The global movement of people is a key characteristic that defines the professional and affluent classes in India. In the past ten years, more Indian families have moved abroad for reasons such as a better lifestyle, good education, or lucrative investments. Nevertheless, along with the geographical freedom comes a host of complexities, particularly regarding wealth management and estate planning in different countries. What was once regarded as a mere administrative issue could become a complicated labyrinth of tax exposures, inheritance issues, and obstacles created by regulations if not handled cautiously.
Complexity due to the existence of two tax and legal systems
After the relocation of Indian families abroad, one of the first things they have to get used to is the fact that their financial footprint is not confined to one legal system anymore. The taxation laws of India concerning foreign income and capital gains are quite different from those of countries such as Australia, New Zealand, the UK, or the UAE. For example, people living in these countries may be liable to pay tax on their entire income, whereas in India, there is a provision for different treatment for residents and non-residents under its Income-tax Act. Currently, the situation of being exposed to two systems together means that if the wealth structures, such as trusts, property, or shares, are not meticulously planned, there is a risk of either taxes being levied twice or the family being unable to comply with the tax laws. It is important to have good taxation advice that crosses borders and is often sought in conjunction with migration and legal professionals, so that it can be made clear which part of the income or assets will be taxed under which regime.
The gap between inheritance and succession planning
Estate planning is a complicated process, and it adds to the dilemma. Indian families usually depend on wills as their prime source of succession according to Indian laws, with an assumption that the wills would be applicable without any change to the estate’s assets located abroad. But sadly, this is not the actual scenario. Each country has its own rules concerning inheritance, property, and such other things that vary from the legal jurisdictions, like documentation standards and probate requirements, leading to fragmented estates or long delays in executing wills. To illustrate the point, a property inheritance in New Zealand or a trust fund in the UK may be subject to common law principles that differ significantly from India’s succession laws, especially those under the Hindu Succession Act or the Indian Succession Act. This divergence can lead to heirs being involved in multiple-country probate processes and even disputes if the wills are not officially recognized in every country or if the assets are not declared.
Exchange control and repatriation considerations
The Foreign Exchange Management Act (FEMA) governs wealth transfers from India and, therefore, limits the ability of Indian residents to transfer assets offshore. Even after moving, expatriates still have emotional or financial ties to India – i.e., property, family shareholdings, or business ownership interests. Dealing with FEMA permissions and the Liberalized Remittance Scheme (LRS) is often necessary if they want to transfer or purchase overseas holdings legally.
Once expatriates have moved, repatriating the proceeds from those Indian assets (as an example, selling family-inherited property) can sometimes be challenging. This sometimes occurs because the family’s residence has changed, or because the documentation was misplaced between the Indian banks, tax authorities, and the new residence or country or establishment, destination, or domicile. Before an expatriate leaves India, planning with cross-border financial professionals can help navigate these considerations and prevent liquidity traps or delays.
Changing Wealth Ownership Structures
An increasing number of Indian high-net-worth families are establishing trusts and/or holding companies to transfer their wealth than before. This is increasingly common with expatriates. This certainly will protect their wealth and provide for estate continuity; however, the wealth ownership structure must be reviewed in connection with the tax reporting provisions of the destination country. For example, countries such as Australia or New Zealand have strict settlor and beneficiary disclosure rules under anti-avoidance regimes. A trust that is considered resident in one country may trigger annual reporting or tax obligations even where the beneficiaries are subject to residency in another state. Likewise, family offices or investment vehicles that have exposure to two countries in their operations and investments must reformulate the governance structures in accordance with global frameworks such as FATCA and CRS or face penalties.
Bringing together personal, legal, and financial considerations
Successful international wealth and estate planning is more about achieving sustainable family stability and continuity than just standalone financial management. A more holistic framework that weaves together legal, tax, and financial advice will allow the family to remain connected across generations and achieve legal compliance on either side of the border. This requires continued collaboration between Indian advisors and professionals in the destination country. Migration consultants, financial planners, and estate lawyers must simultaneously consider all of the families’ goals, their residency, and exposure to global reporting standards.
As migration continues to increase, families that are mindful and plan for the implications of cross-border wealth will protect their estate while ensuring family harmony into their third and fourth generations.