Introduction To UAE Inheritance Law

Introduction to UAE Inheritance Law The Cove Rotana 3 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?

strohal-International Legal Consultants UAE - Singapore - Vienna

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

Movable: application of the national law of the deceased

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:

Movable: Application of foreign law if non-UAE national requested so.

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:

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

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:

Movable and Immovable inheritance

Bank accounts

Residence visa

Severance pay

Inheritance Tax

Funeral organization

1- Movable and Immovable Inheritance

Potential application of Shari’a provisions

The testator can only freely distribute one third of the estate

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

All illegitimate and adopted children are excluded from being heirs

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 Solutions 1- 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:

Ownership of the property can be transferred by transferring shares in the company

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 strohal-International Legal Consultants UAE - Singapore - Vienna

Contacts email: tstrohal@advocates.cc strohal-International Legal Consultants UAE - Singapore - Vienna Vienna Franz Josefs Kai 3; A-1010 Wien, Austria Tel: (43 1) 513 19 11 Fax: (43 1) 513 19 11 24 Singapore 20, Upper Circular Road #02-10 The Riverwalk; Singapore 058416 Tel: (65)6 56330212 , Fax: (65)6 56330313 United Arab Emirates Ras al Khaimah City a) Villa 2, 26b Street; behind Ittihad University b) RAKEEN Bldg, 4 th floor P.O.Box 31484 RAK Tel:(971)(7)2364530 Fax:(971)(7)2364531