What expats need to know about new inheritance laws
Earlier this month, the UAE announced sweeping changes to legislation
This month, the UAE government announced new legislation for inheritance. Expatriates can now use the laws of their own country or nationality to deal with their personal estate. Previously, unless official legal measures were taken, the Sharia Law of Inheritance was applied to the estates of expats who passed away. This meant that assets were distributed according to Sharia law and even the custodianship of children was subject to the same laws.
Following the announcement, Nita Maru, Solicitor and Managing Partner, TWS Legal Consultants, says that the new legislation will be beneficial to non-Emiratis residing in the UAE. “It provides peace of mind to expatriates that their home country law can apply upon their demise as opposed to their estate being distributed under Sharia law where heirs inherit in fixed ratios. There is now an increased expectation from the courts to actually apply the home country law in practice as the new legislative changes will provide a legal framework for them to do so more proactively. Expatriates have the option of opting out of Sharia law, enabling them to have the freedom to make provisions in their will as per their home country law.”
It’s important to have a solid estate plan in place to ensure that your loved ones receive your assets.
Luna de Lange, Partner Attorney and Sectional Head of the Estates and Succession Planning Department at KARM, also believes that the new legislation will be advantageous to residents and investors, particularly those who did not understand Sharia law and inheritance. “Previously, and in my professional experience, numerous clients and people I’ve encountered, from all walks of life, were blissfully unaware that not having a validly executed will within the UAE had meant that the Sharia law of inheritance would apply, through automatic operation of the law, in respect of that person’s late estate within the UAE, should they pass away.”
Lange says that many UAE residents and investors can find Sharia law difficult to comprehend. “Many principles of Sharia law were foreign and confusing to people and their families – particularly so as inheritance could be predetermined and calculated, even prior to a person’s passing. Most concerning for some parents is that the Sharia system dictates their minor children’s guardianship and custody arrangements, should the biological father of the children pass away.”
A will in the UAE is the simplest way for an expat to ensure their assets are dealt with as per their wishes.
The importance of a will
Maru says that regardless of the new laws, it remains important to arrange the affairs of your estate in the UAE. “Having a will in place in the UAE would be recommended in light of these developments as it is confirmation of opting into the application of one’s home country law as the applicable law and not UAE law. Regardless of these changes, a will in the UAE is the simplest way for an expat to ensure their assets are dealt with as per their wishes particularly where expats are living outside their own home country. Further, where expatriates own real estate in the UAE, UAE law will still apply and therefore it’s highly recommended to have a will in the UAE. The actual impact will only become apparent once we have had sight of the official legislation, which is not yet available at the time of contributing to this piece.”
She also says that wills should be created by qualified legal professionals to avoid mistakes and complications. “Wills that have been prepared by unqualified or unlicensed will writers in the UAE or those that are homemade often contain dangerous errors or are omitting key clauses resulting in a misleading and confusing document that does not accurately reflect the testator’s true intentions. The main aspect to consider when choosing a method of will writing is, will it be effective when you die and has it been prepared by a qualified, licensed and experienced lawyer? Preparing a will, especially outside of your home country, cannot be reduced to a one size fits all box-ticking exercise. A UAE will must be tailored to individual needs. All too often, incorrectly drawn up wills are found to be invalid and disregarded, or at best ineffective. This can lead to the estate being treated as if you had died intestate, meaning without a will.
“Sometimes clients incur more legal fees and lawyers make more money dealing with family disputes over poorly written wills than they ever could by writing proper wills in the first place.”
Lange says that the pandemic is proof that life can be unpredictable and that people should be prepared for the unexpected. “Our current health challenge, amidst the COVID 19 pandemic, is a stark reminder as to the fragility and unpredictability of life. It’s important to have a solid estate plan in place to ensure that your loved ones receive your assets without hassle or undue delay after your death. Expatriate residents have a choice as to how to govern their personal estate, be it by execution of a validly recognised UAE will, the establishment a trust or setting up a foundation. Notably, the latter two options too are available to persons of the Islamic faith (to the exclusion of no religion) and also, to Emirati citizens of the UAE.”
Business owners
If you are a business owner or a stakeholder in a business, Maru says that you should consider the future of the company. “As a business owner, it’s very important to consider business succession planning as part of the wills process. All businesses whether sole establishments, partnerships, LLC’s or free zone corporations, should plan for the eventual transfer or succession,” she says.
“If you don’t seriously consider succession planning or a will, you simply cannot be sure what will happen after your death: whether your family will be provided for, who will look after your business, and when and how your beneficiaries will stand to benefit from your estate.
“Besides designating who is to benefit from your estate or shares, your will also appoints your chosen executors who are responsible for the administration of your estate on death. It is possible for you to make an appointment of an executor to specifically deal with the business aspect of your estate. If you make a will you can decide who would be the most appropriate person to manage specifically this part of your estate. Investors and residents can also consider structuring their assets offshore or through a foundation to ensure their wealth and assets are protected.”