If the transient bout of economic recession is kept aside, yester years witnessed huge growth in the financial sector of the UAE. This inspired a big chunk of expatriate population to relocate to the UAE both for employment and investment. With the most congenial economic and employment ambience created by the visionary rulers of the country, many of the expatriates made significant economical gains too.
However, with no qualms, it could easily be said that the vigour and enthusiasm displayed by the expatriates in making savings or investments are not reflected in safeguarding their interests. A vast majority of the expatriates are not conversant with the laws and regulations of the country. Apart from the imbroglios that they may land in owing to such ignorance, another serious problem that they may come across is on the front of inheritance.
The experts reckon that the recession's aggression is fading out steadily and the world economy is heading towards normalcy. This may hopefully bring agility to the country's market too, with more opportunities and returns. And for the expatriates, the question of safeguarding their interests on whatever they own assumes considerable importance.
Laws Governing Inheritance
The general rule in the UAE is that inheritance issues related to Muslims shall be dealt with in accordance with Shari'ah principles, and for others, the law of the deceased's home country shall apply. The main laws of the UAE that contains provisions on inheritance are Federal Law No. 05 of 1985 on the issuance of the Civil Transactions Law ("Civil Code") and Federal Law No. 28 of 2005 regarding the UAE Personal Affairs Law.
Devolution Of Movable Assets
The Civil Code [Article 17] stipulates that inheritance shall be governed by the law of the deceased at the time of his death. The substantive provisions governing testamentary dispositions taking effect after death shall be governed by the law of the state of which the person making such disposition is a national at the time of his death. The form of Wills and other dispositions taking effect after death shall be governed by the law of the state of which the person making such disposition is a national at the time the disposition is made or the law of the state in which the disposition is made.
In view of the above, if a resident expatriate dies in the UAE, inheritance issues related to his movable assets [cash deposited in banks, stocks, bonds, jewelleries etc] shall be dealt with as per the laws of his country at the time of his death.
Generally, when an expatriate resident dies, his bank accounts, fixed deposits etc. shall be freezed. The cash deposited in the accounts shall be delivered to the legal heirs only upon their submission of necessary proof - normally upon submission of a succession or heirship certificate [the name/procedure for obtaining the same may vary according to jurisdictions].
In order to get the succession certificate, the legal heirs may have to approach the competent civil court of their country. Once the certificate is obtained, it has to be legalized up to the UAE Embassy of their country, and once brought to the UAE it has to be attested by the Ministry of Foreign Affairs and translated in to Arabic before approaching the local courts. The entire procedure is complicated; and is likely to consume much time and money.
Further, even if the related procedures are completed in a time bound manner, it may not ensure that the assets shall devolve as per the wishes of the deceased. The succession certificate generally lists the names of all the legal heirs, and all of them may be equally entitled for the deceased's assets, subject to the laws of his country. This may be contrary to the wishes of the deceased especially where the deceased had intended his assets to pass on only to his wife and/or children.
It is also pertinent to note that as per the Civil Code, the property rights located in the territory of the UAE which belong to an expatriate having no heir shall become vested with the state. Consequently, in the event of a delay in complying with the above procedures, chances are likely that the estate of the deceased becomes vested with the state.
The execution of a Will clearly stipulating the manner in which and the persons to whom the assets shall devolve upon, shall ensure that the assets shall pass on only as per the wishes of the deceased.
Devolution Of Immovable Assets
The legal provisions pertaining to inheritance of immovable assets appears to lack clarity. Albeit the rest of Article 17 of the Civil Code stipulates that the laws of the country of the deceased shall apply to matters regarding inheritance, Article 17(4) provides that the law of the UAE shall apply to Wills made by expatriates disposing of their real property located in the state.
It was anticipated that the enactment of the Personal Affairs Law would clarify the position as far as real property is concerned. However, it did not. Although it confirms that the laws of the home country would apply to matters of inheritance for expatriates, it makes no specific reference to real property located in the UAE.
The question whether or not the general provisions of the Personal Affairs Law would override the specific restrictions stipulated under the Civil Code still seems to have no clear answer. Some believes that if an expatriate makes a specific reference in his Will to the disposal of property in the UAE, the courts may follow the wishes of the deceased. On the contrary, the other view proposes that the Personal Affairs Law only applies to general matters of inheritance and that the inheritance of real property shall continue to be governed by the Civil Code. Ultimately, it is up to the UAE Courts to decide which law would apply on a case by case basis.
Despite the prevailing confusion, it appears that the only practical approach towards safeguarding an expatriate's rights over real property is by executing a Will.
Registration Of Real Property Rights
The UAE courts will look in to the evidence of ownership to determine who actually owns the property. Therefore, it is important that the property owners register their ownership at the local land department.
There are myriad provisions in the laws of many of the Emirates to the effect that any transaction related to land shall not be valid or effective towards third parties, unless registered with the land department. The Dubai Law No. 07 of 2006 concerning Land Registration contains specific provisions on inheritance of immovable property, which stipulates that any inheritance declaration that includes real property rights shall be registered in the real property register kept with the land department. It also states that no dispositions by any heir in connection with any such rights shall be valid or effective against third parties, unless registered.
Alternate Method
The application of Shari'ah law on inheritance can be circumvent by purchasing the property in the name of an off shore company. If the investors are husband and wife, both the spouses can be made equal shareholders in the company. The Memorandum of Association can include a clause stipulating that upon the death of one of the shareholders, the other shareholder becomes the sole owner of the company, who in turn "owns" the property. Their children can also be introduced to the company in due course as a means of passing on the assets through the offshore company. This may technically bypass the provisions of the Shari'ah law as shares in a company are not considered to be real property, and resultantly, the said laws may not apply.
Registration Of Will Before The UAE Courts
The UAE courts permit only expatriates with valid residence visa to register and legalize the Will. In order to be eligible, the Will should be approved and attested by the Embassy of his country. Once the procedural formalities before the Embassy are done, the Will should be attested by the Ministry of Foreign Affairs, UAE, and later on translated in to Arabic. The testator of the Will is required to visit the court with 02 Muslim men as witnesses to register the Will [even if the testator is a non-Muslim]. The testator and the witnesses are required to submit their original passports to the court for verification.
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.
