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Where there’s a Will there’s a Rock – Elliott Phillips and Simon Everington

By Elliott Phillips & Simon Everington

Partner Elliott Phillips and Associate Simon Everington discuss the subject of estate planning, in particular the use of wills, in Gibraltar on behalf of foreign-based individuals who have or who are thinking of acquiring assets in that jurisdiction, in Offshore Red.

Elliott and Simon’s article was published in Offshore Red, April 2020. A version of this article was published in Private Banker International, 2 June 2020, and can be found here.

As many readers will know, Gibraltar is a British Overseas Territory located at the southern tip of the Iberian Peninsula. With Morocco a short hop across the Strait of Gibraltar, the territory is a business-friendly commercial hub in the region, with close transport and trading links to the UK, the rest of Europe and Africa. Gibraltar’s economy (GDP in 2018 was £2.344 billion) is mainly driven by shipping, tourism, financial services and gaming, and the Gibraltarian pound is pegged to, and exchangeable with the British pound sterling at par value.

Gibraltar offers a reliable common law legal system, which is broadly based on the system in England and Wales, and has a favourable tax regime; for example, corporate tax is 10%, income tax is low by most European standards (and is capped for those who qualify for Category 2 or High Executive Possessing Specialist Skills status), and there is no Wealth Tax, Capital Gains Tax, Value Added Tax or Inheritance Tax.

Combined with excellent weather and fascinating local history, there is no wonder that Gibraltar captures the interest and imagination of foreign individuals and businesses alike.

This article focuses on estate planning, in particular the use of wills, in Gibraltar for foreign-based individuals who have or who are considering acquiring assets in the jurisdiction.

The recognition of foreign wills in Gibraltar

Wills can either be drafted to apply to the testator’s worldwide assets or those in a specific jurisdiction.  Where a will applies to the former, two key questions arise: 1) what do “worldwide” assets cover? and 2) does the relevant foreign jurisdiction recognise the will?

Let us take the example of someone domiciled in England and who dies leaving an English will that purportedly applies to his worldwide assets, including some in Gibraltar. Notwithstanding the wording in the will, it covers the moveable assets (for example, bank accounts and investments) held in England and in the foreign jurisdictions (provided the will is considered to be valid in those jurisdictions), as well as the immoveable assets (in other words, real estate) in England. However, the will does not apply to the foreign-based immoveable assets because, under the English rules, their succession is governed by the laws of the relevant foreign jurisdictions.

Fortunately, Gibraltar recognises foreign wills where they are considered to have been properly executed (meaning where their execution conforms to the laws of the jurisdiction where they were executed or to the laws of the jurisdiction in which the testator was domiciled or habitually resident or of which the testator was a national at the time he executed the will or at the time of his death).

The English Wills Act 1837 (the “English Wills Act”) sets out the necessary formalities for the execution of an English will.  If the will in the above example was validly executed pursuant to the English Wills Act, any immovable (and moveable) assets in Gibraltar that are subject to probate would pass in accordance with the provisions under the English will.

However, although it may appear more straightforward to simply have one will covering worldwide assets, it is often advisable to prepare a separate will for each relevant jurisdiction. This avoids the risk that a foreign will is not recognised by the local Court or that the collecting in of assets is unnecessarily delayed because financial institutions such as banks demand further evidence before releasing assets to those responsible for probate.

In summary, therefore, where a person has a will that purportedly applies to his worldwide assets, he may wish to supersede that with individual wills for each of the jurisdictions in which those assets are held. Similarly, a person may wish to execute a will to apply to assets that are not currently covered by a will (whether foreign or local).

What follows is a summary of the key considerations when executing a Gibraltar will.

The intestacy regime in Gibraltar

Under Gibraltar law, various types of asset pass outside of the will. These include, inter alia, the deceased’s equitable interest in joint bank accounts and in real estate held as joint tenants in equity, which instead pass on death under the rule of survivorship to the surviving joint owner(s).

For assets that are subject to probate, the principle of “testamentary freedom” (common to England but not many other European jurisdictions) applies – the right to choose what to leave, to whom and under what contingencies. To formally exercise that freedom, it is necessary to execute a valid will (whether a foreign will as described above or a Gibraltar will as described below). Otherwise, the Gibraltarian assets automatically pass on the testator’s death in accordance with the rules of intestacy set out in section 51 of the Administration of Estates Act 1933 (the “1933 Act”).

The rules of the 1933 Act

If the deceased is survived by their husband, wife or civil partner (“spouse”) and leaves no lineal descendants (i.e. any children, or where a child died before the deceased, any grandchildren) (“issue”), the spouse will inherit the deceased’s personal possessions (“chattels”) and the first £150,000 of the deceased’s estate plus 5% interest from the date of death. The remainder of the deceased’s net estate (the “residuary estate”) also passes to the spouse on trust during their lifetime.

If the deceased is survived by their spouse and one or more issue, the spouse will, as above, inherit the deceased’s chattels and the first £150,000 of the deceased’s estate plus 5% interest from the date of death.  However, only half of the residuary estate passes to the spouse on trust during their lifetime (after which what is left is held on trust for the deceased’s issue in equal shares until they reach the age of 18 (or until they marry or enter into a civil partnership before that age)). The other half of the residuary estate is held on trust for the deceased’s issue in equal shares until they reach the age of 18 years (or until they marry or enter into a civil partnership before that age).

If the deceased has no spouse at the time of death but is survived by issue, the issue will inherit all of the residuary estate on trust in equal shares until they reach the age of 18 years (or until they marry or enter into a civil partnership before that age).

If the deceased has no spouse or issue at the time of death but is survived by parents, the parents inherit the residuary estate on trust in equal shares.

The 1933 Act sets out further provisions where there are no surviving spouse, issue or parents and so on, until the scenario where there are no surviving family members, at which point the deceased’s assets pass bona vacantia to the Crown.

Clearly, the intestacy rules are a necessary but blunt tool, often at odds with a person’s true testamentary wishes. Hence the importance of executing a will.

Creating a valid Gibraltar will

 The requisite formalities for a Gibraltar will are set out in the Wills Act 2009 (which largely repeats the English Wills Act for Gibraltar), namely:

  • The testator must be 18 years of age;
  • The will must be in writing;
  • It must be signed by the testator or by some other person in his presence any by his direction;
  • It must appear that the testator intended by his signature to give effect to the will;
  • The testator’s signature is made or acknowledged by the testator in the presence of two or more witnesses present at the same time; and
  • Each witness must attest and sign the will or acknowledge his signature in the presence of the testator (but not necessarily in the presence of any other witness).

A less stringent regime applies for soldiers (including members of the Royal Navy, Royal Marines or Royal Air Force) in actual military service and any mariner or seaman at sea. There is no requirement for a Gibraltar will to include an attestation clause.

In addition to the above formalities:

  • The testator must have testamentary capacity at the time (the leading authority is the English case of Banks v Goodfellow, which sets out the criteria:- that the testator must understand the nature and effect of the will, have some idea of the extent of the property of which he is disposing under the will, be aware of the persons for whom he would normally be expected to provide, and has no disorder of the mind that perverts his sense of right or prevents the exercise of his natural faculties in disposing of his property by the will);
  • The testator must know of and approve the contents of the will;
  • The testator must not have been unduly influenced into executing the will; and
  • The will must not be forged.

Like their English counterparts, the Gibraltar rules allow for a Gibraltar will to apply to the testator’s worldwide assets, although, for the reasons set out earlier, it is often advisable to have individual wills for each jurisdiction in which assets are held.

Storage of Gibraltar wills

Once a Gibraltar will has been validly executed, it should be kept in a safe place.  Until recently, testators in Gibraltar had the option of depositing wills with the Registry for a fee of £250. This service has now been discontinued, although it is understood that it will recommence in the not-too-distant future. In any event, there is no requirement to register a Gibraltar will during the testator’s lifetime.

How gifts become void in Gibraltar wills

As with English wills, testamentary gifts to an attesting witness or to the spouse of that witness are void. Whilst a witness may, if appointed under the will, subsequently act as executor, again any testamentary gifts to the executor or his spouse are void.

Further, where a testator executes a will under which a gift is left to his spouse or where he appoints his spouse as executor or trustee, and where the testator subsequently divorces or has his marriage or civil partnership annulled, that gift will lapse and that appointment will not take effect (unless the will indicates a contrary intention).  Where the lapsing gift to the spouse is a life interest, the interest in remainder is treated as if there was no life interest.

Additionally, where the will includes a gift to a child or remoter descendant of the testator but the intended beneficiary predeceases the testator, leaving his own descendants who are alive at the time of the testator’s death, that gift will take effect as a gift to those descendants in equal shares (again unless the will indicates a contrary intention).

Revocation of Gibraltar wills

A Gibraltar will is revoked where the testator subsequently marries or enters into a civil partnership (unless the will was made in the contemplation of that marriage or civil partnership), where the testator intentionally destroys the will, where the testator makes a new will (or codicil) that expressly revokes a previous will or where the testator makes a written declaration stating his wish to revoke the will.

Claims for reasonable financial provision

Readers should also note that, like the English regime, where a person dies domiciled in Gibraltar, there is a risk that a claim might be brought against the estate for reasonable financial provision where the will (or, in its absence, the intestacy rules) fails to provide this. Those eligible to make a claim under the Inheritance (Provision for Family and Dependants) Act 1977 (the “1977 Act”) include the deceased’s spouse, former spouse who has not remarried, child, any person treated as a child of the family or any person who immediately before the deceased’s death was being maintained by the deceased.

Except with the permission of the Court, the claim must be made within 6 months from the date on which the Grant of Representation is taken out by the personal representatives.  If the Court finds that reasonable financial provision has not been provided to the eligible claimant, it has the power to make a variety of orders, inter alia orders for a lump sum or periodical payments to be paid out of the estate, or for a property that is held in the estate to be transferred, to the successful claimant.  Such claims can delay the administration of the estate and, if successful, can significantly deplete its value.

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