Holding foreign assets in one’s own name can be complex, especially upon death. It is generally not tax efficient, requires foreign probate and can take considerable time – not to mention cost. Since the introduction of Non-Habitual Residency (NHR) many expats in Portugal have looked at International Pension Plans (IPP) which are not subject to probate or succession and avoid unnecessary executor fees or the need for a foreign will. These plans allow members to choose who their beneficiaries should be in the event of their death, which could be their spouse, dependents, or other individuals. Furthermore, IPP’s facilitate the concept of ‘ruling from the grave’ as they allow members to request that the trustees pay income to their spouse via another pension, or to minors via a trust.
The death of a loved one brings about immense stress and suffering to any family, even more so if the deceased is the main bread winner. Concerns over international wills, appointing executors and dealing with estates are a minefield of bureaucracy and frustration – the family should not have to bear the additional burden of financial stress at a time of mourning. Members of international pensions can be assured that on the event of their death, beneficiaries will have rapid access to funds, ensuring that they are able to continue with as little disruption as possible in their time of bereavement.
International pensions avoid the need for foreign wills and adherence to foreign succession rules. Trustees do not have to rely on wills in order for estates to be wound up before they are able to pay benefits to beneficiaries, thus saving a great deal of time – the time and costs associated with foreign probate are mitigated when dealing with international pensions.
As with probate and succession, each country has its own laws regarding the taxation of assets held by individuals, depending on where they are resident at time of death, and tax on assets can vary greatly depending on the countries involved. International pensions can be of use in minimising charges levied on your estate. They provide flexibility in that members can guide the trustees in terms of how they should pay the benefits to the beneficiaries, who are nominated during the pension application process.
The use of ‘letters of wishes’ allows members to instruct trustees in terms of any specific provisions that they wish them to follow when paying benefits to their appointed beneficiaries. This is helpful when transferring benefits for the spouse to another international pension plan where there is a need to protect the benefits from events such as repatriating assets to undesirable jurisdictions. It can also be beneficial for protecting the rights of younger children by having their benefits placed in trusts.
The ability to pass benefits on to individuals with no requirements for dependency is useful for those members who may not be married and wish to pass benefits on to their life partner, or even to provide financial support to someone who has played an important role in their life. The ability to nominate a trust allows members to create an efficient means of transferring benefits to children in the event of their spouse predeceasing them or in the event of simultaneous death.
Insofar as succession is concerned international pensions mitigate foreign probate, laws of succession, forced heirship and remove the need for foreign wills. The wishes of the members are conveyed to the trustees who are able to transfer wealth efficiently, in the manner desired by the member, expediently and seamlessly.
In most cases on the death of a member, trustees usually require a copy of the death certificate and for the beneficiaries to verify their identity – this can result in the distribution of assets taking a few weeks rather than months, or even years in extreme cases for an estate to be wound up.
In our experience, members of international pension schemes have worked hard to diversify their wealth for retirement outside of their country of tax residence. The schemes afford members the surety and peace of mind that, irrespective of events, their wealth will be protected and passed on to nominated beneficiaries in-line with their wishes. If you would like advice on how you might benefit from an international pension, please get in contact for an independent appraisal of your financial situation.
Blacktower Financial Management has been providing expert, localised, wealth management advice in Portugal for the last 20 years. We can help with specialist, independent advice on securing your financial future. Get in touch with us on: (+351) 289 355 685 or email us at: firstname.lastname@example.org.
This communication is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice form a professional adviser before embarking on any financial planning activity.