Domicile and Impact on Deceased Estates
In today’s globalised world, many Australian citizens work and live overseas with their families. They may have acquired citizenship or residency rights in the country they reside in. Often, they continue to hold assets in Australia.
On the other hand, there are many people from overseas who have migrated to Australia. They live and work in Australia but may not take up Australian citizenship. Instead, they continue to hold the citizenship of their country of origin and retain substantial connection to their home country with the intention of returning in the future.
With an open economy, Australia attracts substantial foreign investments. These foreign investors may hold real estate, company shares, bank deposits and other assets in Australia. They are not Australian citizens and do not reside in Australia.
In the above scenarios, when a person passes away without a will, the question arises – does the laws of Australia or the country of origin of the deceased applies to the distribution of the Australian assets of the deceased estate?
Often there are significant differences in the treatment of deceased estates under Australian and another country’s law. These differences may result in different beneficiaries of the deceased estate, different amounts to be paid to each beneficiary and the application of inheritance and other taxes payable by the deceased estate.
Whether Australian or another country’s law applies depends on the “domicile” of the deceased. “Domicile” is a legal concept and it means the country where the deceased has substantial connection and is considered to be the permanent home of the deceased to which they intend to return in the future, if they currently live elsewhere.
Domicile is the not the same as residency. Residence is where a person lives, whereas domicile relates to a deeper and longer lasting connection to a country where that person intends to remain or to return in the future. So, if an Australian citizen works and lives overseas for a substantial period but still considers Australia to be his or her permanent home, then Australia will be the domicile. Applying the same principle, if a foreign person relocates to Australia, acquires Australian citizenship and has no intention of returning to the country of origin, the domicile of that foreign person has now changed to Australia.
Depending on the circumstances, the domicile of the deceased may have an impact on the deceased estate.
If the deceased dies leaving a will, the assets of deceased will be distributed in accordance with the terms of the will regardless of the domicile of the deceased. Section 24 of the Wills Act (WA) states that the construction of a will shall not be altered by reason of any change in the testator’s domicile after the execution of the will. The will must of course be proved to the court in order for the grant of probate to be issued so that the executor has authority to deal with the deceased estate.
If the deceased dies without a will, the domicile of the deceased will only be relevant to the movable property of the deceased held in Australia. Movable property includes bank deposits, company shares, motor-vehicle, jewellery and other movable items. The domicile of the deceased is not relevant to the distribution of immovable property held by the deceased in Australia. Immovable property refers to any real estate held by the deceased.
With respect to the movable property of a deceased passing away without a will, the law of the domicile of the deceased will determine the beneficiaries and the share of each beneficiary to such property held in Australia.
As for immovable property, lex situs meaning the law where the real estate is situated determines the beneficiaries regardless of the domicile of the deceased. Thus, if a person dies domiciled overseas leaving real estate within Australia, those assets will be distributed to beneficiaries entitled to them under Australian law.
How is the “domicile” of the deceased determined under Australian law? Domicile is governed by both common law principles and legislation. All states and territories in Australia have legislated a Domicile Act. It is a fundamental principle of the common law that every person must have a domicile at all times. Generally, there are three kinds of domicile: domicile of origin, domicile of choice, and domicile by operation of law.
Domicile of origin refers to a person’s domicile at birth. A child acquires the domicile of his or her father at birth. However, if the father is unknown or had passed away before the child’s birth, the child would take the domicile of his or her mother. A person retains this domicile of origin from birth until that person acquires a domicile of choice in another country.
Domicile of choice is determined by that person’s intention to acquire to acquire another docile. Section 9 of the Domicile Act 1981 (WA) states that, “The intention that a person must have in order to acquire a domicile of choice in a country is the intention to make his home indefinitely in that country.”
Whether the deceased has acquired a new domicile by choice would require an investigation to the deceased’s person’s citizenship and visa status, living arrangements and linkages to the new country. Some factors that demonstrate an intention to change domicile include: –
- The deceased acquiring citizenship or a visa that enables the deceased to live permanently in the country of choice. A working visa or a temporary visa may not be sufficient to demonstrate an intention to acquire a new domicile by choice as the deceased does not have the right to live permanently in the new country of choice.
- The deceased spending substantial residence in the country of choice.
- The deceased having employment or operating a business in the country of choice.
- The deceased transferring assets to the country of choice.
- The deceased holding a preponderance of assets in the domicile of choice.
- The residence of the immediate family of the deceased in the country of choice.
- The deceased enrolling to vote to in the country of choice.
- The deceased obtaining medical and other government benefits in the country of choice.
- The deceased’s address stated in tax returns filed with the Australian Taxation Office.
- The cancellation, termination or abandonment of links to the country of origin.
At the end of the day, one factor alone will not be sufficient to determine whether the deceased intended to change his or her domicile. The factors must be considered as a whole and must show on a balance of probabilities that the deceased intended to acquire a domicile of choice and to abandon the domicile of origin.