Estate planning for UK expats living in Australia: Navigating cross-border complexity

For UK expats living in Australia, estate planning can be a complex proposition. It means navigating two tax regimes, two sets of legal systems and the nuances of cross-border asset management.

The key to a smooth transfer of wealth and protection of your legacy is thoughtful estate planning. Here are some key considerations when it comes to estate planning for UK expats to avoid common traps and pitfalls.

Understanding the UK inheritance tax regime

One of the key estate planning challenges facing UK expats is exposure to UK inheritance tax (IHT), which can apply even years after leaving the country. Previously based on domicile, the IHT system has shifted to a residency-based model. As of 6 April 2025, individuals who have been UK tax residents for at least ten out of the previous 20 years will be classified as long-term UK residents. After leaving the UK, these individuals remain within the IHT net for up to ten years.

This change has significant implications. Even if you’re settled in Australia, your global assets may still be subject to UK IHT for a full decade after departure. For estates exceeding the nil-rate band (£325,000 for individuals or £650,000 for married couples), the tax rate sits at a steep 40 per cent.

Managing your IHT exposure

While the IHT rules can’t be avoided altogether, there are strategies to help reduce their impact.

One effective approach for managing exposure to UK inheritance tax in Australia is using a term life insurance policy. This can be tailored to cover your projected IHT liability, allowing your beneficiaries to receive the full value of your estate without needing to sell off assets to pay the tax. The term of the policy can match the years remaining on your IHT exposure. For example, if you’ve been out of the UK for three years, a seven-year term policy could be sufficient.

Another common strategy is gifting assets. If you survive for seven years after making a gift, that gift is typically exempt from IHT. However, it must be an unconditional transfer. Retaining any benefit – such as continuing to receive rental income from a gifted property – means the asset remains within your taxable estate.

More complex structures, such as trusts or family investment companies, may also provide tax and control benefits. Discretionary trusts, for example, are often used in Australia to manage wealth efficiently. But these must be carefully structured to avoid unintended UK tax consequences as His Majesty’s Revenue and Customs (HMRC) may still include certain trusts within the IHT net. Similarly, family investment companies are becoming more common in the UK for managing intergenerational wealth, though their Australian tax treatment can be more complicated. Every structure must be reviewed from both a UK and Australian legal and tax perspective to ensure it delivers the intended outcome.

Why you may need two wills

Wills are the cornerstone of any estate plan, but expats with assets in both countries should strongly consider having separate wills – one for Australia and one for the UK. Without a UK will, your Australian will would need to go through the local probate process before it can be ‘resealed’ and read in the UK. This often adds months of delay and additional cost to estate administration.

Having a dedicated UK will simplifies matters for any UK-based assets and can help your beneficiaries avoid extended probate timelines in both countries. Similarly, ensuring that at least one executor of your Australian will is a resident in Australia is essential. This can impact eligibility for certain capital gains tax exemptions, which may not apply if all executors live overseas.

Navigating legal and structural differences

The laws around estate distribution differ between the UK and Australia. Each country has its own rules around probate, jointly held property, inheritance rights and tax obligations. Without careful planning, these differences can lead to unintended consequences or delays in distributing your assets.

For example, pensions are treated differently under each system. Under proposed UK changes from April 2027, pensions may be subject to inheritance tax, even when passed to a non-UK-resident spouse. This was not the case under previous rules. Understanding how these changes interact with Australian regulations is vital to avoiding unnecessary tax liabilities.

Don’t overlook power of attorney

Many people focus on wills and IHT but overlook another vital part of estate planning: power of attorney. If you lose capacity, having someone authorised to act on your behalf becomes critical. But one country’s power of attorney isn’t necessarily valid in the other.

To manage UK assets effectively, you’ll likely need a separate UK-specific power of attorney, known as a lasting power of attorney (LPA). Setting one up is relatively straightforward and can save significant hassle for your family.

It’s also important to ensure your Australian power of attorney is valid in your state of residence. For example, a power of attorney drafted in New South Wales may not meet the legal requirements in Western Australia.

Why expert advice is essential

Estate planning for expats is rarely straightforward. Every decision, from how you hold assets to who you name as executor, can have cross-border implications. That’s why tailored advice from professionals with expertise in both UK and Australian estate planning is essential.

At Apt Wealth Partners, we work closely with international tax advisers and estate planning lawyers to ensure your plan meets the requirements of both countries. Whether you’ve recently moved or have lived in Australia for decades, now is the time to ensure your estate plan is aligned with your intentions and the latest regulations.

Get in touch to discuss how you can protect your legacy and reduce future complexity for your loved ones.