Succession Planning

1. Succession Planning The UAE Laws & How They Are Applied to Expatriates

2. Introduction • Every Expatriate has a bank account in the UAE and many also own property here. • Some hold the majority of their savings in their UAE bank account. • Many Expatriates are under the impression that their UAE based savings and property will pass to their heirs should they die. • This presentation looks at the laws in place, how these would affect you and your family, and what you can do to ensure your family are secure.

3. Potential Problems The death of a loved one can create several problems for expatriates in the UAE. As well as the registering of the death, funeral arrangements and/or repatriation of the body, there are also several financial problems. These can be summarised as: • What happens to the surviving family’s residence visas? • Is severance payable? • What happens to UAE based bank accounts? • How are UAE based assets distributed on death? • Are there death taxes on the inheritance?

4. Residency • An expatriates residence visa is immediately cancelled upon their death. • If the deceased has sponsored their family, the families visas will also be cancelled as they no longer have a sponsor. • The wife and children then have 30 days in which to leave the country.

5. Residency 2 There are 2 potential solutions for those who wish to stay in the UAE: 1. A new Federal Law is currently being produced which will allow 6 month renewable residency visas to freehold property owners. • The Ministry of Interior is also studying the option of granting residency visa to family members of a property owner. • As the property does not die with the owner, the spouses and children’s residency visas would not be cancelled if they are attached to the property. 2. A second option would be for the spouse to go on their own employers’ visa (if employed) or find employment.

6. Severance Pay • In most case, severance pay will be due to the heirs. • This will not be paid until proof of their legal status as heirs is provided by either a valid Will or by a Court order. • Application of this rule is flexible and depends on the flexibility of the employer. It is always best to work on the worst case scenario just in case the employer does not want to release the money as early as they could. • If the severance pay is paid into a local account, this will be frozen with the remainder of the account.

7. UAE Based Bank Accounts • Counter to popular belief, both individual and joint name bank accounts will be frozen upon an expatriates death. As such, the surviving spouse will not have access to money in a joint name UAE account or an account in their spouses name. • All the deceased’s debts in the UAE will be repaid from the account before it is unfrozen. • The procedure for reactivating the account is complex and it can take up to 18 months before a Sharia’h court order names the beneficiaries to whom the residual value can be paid.

8. UAE Based Bank Accounts 2 • This can create problems if the majority of an expatriates savings are in their UAE account. • The surviving family will have no money (for up to 18 months) to pay for the rent or mortgage, utility bills, food and clothing, education fees, etc... • However, only UAE based bank accounts are frozen so this does not affect savings in other countries which do not apply Sharia’h law.

9. UAE Based Bank Accounts 3 • This problem can be simply avoided by establishing an offshore bank account outside the UAE. • UK offshore bank accounts offer tax-free savings as well as financial and legal regulation familiar to the expatriate. • Expatriates should keep 3 months salary in a UAE account for day to day living and emergencies. • The rest they should send to an offshore savings account. Sending money every 3 months will be cheaper than sending money on a monthly basis.

10. UAE Based Bank Accounts 4 • Globaleye can establish offshore bank accounts very cheaply. • As we are certified introducers, there is no need for you to leave the UAE or send original documents overseas. • Most offshore accounts offer debit cards, cheque books and internet banking to enable easy access to your money both now and on the death of a spouse. • If there is not enough money in your offshore account to live on for 18 months, a small life assurance policy (written in trust) will easily provide quick access to cash for a small monthly premium.

11. UAE Succession Laws • The UAE treats movable assets (such as cash, investments, cars, etc...) different to immovable assets (property) for inheritance purposes. • Movable assets will be frozen until all debts have been repaid and probate is granted. These assets will then be distributed as per the law of the expatriates home country – but only if it is clearly requested in their Will. • The UAE Civil Code states that immovable assets should be distributed as per UAE (Sharia’h) law.

12. UAE Succession Laws 2 • As an expatriate’s UAE real estate is an immovable asset, technically this should be distributed as per Sharia’h law. • However, there is uncertainty as some scholars believe that foreign law should apply and the property distributed as per the deceased’s Will. • Consequently, jurisprudence does not resolve this ambiguity and more bodies are calling for new laws or clarification of the existing laws.

13. UAE Succession Laws 3 • The outcome of this is that the UAE Courts are likely to decide on the applicable law on a case by case basis. • This means there is no guarantee that the Courts will apply foreign law over Sharia’h law. • Additionally, many foreign jurisdictions refer immovable assets back to the laws of the country where they are located so the property would still fall under UAE law!

14. Sharia’h Principles on Inheritance • The testator can only freely distribute one third of their estate • The residual is distributed as per the ‘reserved portion’. • The reserved portion differs in every scenario. • A Will is null and void unless accepted by all the adult heirs. • Illegitimate and adopted children are excluded from being heirs.

15. Examples of the Reserved Portion • If a father leaves a wife, son and a daughter, the wife would get 1/8 of the reserve portion, with the son getting 2/3 of what’s left and the daughter 1/3 of what’s left. • If a husband dies and leaves a wife but no legitimate children, the wife will receive 1/4 of the estate with the residual distributed amongst other surviving heirs such as parents, siblings, etc... • Consequently, it is unlikely the surviving wife will get more than 50% of the UAE based real estate if Sharia’h law is applied!

16. How Do I Protect My Assets? • The first thing you should do is have a Will written that clearly states that it is written under the laws of your home country. • This will ensure that foreign (your home country) law will apply to your moveable assets rather than Sharia’h law. • If you do not already have an offshore bank account, establish one immediately and transfer the majority of your savings into that account. • Globaleye can help with both of these points.

17. How Do I Protect My Assets? 2 • If you have a mortgage, ensure there is life assurance in place to repay this; removing the debt from your estate and leaving your family mortgage free. • If you do not have sufficient savings for the family to live on for 18 months, take out a second small life assurance policy (written in trust) for your family. • Globaleye can quote for and arrange international life assurance for you if needed. Our quotes are obligation free and free of cost.

18. How Do I Protect My Assets? 3 • If you own a mortgage free UAE based property, you could transfer the ownership of the property to an offshore company (with all your family members as Directors) • This will avoid the property being distributed as per Sharia’h law as the company does not die when you do. • As your shares in the company are overseas, they will be distributed as per the laws of your home country and therefore your wishes. • However, as no UAE banks currently lend to offshore companies, it is only applicable to those who are mortgage free. • Candour Consultancy can also establish offshore companies.

19. Inheritance Tax • There is no inheritance tax in the UAE • However, as an expatriate, you are still liable to death taxes in your home country on your worldwide estate (unless you can change your domicile). • This means your UAE based assets will be liable to death taxes in your home country even if you have not lived there for several decades. • It is also important to remember that there will be a property transfer fee when the property is re-registered from the deceased to their heirs.

20. Drafting A Will • It is strongly recommended that all expatriates draft a valid Will under the laws of their home country. • This should be written by a professional as mistakes could make it invalid to a UAE Court and Sharia’h law could be applied to all UAE based assets. • The Will should be printed and signed by 2 witnesses. • Globaleye offer a professional Will writing service through our network of established law firms.

21. About Globaleye • Globaleye are a multi award winning firm of Independent Wealth Managers that have been established 11 years in the U.A.E. • We are authorised introducers’ to most of the major banks, life assurance providers, insurers and investment houses. • We advise on the whole spectrum of financial services including Offshore Bank Accounts, Expat Medical Insurance, International Life Assurance, Tax-Efficient Savings and Investments, Retirement Planning, Wills, International Mortgages and Tax-Planning.

22. Contact Us Globaleye can be contacted by: • Mail: PO BOX 24592, Dubai, UAE • Email: callafranco@globaleye.com • Mob: +971 5 341 2785 • Tel: +971 4 404 3700 • Fax: +971 4 348 9331 • Toll free: 800 4558