Introduction To UAE Inheritance Law

Introduction to UAE Inheritance Law

The Cove Rotana3 March 2009

strohal-International Legal Consultants UAE - Singapore - Vienna

Introduction

Important questions need to be answered • Which Inheritance law should govern movable

and immovable estate located in UAE? UAE law and consequently Shari’a or foreign national law?

• If the Shari’a shall apply, can the testator appoint his heirs according to his sole will and desire?


Introduction

• Jointly owned properties• Joint bank accounts – frozen or not? • If yes, what is the procedure to reactivate it

and to be able to dispose of the money again?


Introduction

According to an informal survey by lawyers in Dubai who advise clients on real estate investment, only 5% of buyers are aware of the laws regarding freehold property.


Introduction

For clarifying UAE regulations we will expose:

1. UAE laws which govern matters of inheritance

2. Potential difficulties and problems

3. Proposed Solutions


I- UAE Laws governing inheritance matters

Matters of Inheritance are governed by two Federal Laws

1. Federal Law No.5 of 1985 regarding the law of Civil Transactions in UAE

2. Federal Law No. 28 of 2005 regarding the UAE Personal Affairs


UAE Civil Code

UAE Civil Code distinguishes between movable and immovable assets for determining the applicable law

1. Movable: application of the national law of the deceased

2. Immovable: application of UAE law (Shari’a)


UAE Personal Status Law

• The law applies on non-UAE nationals unless they requested the application of their own national law

• Conclusion:1. Movable: Application of foreign law if non-UAE

national requested so.2. Immovable: Uncertainty about the applicable law

on immovable located in UAE


Applicable law on foreign owned real estate in UAE

• Legislation is unclear and uncertain• Doctrine is divided:

1. Some require the application of the law where the immovable is located and consequently Shari’a as it is a matter related to sovereignty and public policy

2. Others require the application of foreign law as it is a matter left to the parties’ will

• Jurisprudence: did not clarify firmly this uncertainty


Solution concerning real estate

• UAE courts will decide on the applicable law on case by case basis in their sole discretion .

• No guarantee can be granted that the Court will apply foreign law and not Shari’a.

• Even if Court ruled the application of foreign law, most foreign jurisdictions refer back to the law where the immovable is located. (lex rei sitae)


II- Potential Problems and difficulties

Problems will be faced in the following domains upon the death of the testator:

1. Movable and Immovable inheritance2. Bank accounts3. Residence visa4. Severance pay5. Inheritance Tax6. Funeral organization


1- Movable and Immovable Inheritance

Potential application of Shari’a provisions

1. The testator can only freely distribute one third of the estate

2. A Will which gives benefits to one of the heirs is null and void unless otherwise accepted by all other adult heirs

3. All illegitimate and adopted children are excluded from being heirs

4. Respect of reserved portion


Examples of reserved portion

• If a father leaves a wife, son and a daughter, the wife receives one eight of the estate, the balance shall be distributed between the son (two thirds) and the daughter (one third).

• If a husband dies with a wife and no children, the wife will receive one quarter of the estate and the balance will be distributed among the surviving heirs such as mother, brothers


2- Bank Accounts

• Both personal and joint bank accounts will be frozen upon the death of its holder.

• Procedure for reactivating the account is complex and takes some time.

• If the bank accounts are in personal names, it can take up to 18 months before a Shari’a Court order would properly name the beneficiaries.


3- Residence visa

• A residence visa is cancelled upon the death of the husband whenever he sponsored his family

• Wife and children have just 30 days within which they should leave the country.

• They may be able to stay longer if either found a job or established a company under which they would be sponsored


3- Residence visa

• A new Federal law is currently under preparation for granting renewable six-month residence visas to owners of freehold properties

• The Ministry of Interior is also studying the

possibility of granting residence visas to families of property owners


4- Severance Pay

• Severance pay is due to the heirs upon the proof of their legal status being heirs of the deceased either by a valid Will or by a Court decision.

• Application of this rule is flexible and depends on the flexibility of the employer


5- Inheritance tax

• There is no Inheritance Tax in UAE

• However, transfer of ownership fees are imposed when re-registering the property in the name of the beneficiary


6- Funeral organization

• Corpse can be repatriated (very expensive) or buried in the Emirate where the deceased has been resident

• burying the corpse in UAE is free of charge• Cremation is uncommon in Islamic countries

but Dubai offers cremation for its non Muslim residents


III- Proposed Solutions1- Drafting a Will

• It is strongly recommended that non- UAE nationals draft a Will according to the laws of their own nationality.

• The wording of such Will shall be drafted under supervision of a legal consultant.

• Severe mistakes in the Will will make it invalid so Shari’a Law would apply on all assets of the foreigner.


1- Drafting a Will

• If the Will is made in the home country of the foreigner it must be ratified by UAE Embassy.

• If the Will is done in the UAE, its notarization is not required but preferred.

• A non-hand written Will needs the signature of 3 witnesses who preferably should live in the UAE


1- Drafting a Will

• Provisions of the Will shall apply on all movable assets held in UAE

• Immovable assets in UAE can be mentioned in the Will but it is uncertain if the courts will rule according to the Will. Most probably Shari’a Law will apply.

• In this case one third of the estate will be distributed in terms of the Will; the balance according to Shari’a


2- Establishing an Offshore (or Free Zone) company

• The most proper way to circumvent the application of Shari’a on the real estate held in UAE

• Such companies can be used to purchase the real estate in the name of the company and not in the name of individuals.

• All family members or third parties can be shareholders in the company according to the Memorandum of Association


2- Establishing an offshore company

• Advantages:1. Ownership of the property can be transferred by

transferring shares in the company2. Shares in a legal entity are qualified as movable

assets. So the provisions of the Will drafted under foreign law applies. If the Will stipulated that the shares shall be inherited by a specific heir (e.g.the wife) this heir will become the sole owner of the company, holding the UAE property.


3- Bank Account

• It is recommended to open a bank account for an offshore company and to keep the funds in this account

• In the event one of the shareholders or directors die, the account will not be frozen by the bank.

• The remaining signatories still can operate the account


Offshore Companies• RAK Offshore is an internationally recognized

offshore hub• Foundation within 1 hour• No minimum capital• No presence of shareholders or directors required• Our firm is certified agent with RAK Offshore• Almost all activities• Purchase and management of real estates in the UAE

(free hold)• Offshore companies can hold bank accounts


Documents required for Offshore Companies

• Passport copies of individual shareholders• Company documents for corporate shareholders• Bank recommendation letter• Proof of residence• Setup fees AED 15.000 incl. 1st year agent fees• Annual costs AED 7.000

(legal consultancy to be charged separately)


Thank you for listening!Our team in RAK


Contactsemail: [email protected]

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Introduction To UAE Inheritance Law