Is it necessary to have an Italian 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.
The laws in relation to wills and inheritance in Italy are very different to those in England. If you have assets in both Italy and England, these differences will need to be carefully considered when you are preparing a will whether in England or in Italy.
Italian law does recognise a will that has been prepared in another country as long as it is valid in that country. Therefore your Italian assets could be dealt with together with your English assets under a carefully drafted English will. However, it is recommended to make a separate Italian will in certain circumstances. You should always consult a specialist lawyer to advise you as to what is best for you in your individual circumstances.
If both Italian and English wills are prepared, each will can independently deal with the assets in their respective country avoiding delays and complications. 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 however need to ensure 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 Italy or in the UK is aware of the contents of any other will that you have.
Who will inherit my Italian 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 this is set out in a valid will.
Italy however has a system of forced heirship. This means that under Italian law you may not freely determine who gets what in your estate as Italian law makes it obligatory for particular family members to inherit certain proportions of your estate regardless of what it says in your will.
Italian law does however allow your national law to apply. Therefore an English national would have testamentary freedom in accordance with English law, avoiding the forced heirship provisions.
One of the most effective ways to ensure that English law applies is to make a Italian will in relation to your Italian assets, specifying that you wish English law to apply to your Italian estate.
Will there be any 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 estate 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 Italian and English assets as well as assets that you may have in any other country. It may also include any gifts that you have made in the lat 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 will be able to advise you as to what is applicable to you 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. Italian inhertance tax is applicable to your worldwide assets if you are resident in Italy at the time of death or gift. If you are resident outside of Italy at the time of death or gift Italian inheritance tax is applicable only to assets located in Italy.
It may be that both UK and Italian inheritance tax is payable in your estate.
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.
