Cross-Border Estate Planning For NRIs: Key Legal Considerations

With increasing global mobility, many Non-Resident Indians (“NRIs”) own assets across multiple jurisdictions, including immovable property in India, overseas investments, bank accounts, business interests and other financial assets. While such diversified asset ownership offers significant investment opportunities, it also presents complex succession challenges. Estate planning for NRIs is rarely governed by the laws of a single jurisdiction. Instead, it often requires careful coordination between the succession, tax and regulatory frameworks of multiple countries to ensure that assets are transferred efficiently and in accordance with the individual’s wishes.

An estate plan that is effective in one jurisdiction may not adequately address legal requirements in another. Consequently, cross-border estate planning requires a comprehensive strategy that reconciles the applicable laws governing succession, taxation, foreign exchange and probate across the jurisdictions in which assets are situated.

Determining the Applicable Law

The starting point in any cross-border succession exercise is identifying the law that governs the various categories of assets forming part of the estate.

As a general principle of private international law, succession to immovable propertyis governed by the law of the jurisdiction in which the property is situated (lex situs). Accordingly, immovable property located in India will ordinarily be governed by the applicable Indian succession laws, irrespective of the owner’s nationality, citizenship or tax residency.

The position is often different for movable assets, such as bank accounts, shares, securities and other financial investments. Succession to movable property is generally determined by the law of the deceased’s domicile, subject to the applicable conflict-of-law rules of the relevant jurisdiction. Since domicile is a distinct legal concept and may differ from citizenship or tax residency, determining the governing law requires careful legal analysis.

Accordingly, a comprehensive understanding of the applicable legal framework is fundamental to ensuring that succession documents remain effective across multiple jurisdictions.

Coordinating Testamentary Documents Across Jurisdictions

One of the most important considerations for NRIs is whether a single Will is sufficient to govern all assets. While there is no legal requirement to execute multiple Wills, a single testamentary document may not always provide the most efficient mechanism for administering assets situated across different jurisdictions.

Depending on the location and nature of the assets, executing separate jurisdiction-specific Wills may simplify estate administration and reduce delays associated with probate and ancillary proceedings. However, multiple Wills require careful drafting to ensure that they operate harmoniously.

Under Section 70 of the Indian Succession Act, 1925, a Will may be revoked by a subsequent Will. Similarly, many foreign testamentary documents contain broadly drafted revocation clauses stating that they revoke all previous Wills. Unless carefully drafted, a later Will executed in another jurisdiction may unintentionally revoke an earlier Indian Will, thereby frustrating the testator’s intended succession plan.

To mitigate this risk, jurisdiction-specific Wills should clearly identify the assets they govern and expressly provide that they do not revoke testamentary documents executed for assets situated in other jurisdictions. Coordinated drafting across jurisdictions is therefore essential to preserving the effectiveness of the overall estate plan.

Aligning Nominations with the Overall Estate Plan

Nominations remain an important administrative tool for facilitating the transmission of financial assets; however, they should not be viewed as substitutes for a comprehensive succession plan.

For most financial assets, including bank accounts, fixed deposits and dematerialised securities, a nominee ordinarily facilitates the transmission of the asset and does not necessarily become its beneficial owner unless the governing statute provides otherwise. The ultimate devolution of ownership generally continues to be governed by the Will or the applicable law of succession.

Insurance policies are governed by a separate statutory framework under the Insurance Act, and specified nominees may, in certain circumstances, acquire beneficial rights. Accordingly, insurance nominations should also be reviewed carefully as part of the broader estate planning process.

For NRIs managing investments across multiple jurisdictions, periodic review of nominations is particularly important. Nominations maintained with banks, mutual funds, portfolio management services, demat accounts and insurance policies should remain consistent with the overall succession plan to minimise the risk of future disputes.

FEMA Considerations in Repatriating Inherited Assets

Inheritance of an Indian asset and the subsequent repatriation of its proceeds are governed by distinct legal frameworks. While succession determines ownership, the movement of funds outside India is regulated by the Foreign Exchange Management Act, 1999 (FEMA) and the regulations issued thereunder.

Under the applicable FEMA framework, NRIs may generally remit up to USD 1 million per financial year from balances held in their Non-Resident Ordinary (NRO) accounts, subject to compliance with prescribed documentation, tax obligations and applicable Reserve Bank of India (RBI) regulations. This typically includes obtaining the necessary tax certifications and fulfilling procedural requirements before remittance is permitted.

Special considerations also apply to agricultural land, plantation property and farmhouses. While NRIs are permitted to inherit such properties in India, FEMA imposes significant restrictions on their transfer and on the repatriation of sale proceeds. Accordingly, these assets often require careful legal and regulatory planning before any transfer or remittance is undertaken.

Tax Considerations for Cross-Border Estates

Although India does not presently levy inheritance or estate tax, this position should not be viewed in isolation where overseas assets are involved.

Capital gains tax in India generally arises when inherited assets are subsequently transferred by the legal heir. However, foreign jurisdictions may impose estate or inheritance taxes at the time of succession.

For instance, the United States imposes federal estate tax which may, in certain circumstances, apply at rates of up to 40%. Non-resident, non-citizens are generally entitled to a substantially lower exemption than US citizens and residents, making estate planning particularly important for NRIs holding US-situated assets.

Similarly, other jurisdictions may impose inheritance or estate taxes based on domicile, residency or the location of the assets. It is also important to note that the India–United States Double Taxation Avoidance Agreement (DTAA) addresses income taxation and does not provide relief from estate or inheritance taxes. Consequently, individuals with international assets should evaluate potential tax exposure separately in each relevant jurisdiction.

The Role of Trusts in Cross-Border Estate Planning

Private trusts established under the Indian Trusts Act, 1882 continue to be an effective succession planning tool for many NRIs, particularly where long-term wealth preservation, structured asset management and intergenerational succession are key objectives.

Assets validly transferred into a trust during the settlor’s lifetime generally do not form part of the probate estate, thereby facilitating continuity in the administration of the trust assets. Trusts may also assist in protecting family wealth, managing business interests and providing for beneficiaries in a structured manner.

Where trusts involve non-resident settlors, trustees or beneficiaries, their establishment and administration should be carefully evaluated for compliance with FEMA, the Income-tax Act and applicable RBI regulations. Given the interaction of multiple legal regimes, trust structures intended for cross-border families require careful legal, regulatory and tax planning.

Conclusion

Cross-border estate planning involves considerably more than preparing a Will. For NRIs with assets situated across multiple jurisdictions, an effective succession plan must integrate succession laws, foreign exchange regulations, taxation, probate considerations and coordinated testamentary documents into a unified legal strategy.

Periodic review of Wills, trusts, nominations and ownership structures is equally important, particularly as family circumstances, asset portfolios and regulatory frameworks continue to evolve. By adopting a comprehensive and coordinated approach, NRIs can significantly reduce the risk of legal disputes, administrative delays and regulatory complications while ensuring that their wealth is transferred efficiently and in accordance with their long-term succession objectives.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.