Introduction To UAE Inheritance Law
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UAE inheritance law is complex, with movable and immovable assets subject to different laws. For non-UAE nationals, movable assets may follow foreign law while immovable assets in the UAE like real estate are likely governed by Sharia law. This can cause problems like frozen bank accounts and visa issues after death. To avoid these, the document recommends drafting a will under foreign law and establishing an offshore company to own real estate.
Introduction To UAE Inheritance Law
- 1. Introduction to UAE Inheritance Law The Cove Rotana 3 March 2009 strohal-International Legal Consultants UAE - Singapore - Vienna
- 2. 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
- 3. 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? strohal-International Legal Consultants UAE - Singapore - Vienna
- 4. 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. strohal-International Legal Consultants UAE - Singapore - Vienna
- 5. Introduction For clarifying UAE regulations we will expose: 1. UAE laws which govern matters of inheritance 2. Potential difficulties and problems 3. Proposed Solutions strohal-International Legal Consultants UAE - Singapore - Vienna
- 6. 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 strohal-International Legal Consultants UAE - Singapore - Vienna
- 7. 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) strohal-International Legal Consultants UAE - Singapore - Vienna
- 8. 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 strohal-International Legal Consultants UAE - Singapore - Vienna
- 9. 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 strohal-International Legal Consultants UAE - Singapore - Vienna
- 10. 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) strohal-International Legal Consultants UAE - Singapore - Vienna
- 11. 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 strohal-International Legal Consultants UAE - Singapore - Vienna
- 12. 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 strohal-International Legal Consultants UAE - Singapore - Vienna
- 13. 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 strohal-International Legal Consultants UAE - Singapore - Vienna
- 14. 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. strohal-International Legal Consultants UAE - Singapore - Vienna
- 15. 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 strohal-International Legal Consultants UAE - Singapore - Vienna
- 16. 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 strohal-International Legal Consultants UAE - Singapore - Vienna
- 17. 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 strohal-International Legal Consultants UAE - Singapore - Vienna
- 18. 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 strohal-International Legal Consultants UAE - Singapore - Vienna
- 19. 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 strohal-International Legal Consultants UAE - Singapore - Vienna
- 20. 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. strohal-International Legal Consultants UAE - Singapore - Vienna
- 21. 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 strohal-International Legal Consultants UAE - Singapore - Vienna
- 22. 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 strohal-International Legal Consultants UAE - Singapore - Vienna
- 23. 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 strohal-International Legal Consultants UAE - Singapore - Vienna
- 24. 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. strohal-International Legal Consultants UAE - Singapore - Vienna
- 25. 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 strohal-International Legal Consultants UAE - Singapore - Vienna
- 26. 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 strohal-International Legal Consultants UAE - Singapore - Vienna
- 27. 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) strohal-International Legal Consultants UAE - Singapore - Vienna
- 28. Thank you for listening! Our team in RAK strohal-International Legal Consultants UAE - Singapore - Vienna
- 29. 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