Why is having conversations about personal assets and circumstances with tax and legal professionals so important?
It is very rare these days to come across families with significant assets that live in the same country, or possibly even the same continent. They move around to study, to work and for retirement, amongst many other reasons. However, all too often people tend to overlook how this mobility impacts on their or their family's ability to own and enjoy the proceeds of personal assets due to a disparity in the tax and legal rules of other countries.
When should I have these conversations?
Families typically get comfortable when they understand the rules in the country in which they live. They make certain decisions, including investment decisions, that are consistent with their aims in the context of the rules in that country, and rarely revisit this logic. However family members very rarely manage to stay put in the same country for long - particularly in search of the experiences and opportunities that financial stability allows. Some of these sojourns are short term, whereas others tend to be longer term.
It is very rare that short term opportunities abroad cause big tax and legal concerns, however when the stay tends to become more permanent, it is perhaps time to revisit some crucial concepts like planning for personal succession, business succession, marriage, gifts and other similar matters.
Malta does not have an inheritance, gift or wealth tax. However, this is not always the case in other countries. It may very well be the case that a donation to a child or parent living abroad may expose him or her to a tax on the gift. Or spending some time living in a country with an inheritance tax may cause an inheritance tax charge even though the deceased has never set foot in that particular country and none of the assets are sited there! Other territories also have particularly complex and onerous rules that would apply to beneficiaries of a trust.
This may concern us. What should I do?
If you are thinking of gifting material assets or amounts to family members who do not live in Malta, it is not safe to assume that you know how tax rules work in that country. It is also not prudent to assume that all countries have the same rules that exist in Malta.
If you have a prospective heir who lives outside of Malta, or you live outside of Malta and stand to inherit assets from Malta or Maltese based individuals, the same considerations apply. Have you considered whether a tax liability arises on inheritance? And have you also considered whether you can afford to pay this, not least if the asset that is inherited is illiquid and whilst valuable, cannot be sold in a short span of time, such as significant real estate holdings, for example?
If you are married in Malta and are moving with your family outside of Malta, have you considered whether you can 'transport' your marriage regime with you, such as separation of estates or community of acquests, or whether a new regime applies?
Now is the time to speak to professionals who can help you understand what the legal implications are, what the tax implications are, and whether you can avoid some very inconvenient headaches in the future. It may be that no concerns arise, but leaving this down to chance is very risky.
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