Question 1 - what is the lex situs of a US life assurance policy owned by a UK domiciliary? Does it pass under his UK will as part of his personalty or under his US will on some other basis?
Question 2- One is domiciled where one has a fixed permanent intention of residing. Although the deemed domicile rules will not of themselves displace one’s domicile of origin, can that intention be inferred from a course of conduct even if one hasn’t given one’s domicile a moments thought?
For example, a US citizen comes to work in a school on a US Air Force base. During his employment he is covered by the visiting forces rules and so the deemed domicile rules do not apply. He buys and lives in a nice house in the village, brings up his children there, they go to English schools then English university, marry and leave home. After his retirement the teacher remains in the village and eventually dies there.He had no property in the US other than some cash at bank and some US insurance policies. He retained his US passport and always regarded himself as American. He had lived in the village for close on 50 years.
Had he retained his US domicile of origin at his death?
Regarding 1, I’m not going to attempt to answer your question but would just wonder aloud whether you know, or can check with the policy holder, if the Deceased nominated beneficiaries for the policy? Subject to the terms of the nominations, this may have the effect of taking the policy out of the estate altogether, as the US policy holder would consider the asset as passing into the ownership of the beneficiary/ies the moment the death took place.
Life assurance proceeds are included in the decedent’s estate in the US, but whether they are taxable depends in part on the insurance policy itself, who has ‘incidents’ of ownership, and who the beneficiary is. US tax law does not look at the lex situs of the insurance policy, but at who is a beneficiary and/or has incidents of ownership.
A US ‘person’ (US citizen or permanent resident) is subject to US taxation, including gift and inheritance tax, regardless of domicile of origin. It sounds like the deceased was living in England on a permanent residency visa rather than as a visiting forces member. On that basis, his estate would be subject to both US and UK gift and inheritance tax, subject to possible mitigation through the US/UK double taxation treaty.
It also sounds like the deceased did not retain residency in has last state of residence in the US. If he did, however, the laws of some (but a decreasing number of) states raise gift and inheritance tax claims there as well.
John C. Sturgeon, TEP, BS, MS, JD
Attorney and Counsellor at Law / Rechtsbeistand
Sturgeon & Company Limited
Domicile is, of course, a concept of private international law.
Bell v Kennedy (1868) provides that. “A new domicile is not acquired until there is not only a fixed intention of establishing a permanent residence in a nw country, but until also this intention has been carried out be actual residence there”.
Ascertaining whether the requisite intention subsists is a question of fact (every aspect being taken into account (Casdagli v Casdagli (1919)) and the courts have shown that a requisite intention has been shown to subsist (or has not) at the relevant time even if the person is/was, as such, unaware that such an intention did (or did not) exist.
It’s impossible on the limited information provided to form a view as to whether a UK domicile of choice had ben acquired at date of death. IRC. v Bullock (1976) involved an individual who spent 40 years in the UK but had not acquired a UK domicile of choice whereas in Re Furse (1980) involved an individual who spent a similar length of time in the UK but was found to have a acquired a UK domicile of choice.
Life policies which are not executed by way of deed (ie not. speciality debts) I believe have a situs where the life company (ie debtor) is resident (presumably in your case the USA). If the life policy is made under a deed historically it would seem that its situs was where the deed was located but I’m unclear if this is still correct.
Succession to moveables is governed by law of domicile of the deceased at date of death.
I have nothing to add to what has been set out in the previous answers as most issues have been covered, but surely someone has read the policy to see if it has a governing law clause, and as Louise Levene says a nominated beneficiary. Sometimes the life policy company will pay out the policy direct to the named beneficiaries as it does not treat the policy (as mentioned by John Sturgeon) as an asset of the deceased’s estate but as matter of contract is payable direct to such beneficiary. Certainly the policy itself needs to be carefully looked at.
As is probably usual, you need to be careful as the value of the policy as the life company may well ask for a Federal Transfer Certificate (something we do on a regular basis). This of itself can create knotty legal issues as if the policy is not an asset of the deceased, technically no Federal Transfer Certificate can be obtained. The same issue arises if you apply for a USA Grant of Probate as the local courts may take the view they have no jurisdiction.
You therefore need to deal with the life company carefully, to see what they want in order to release the monies - they have their set procedures which even if wrong, they will insist are complied with unless you can get to the legal department and explain the problem. This can also be difficult. You will need to be very patient - it will be many months before the monies are released - the FTC takes about a year at the moment even though the IRS says 3 months!
Yours sincerely,
Peter Double
Probate Resealing Services