When your estate crosses borders: overseas assets, overseas beneficiaries, and the traps in between

A significant share of Australian retirees have a cross-border dimension to their estate — a property in their country of origin (a UK flat, an Italian house, a Greek village home), a foreign bank or investment account, a foreign pension, or beneficiaries living overseas (children who emigrated, grandchildren born abroad). These elements introduce complications a standard Australian will doesn't address, and that catch families out badly after death. Foreign assets may be governed by the succession law of the country where they sit — which can override the Australian will entirely, especially in the many countries with forced-heirship rules requiring fixed shares to children. Multiple wills may be needed, one per jurisdiction, drafted carefully so they don't accidentally revoke each other. Foreign death duties may apply — Australia has none, but the UK, the US and many other countries do. Probate may be required in several places, and passing assets to overseas-resident beneficiaries can trigger Australian capital gains tax that wouldn't otherwise arise.

This is genuinely specialist territory, needing an Australian estate solicitor coordinating with a lawyer in each relevant foreign jurisdiction — but the retiree needs to understand the issues well enough to know they need that help. This article frames the problem. It is general information only, not personal advice, and the foreign-law points especially must be confirmed with a specialist in each country, since those rules are outside Australian authority and change.

Which country's law governs — the foundational complication?

A general principle of private international law is that immovable property (real estate) is typically governed by the law of the country where it's located, known as lex situs, while movable property (bank accounts, shares, personal effects) is often governed by the law of the deceased's domicile. So an Australian retiree's Italian house may be governed by Italian succession law even though their will is Australian. This matters most because of forced heirship: many civil-law countries (much of continental Europe, parts of Asia, the Middle East and Latin America) require a fixed proportion of the estate, or of assets located there, to go to certain heirs — usually children and spouse — regardless of what the will says. An Australian will leaving the Italian house to one child, or to a charity, may be overridden by Italian rules requiring shares to all the children. This contrasts sharply with Australia's common-law freedom of testation (subject to family-provision claims), and that contrast is the source of much cross-border complication. For assets in the European Union, the EU Succession Regulation (often called "Brussels IV") may allow a person to elect the law of their nationality to govern their estate, potentially applying Australian-style freedom of testation to EU assets — but whether and how that applies to an Australian national is exactly the kind of question only a specialist in the relevant country can answer.

What is the revocation trap with multiple wills?

For an estate with assets in several countries, it's often wise to have separate wills for each jurisdiction — an Australian will for Australian assets, a foreign will for foreign assets — each drafted to local law and able to be probated locally without waiting for the other. But there's a classic, avoidable disaster here: a standard will usually opens with "I revoke all previous wills." If the Australian will revokes the foreign will, or vice versa, the careful multi-will structure collapses. Multi-jurisdiction wills must be drafted to revoke only the will for that jurisdiction's assets, not all wills globally. This is exactly why the wills must be prepared by lawyers coordinating across jurisdictions: a generalist drafting an Australian will in isolation, with a standard revoke-all clause, can wipe out a carefully prepared foreign will without anyone realising until after death.

What foreign death duties exist that Australia doesn't have?

Australia abolished inheritance tax and estate duty decades ago, so receiving an inheritance is not itself taxed here — but that gives no protection against foreign death taxes. The UK Inheritance Tax is the big one for UK migrants: the UK levies it at 40% above its nil-rate band on the worldwide estate of a UK-domiciled person, and on UK-located assets of a non-UK-domiciled person (a UK rule, to be confirmed with a UK specialist). The trap is domicile — a legal concept distinct from residence or citizenship, and famously "sticky" — because many long-term Australian residents who migrated from the UK decades ago may still be UK-domiciled for Inheritance Tax purposes, potentially exposing their entire worldwide estate. Most UK-Australian retirees have no idea about this. The US Estate Tax is the other major one: the US taxes US-situated assets (US real estate, and US shares held directly) of non-residents above a relatively low non-resident threshold, so an Australian retiree holding US shares directly could have US estate-tax exposure (a US rule, to be confirmed with a US specialist). Other countries — France, Germany, Japan and more — have their own inheritance or estate taxes on assets located there or on resident beneficiaries. None of these can be assessed from Australia; they need advice in the country concerned.

How does probate work across jurisdictions?

To deal with assets in a foreign country, the executor typically needs a grant of probate recognised there — either a fresh local grant or a "resealing" of the Australian grant, a simplified recognition available in some Commonwealth countries under reciprocal arrangements, but not universal and not available for non-Commonwealth countries. Multi-jurisdiction probate is slower and more expensive than a single-country estate, with foreign legal fees, translation, document legalisation (an apostille) and coordination all adding up, and foreign banks and authorities often demand original, apostilled, translated documents before releasing anything — a real practical burden on the executor.

What happens with overseas beneficiaries receiving an Australian inheritance?

Transferring an inheritance to an overseas beneficiary involves currency conversion and international transfer costs, and the beneficiary's country of residence may tax the inheritance itself (in countries with beneficiary-side inheritance tax) or tax future income from it. Some countries — notably the US — require residents to report foreign gifts and inheritances above set thresholds, with penalties for failure, so a US-resident beneficiary will generally need their own US tax advice. And the executor faces the practical work of identifying, locating and paying beneficiaries abroad.

What is the Australian CGT trap on foreign-resident beneficiaries?

This one is genuinely under-appreciated, and it's squarely an Australian rule. Normally, when a CGT asset passes from a deceased estate to a beneficiary, there's no immediate capital gains tax — the beneficiary inherits the cost base and CGT only applies when they later sell (ATO). But a special rule, CGT event K3, overrides that rollover where an asset of an Australian-resident deceased passes to a beneficiary who is a foreign resident and the asset is not "taxable Australian property" in that beneficiary's hands — for example, Australian shares or managed funds, as opposed to Australian real estate. In that case a capital gain is triggered and must be included in the deceased's date-of-death tax return, with pre-CGT assets (acquired before 20 September 1985) disregarded (ATO). So an Australian estate passing share investments to overseas-resident children can trigger CGT that wouldn't have arisen had the children been Australian residents — a tax the deceased never anticipated. Separately, where Australian real property is sold, foreign resident capital gains withholding now applies at 15% of the sale value from 1 January 2025 unless the seller provides an ATO clearance certificate confirming Australian residency (ATO). Both points need modelling for any estate with overseas-resident beneficiaries.

Do powers of attorney work across borders?

An Australian Enduring Power of Attorney may not be recognised in a foreign country for dealing with assets located there, so managing foreign assets if the retiree loses capacity may require a local power of attorney in the relevant jurisdiction — an easily overlooked element of the cross-border plan.

Is the best answer often to simplify?

For many retirees — particularly ageing ones who'd struggle to manage foreign assets anyway — the cleanest solution to cross-border complexity is to simplify during their lifetime: sell the foreign property, repatriate the foreign accounts, and swap direct US shares for US exposure held through an Australian-domiciled fund instead. The post-death complexity — foreign legal fees, multi-jurisdiction probate, foreign death-duty exposure and the CGT traps — often outweighs the benefit of holding the foreign assets directly. Simplification deserves to be raised as a genuine option, not dismissed.

What do worked examples look like?

These two cases show cross-border estate issues in practice. They are illustrative only, not personal advice, and cross-border estates require specialist legal advice in each relevant jurisdiction.

Giuseppe, 76, migrated from Italy to Australia in his 30s. He's an Australian citizen, owns his Australian home and has Australian super and investments, and also still owns the family house in his Italian village (worth perhaps €200,000), which he inherited from his parents; his three children are all in Australia, and his Australian will leaves everything equally between them, which he assumes covers the Italian house too. On these facts his assumption is wrong about the Italian house: as immovable property in Italy, it's governed by Italian succession law, which has forced-heirship rules requiring fixed shares to children. His wish for equal shares may happen to align reasonably well with Italian forced heirship, but the mechanism matters — his Australian will may not be effective to deal with the Italian property at all, and the Italian estate may need to be administered under Italian law. On these facts it is generally rational to engage an Italian lawyer (coordinated with his Australian solicitor) to prepare a separate Italian will for the house, drafted to Italian law and revoking only previous Italian wills, not his Australian one, and to advise on Italian inheritance tax; his Australian will should then be revised to deal only with his Australian assets and to avoid revoking the Italian will, with the Italian lawyer advising on whether the EU Succession Regulation offers any nationality-election option. He should also weigh whether he genuinely wants to keep the Italian house given the cross-border complexity it creates and the difficulty his Australian children would face managing and eventually selling it — simplification, selling it during his lifetime and bringing the proceeds home, is a real option to set against its sentimental value. The key insight is that his Australian will doesn't control the Italian house, and he needs coordinated Australian and Italian advice.

Margaret, 78, migrated from England to Australia 45 years ago. She's an Australian citizen but has never formally changed her domicile, and she retains a UK bank account and a small portfolio of UK shares (worth perhaps £150,000 combined); two of her three children emigrated — one to Canada, one to the US — while one remains in Australia, and her otherwise-Australian estate (home, super, investments) passes equally to the three under her Australian will. On these facts she has two significant cross-border issues. First, UK domicile and Inheritance Tax: despite 45 years in Australia she may still be UK-domiciled for IHT, which could expose her entire worldwide estate — including her Australian home, super and investments — to UK IHT at 40% above the nil-rate band (a UK rule), potentially an enormous liability she's unaware of, so urgent specialist UK-Australia cross-border advice is needed to determine her actual domicile status and structure around it. Second, the overseas-resident beneficiaries: passing her Australian share investments to her Canada-resident and US-resident children can trigger Australian CGT under CGT event K3 that wouldn't arise if they were Australian residents (ATO), the gain falling into her date-of-death return, and her US-resident child faces US reporting obligations on the inheritance. On these facts it is generally rational to model the Australian CGT consequences of the foreign-resident beneficiaries, ensure the US child gets US tax advice, and consider simplifying the UK shares and account (selling and repatriating) to cut both the UK-asset complexity and the multi-jurisdiction probate burden. Her case shows how a seemingly ordinary Australian estate can carry major hidden cross-border exposure that only specialist advice will surface.

For Australian retirees with overseas assets or overseas beneficiaries, the cross-border dimension introduces complications standard Australian estate planning doesn't touch, and that can produce nasty surprises after death — forced heirship overriding the will, UK IHT on the worldwide estate, Australian CGT on passing assets to foreign-resident children, multi-jurisdiction probate delays. The work is to identify the cross-border elements (foreign assets, overseas beneficiaries, dual nationality, foreign pensions, foreign domicile), flag the need for specialist cross-border advice (an Australian estate lawyer coordinating with a lawyer in each relevant country — emphatically not DIY or generalist territory), address domicile (especially the sleeper UK IHT exposure for UK migrants), consider multiple coordinated wills drafted to avoid the revocation trap, model the foreign death duties and the Australian CGT on foreign-resident beneficiaries, check forced-heirship rules where foreign property sits, arrange cross-border powers of attorney for incapacity, and — often the cleanest answer — consider simplifying the cross-border estate during the retiree's lifetime. The headline most clients need to hear is that your Australian will may not control your overseas assets, foreign death taxes may apply even though Australia has none, and passing wealth to overseas-resident children can trigger Australian tax — so if your estate crosses borders, get specialist cross-border advice well before it matters. The foreign rules are highly jurisdiction-specific and change, so verify everything with specialists in each relevant country before relying on it — but the shape of the issues, and the need for coordinated advice, is durable.

Sources

• ATO — How CGT applies to inherited assets (including CGT event K3)
• ATO — Foreign resident capital gains withholding
• ATO — Inherited property and CGT