An Introduction to Personal Succession Planning in the UAE - Wills, Guardianship and Asset Management

Introduction to Succession Planning in the UAE

Succession planning is crucial for ensuring that your assets are distributed according to your wishes after death. In the UAE, failing to have a proper will in place can lead to significant legal complications, especially for expatriates. Without a will, the estate administration process becomes incredibly lengthy and complex and may result in decisions that don’t reflect your intentions.

By proactively planning your estate, including drafting a valid will and considering the legal options available, you can protect your loved ones from potential legal complications and delays. This article will explore the key elements of succession planning in the UAE for individuals focused on their personal affairs, helping you understand the steps required to ensure your wishes are respected.

The Legal Framework Governing Succession in the UAE

The UAE has introduced significant changes to inheritance laws for expatriates, most notably through Federal Decree No. 41 of 2022. Under these reforms, expatriates are no longer automatically subject to Sharia law in matters of inheritance. Non-Muslim expatriates now have the option to draft and register a will to which they may apply the laws of the UAE or the laws of their home country to regulate the distribution of their estate. This shift provides greater flexibility and brings the system more in line with international practices.

However, in cases of intestacy (where no will is in place), complexities arise. While the law provides intestacy rules for expatriates, judges still retain discretion, and in the absence of clear guidelines or established practices, the default application of Sharia principles remains a possibility. This uncertainty underscores the importance of having a valid and enforceable will to ensure that your personal intentions are respected, and to avoid lengthy legal proceedings that may not reflect your wishes.

Creating a Will in the UAE

Having a will is essential for ensuring your assets are distributed according to your wishes. The following points highlight the main elements to consider when drafting a will:

• Drafting and Registration: Wills can be registered through the DIFC Wills Service Centre, which follows English law principles, or the Abu Dhabi Judicial Department (ADJD). Both services are available to expatriates across all emirates, and ADJD Wills are also open to Muslim residents who are not citizens of the UAE.
• Appointing Executors and Guardians:You should appoint an executor, such as a trusted friend, family member, or professional, to manage your estate. It is equally important to designate temporary and permanent guardians for minor children, as the age of majority in the UAE is 21 years.
• Distribution of Assets:Clearly outline how your assets should be allocated to prevent disputes and ensure your estate is handled as you intended.
• Reviewing and Updating:Regularly updating your will after life changes ensures it reflects your current circumstances.

Asset Management and Division

Effective asset management and division are key components of succession planning, ensuring that your estate is distributed according to your wishes and minimising potential disputes. Here’s how to approach this important aspect of your estate planning:

• Inventory and Valuation:Start by creating a comprehensive inventory of your assets. This should include real estate, bank accounts, investments, personal belongings, and any other valuable items. The valuation of these assets is crucial for ensuring fair distribution and managing potential liabilities. An accurate and up-to-date inventory is key as it will substantially reduce the legal costs and time involved in administering your estate, as your executor will know what your assets are and where to find them.

• Managing Real Estate: If you own property, specify how you would like it to be handled in your will. This could involve transferring ownership to specific beneficiaries or directing the sale of the property and distribution of proceeds. Consider any local regulations or mortgage obligations that might impact the transfer process. Usually, getting a life insurance linked to your mortgage is the way to ensure you do not leave your loved ones with liabilities rather than assets.

• Handling Joint Accounts and Assets:For joint accounts or assets held with others, clearly define how these should be managed upon your death. Jointly held assets typically pass directly to the surviving account holder, but it’s important to ensure this aligns with your overall estate plan. If you own your own business with a friend or hold shares in various investments, you might need to consider reviewing your shareholder agreement or putting one in place.

• Addressing Debts and Liabilities: Ensure your will or instructions to the executor address how any outstanding debts and liabilities will be managed. Specify whether these should be paid from the estate before distribution or if they will be the responsibility of specific beneficiaries.

• Overseas Assets and Tax Implications: If you have assets located outside the UAE, consider how these will be managed and distributed. For instance, some foreign jurisdictions may apply inheritance taxes on your assets worldwide.  Different jurisdictions may have varying requirements for the handling of foreign assets, so it may be necessary to draft additional legal documents or seek advice from legal experts in those countries.

• Minimising Disputes:Clearly outlining your wishes and providing detailed instructions in your will can help prevent disputes among beneficiaries. Clear communication and documentation of your decisions reduce the likelihood of conflicts and ensure a smoother probate process, ultimately protecting your loved ones’ piece of mind and asset value.

Guardianship and Financial Protection for Minor Children

When planning your estate, ensuring the care and financial security of your minor children is essential. This involves appointing both a temporary and permanent guardian, as well as setting up financial arrangements to provide for your child's future.

• Appointing a Temporary Guardian: For expatriates, it is crucial to appoint a temporary guardian residing in the UAE. In the event of your death, this prevents your child from being placed in social services, ensuring they remain with someone you trust until the permanent guardian takes over.

• Appointing a Permanent Guardian: The permanent guardian will raise your child according to your wishes, including your beliefs and values. It is vital to choose someone who understands and shares your vision for your child's upbringing. This guardian may live abroad but should be fully prepared to take on this long-term responsibility.

• Establishing a Trust or Foundation: Consider setting up a trust or foundation to provide financial support for your child in perpetuity. This ensures that your child’s needs are met even after they reach adulthood.

• Appointing a Financial Trustee: The financial trustee will manage your child's assets until they turn 21. While this is often the permanent guardian, you can choose anyone you trust to oversee the assets. The trustee may be appointed regardless of whether you set up a trust or not.

• Structuring Financial Support: If you want your child’s inheritance to be managed in a structured way until they reach a certain age, you can specify in your will that a trust will be created upon your death to handle the assets. This option is available through the DIFC Wills Service.

Conclusion: Why Succession Planning is Essential in the UAE

Succession planning is an essential step for expatriates in the UAE to ensure their personal wishes are respected and their loved ones are cared for. By drafting a legally valid will, you can appoint guardians to safeguard the well-being of your minor children and set up financial structures to provide for them throughout their lives. Additionally, ensuring a clear plan for the distribution of your assets helps prevent disputes and guarantees your estate is managed according to your intentions. Regularly reviewing and updating your will is also key, especially after major life changes, to ensure it remains relevant to your current circumstances.

Consulting with a legal expert throughout this process will help you navigate the complexities of UAE laws. The Yungo Law team has over 20 years of experience navigating the complexities of UAE inheritance and family legislation when applying to expatriates. Get in touch with us if you wish to ensure your family's future is secured according to your wishes.

With contributions from Annibale D'Addario