Unfortunately, we were only contacted after the each death. I say unfortunately because, in each case there were simple steps which could have been taken to mitigate much of the pain and hardship placed on the respective families. This month, we review each of the five questions above and offer some simple solutions to protect your family and ensure your estate passes to those you wish it to.

Residency

An expatriate’s residency visa is cancelled upon their death. If the deceased has sponsored their family, the family’s visas will also be cancelled at this time as they no longer have a sponsor. The surviving family then have 30 days in which to leave the country. However, there are 2 potential solutions for those wishing to stay in the UAE.

A new Federal Law has been announced that will allow 6 month renewable residency visas to freehold property owners in the UAE. As a property does not die with its owner, the spouses and children’s residency visa would not be cancelled if they are attached to the property rather than the deceased’s employment.

Secondly, if both spouses are employed, both should be sponsored by their respective employers (rather than one spouse being sponsored by their partner). This too would mitigate both spouses’ visas being cancelled and the children could easily be switched to the surviving spouses’ visa if required.

Severance Pay

In most cases, severance pay will be due to the heirs of a deceased employee. However, the employer does not have to pay this until proof of the legal status of the heirs is provided by either a valid Will or by a Court order.

The application of this rule is flexible and, in a large part, will depend on the willingness of the employer to pay the severance benefit.  I would suggest that it is always best to work on the worst case scenario and assume that this money will not be readily available just in case the employer does not want to release the money as early as they could.

UAE Bank Accounts

Many expatriates are still unaware that both individual and joint name banks accounts will be frozen on an expatriate’s death.  Consequently, a surviving spouse will not have access to money in a joint name bank account (even where they are one of the accountholders) or any account which is in their spouses’ name.

These accounts will remain frozen until probate is granted and all the deceased’s debts in the UAE (including parking tickets and other fines) are repaid. The procedure for reactivating bank accounts is complex and it can take up to 18 months for the Courts to name the beneficiaries to whom the monies should be paid.

Obviously, this can create major problems if the majority of an expatriate’s savings are in their UAE account. The surviving family will have no money (for up to 18 months) to pay the rent or mortgage, the utility bills, food and clothing, education fees, or even their return home.

However, only the UAE based bank accounts are frozen so this does not affect savings in other countries. Consequently, this problem can be simply avoided by establishing an offshore bank account outside the UAE. A good solution is a UK offshore account which offers tax-free savings as well as financial and legal regulation familiar to the expatriate. These accounts also offer debit cards, cheque books and internet banking for easy access to savings.

I would suggest holding 3 months’ salary in the local UAE account for day-to-day living and to cover any unforeseen emergencies. The rest can then be transferred to an offshore account where it is protected and can easily be accessed if required. If money is transferred offshore on a quarterly basis (as opposed to every month) this will reduce the bank transfer fees and help liquidity.

It is also important to note at this stage that, 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.

UAE Succession Laws

The UAE treats movable assets (such as cash, investments, cars, etc...) different to immovable assets (property) for inheritance purposes. Generically speaking, 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. As an expatriates 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. As a result of this ambiguity, more and more bodies are calling for new laws or clarification of the existing laws.

At present, it is likely that the UAE Courts will 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!

Inheritance Tax

As a low tax environment, 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). Consequently, 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, whilst there are no death taxes in the UAE, there will be a property transfer fee in the UAE when the property is re-registered from the deceased to their heirs.

What Can I Do To Protect My Family?

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.

As discussed above, if you do not already have an offshore bank account, establish one immediately and transfer the majority of your savings into that account.

If you have a mortgage, ensure there is life assurance in place to repay this; removing the debt from your estate and your family mortgage free. This will help reactivate bank accounts and ensure the family home is not repossessed.

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.

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, it must be noted that this option is expensive (company formation plus property transfer fees) and, as no UAE banks currently lend to offshore companies, it is only applicable to those who are mortgage free.

Candour Consultancy are able to assist you with all these areas. We retain a specialist Will writer who has extensive experience of working with expatriates. We are also authorised introducers to all the leading offshore banks and international life assurance providers. Likewise, we can establish offshore companies in reputable jurisdictions such as the British Virgin Isles.

Additional information on this subject can be found in our powerpoint presentation which can be downloaded here. Alternatively, please feel free to contact us via the button below: 

Thank you for reading the newsletter, your continued interest and positive feedback.

Best regards,

Managing Partner

Candour Consultancy