpose of a will is to communicate your wishes as to what will happen to your personal possessions after you die. It is a written legal document setting out the people you would like to inherit specified parts of your estate.
It is recommended that most people make a will so that they may specify who they want to inherit their estate and to avoid the complicated intestacy procedures necessary where there is no will.
Cypriot law does recognise a will that has been prepared in another country and therefore assets in Cyprus could be dealt with together with English assets under a carefully drafted English will. However, it is usually recommended for people owning property in Cyprus to make a separate Cypriot will dealing with your Cypriot assets. You should always consult a specialist lawyer to advise you as to what is best for you in your individual circumstances.
If a both Cypriot and English wills are prepared, each will can independently deal with the assets in their respective country which may avoid delays and complications in the estate administration. This can make it significantly easier for your loved ones to deal with the administration of your estate on your death and could reduce both the costs and the associated hassle.
You will need to ensure however that the wills do not conflict or revoke one another and that they work together to achieve the intended result. You should therefore ensure that any lawyer you instruct to prepare a will whether in Cyprus or in the UK is aware of the contents of any other will that you have.
Who will inherit my Cypriot Assets?
Under English law anyone making a will has “testamentary freedom” which means that you can choose whoever you want to inherit your estate and in whatever proportions as long as you set out who you would like to inherit your estate in a valid will.
Cypriot law has a system of forced heirship, which means that the person making the will does not have complete testamentary freedom as they have to leave certain proportions of their estate to particular relatives.
There is an exemption to the forced heirship rules for anyone who was (or anyone whose father was) born in the UK or another commonwealth country. Therefore anyone who falls into this category will be able to make a will leaving their assets to whomever they choose.
Will there be inheritance tax to pay?
This will depend on a number of factors and your personal circumstances.
As a general rule, if you are “domiciled” in the UK at the date of your death your worldwide estate (i.e not just the assets in the UK) will be liable to UK inheritance tax (IHT).
IHT is charged in the UK at 40%, however, everyone is entitled to a tax free amount (also known as the “nil rate band”) which is currently £325,000 (or up to £650,000 for married couples and registered civil partners if the “transferrable nil rate band” applies). This means that the combined value of your worldwide estate is calculated and only the amount that is over the tax free amount will be taxed at 40%. The tax is paid from the assets in the estate before they are distributed to the beneficiaries.
The question of whether or not a person is domiciled in a particular country for inheritance tax purposes is an extremely complex one. You should always obtain expert legal advice to ensure you understand how this will be dealt with on your death so that you can obtain the intended results for your beneficiaries.
Your “worldwide estate” includes the value of your assets in England, Cyprus and any assets that you may have in any other country. It may also include any gifts that you have made in the last 7 years.
There may be some exemptions or reliefs available in respect of the amount of IHT payable depending on who your beneficiaries are and the nature of your assets. Your lawyer may be able to advise you about what is available in your circumstances.If you are not domiciled in the UK, UK inheritance tax will only apply to your assets that are located in the UK.
If only Cypriot laws of inheritance apply there will be no inheritance tax to pay as inheritance tax in Cyprus was abolished in 2001.
Succession tax planning is extremely important if you want to ensure your beneficiaries get to keep as much of their inheritance as possible. Professional advice and careful planning can often make a significant difference to the amount of tax payable. You should always ensure that you get proper specialist advice in relation to your individual circumstances. Your lawyer can discuss inheritance tax planning with you as part of the preparation of your will.