Smart Estate Planning: Know the Rules in Latin America

When retiring to a Latin American haven like Nicaragua, proper estate planning can give you great peace of mind. ©Jason Holland

Just as the food is different, the language and real estate laws you encounter in Latin America will be different from those you find in the U.S. and Canada. So are the legal system and inheritance laws, so it’s important to bear these in mind if you buy property there.

Here’s your guide to estate planning in five of Latin America’s top retirement spots.

Ecuador: The de facto inheritance laws in Ecuador are different from the U.S. In Ecuador, each partner in a married couple has half-ownership of the property. So if one partner in the marriage passes away, the spouse retains 50% ownership of the property. The other half does not automatically pass to the surviving spouse; rather, it is divided equally among the deceased’s children.

Sound estate planning can save your loved ones many legal hassles, potential asset disputes, and even some of the money they might be required to pay in inheritance tax. Note that a last will and testament drawn up in another country (such as the U.S. or Canada) is not recognized by Ecuadorian courts. That will is valid for whatever assets you still possess in your original country, but not for your Ecuadorian property.

However, you can get a will drawn up by a bilingual lawyer in Ecuador from around $120. This will can specify whom you want your Ecuadorian property to pass to upon your death. The will must be in Spanish to be valid in Ecuador, but you can also get it translated into English for your own records.

Note that the deceased’s children have up to three years to contest the will. Final say will rest with the court.

For more information on estate planning in Ecuador, contact Camila Moreno Vinueza of the Moreno di Donato Law Firm.

Nicaragua: If you do not have a will in place in Nicaragua for disposing of your property there, and no one comes forward during an arbitrary period of time, the new owner of your property will be the local government. This is why, if you buy any kind of property in Nicaragua, it is always best to set up a will, written in Spanish by a local lawyer, right away. This will spare your heirs a complicated and frustrating process in the future.

In Nicaragua, a will costs about $50. With a Nicaraguan will, executed by a Nicaraguan attorney/notary (in Nicaragua a notary is a higher level than an attorney), your beneficiaries will have no problems acquiring the property.

If there is no will, but the family comes forward, it can follow a process similar to a probate, called declaratoria de herederos (declaration of heirs), in which property is distributed to the legal heirs (spouse 25%, then children, siblings, parents, and others, in that order). Any legal process in Nicaragua requires translations, red tape, and possibly lengthy stays to get all the paperwork in order if there is no will.

If you have a will only in your home country in English (or any language other than Spanish), your family will also have to follow a process that includes getting the document translated into Spanish and getting an apostille (or certification, if they’re Canadian) to validate the document.

For more information, contact [email protected].

Costa Rica: It is technically possible to use a will from your home country in Costa Rica. But the process is very complicated, involving courts, the embassy, and a mountain of paperwork.

Because of this, it’s important that expats with assets in the country (like property or a vehicle) have a will drawn up in-country. This can all be done with a notario público (notary public), which, as in Nicaragua, is a step above an attorney.

Your Costa Rican will generally covers your assets in Costa Rica, but it can still designate beneficiaries outside the country. The will should be in Spanish, and the process costs around $250. You should keep a valid will in your home country to handle matters there. (If the two wills are in conflict, the one executed later prevails.)

You can also sidestep the probate process altogether by holding valuable assets, such as real estate, in a Costa Rican corporation. Costa Rican attorney Rick Philps, of the firm Petersen and Philps, recommends this approach.

“A surviving spouse who is an active member of the board of directors of the corporation may deal with the asset, without the need for probate, following the death of the other spouse,” says Rick.

“Likewise, heirs may also be made active board members of the corporation holding the asset, which would allow the heir to take control of the asset on the death of the last surviving parent, without the need for probate. You retain 100% ownership of the corporation during your lifetime, which will allow you to make substitutions on the board of directors at will, by way of a corporate resolution.”

One very important note if you’re the parent or guardian of children under 18: If the children are official legal residents or citizens, the will should designate a guardian who has permission to take the children out of the country if you die. You can also set up an Open Travel Permit with Costa Rican immigration, giving permission for the kids to leave the country without parental consent.

Panama: If the only assets you hold in Panama are bank account funds, you may not need to spend any time or money drafting a local will. Panama does not tax revenue generated outside the country, or tax savings held in local banks. When opening any personal accounts, the bank will simply have you designate your beneficiaries on a bank form.

Fortunately, in Panama there is no probate or inheritance tax. That’s not to say there are never probate hearings, however. If an estate is contested or in doubt, you may need to retain an attorney for approximately up to two years…and costs can be as much as 10% of the estate.

The easiest way to avoid probate issues is often to put assets in a private interest foundation. Government taxes on these foundations are $400 a year, but set-up, legal, and other costs will vary greatly, depending on the types of assets.

In the short run, it may cost less to set up a local will than a private interest foundation. But in the long run, the latter is often the better option.

That’s particularly the case if you own real estate here, as real estate assets not in a foundation always go to probate in Panama. Movable assets and other personal assets are usually excluded from probate, unless there is a dispute among heirs.

Step one is to find yourself a good, reputable attorney. Discuss your estate as soon as you move here (or even before). And here’s an important tip: Before you buy any property in Panama, talk to your attorney and decide whether to hold the property in a private interest foundation.

If you have no assets in Panama, you may not need to do anything through your Panama attorney. Just make sure you’re protected in any jurisdictions in which you hold assets. In many cases, the best option is to ensure you have complementary wills for all relevant jurisdictions. That said, a Panamanian will can be crafted for multiple jurisdictions.

Panama’s official language is Spanish, and only documents or official translations in Spanish are legally valid.

For more information, contact Rainelda Mata-Kelly.

Mexico: You and your spouse, both U.S. citizens, buy a vacation house in Mexico together and later divorce. Your spouse takes the Mexico house in the divorce settlement. He eventually remarries and then dies, and in his U.S. will leaves everything to his new spouse. Who owns the house in Mexico?

The correct answer: Most likely you do.

Variations on this scenario happen all the time in Mexico. And they illustrate how important it is to have a local will—and to keep it updated—if you live and have possessions here.

That’s because the detailed U.S. or Canadian will you’ve drawn up back home has absolutely no validity south of the border. Mexico has its own laws and legal system, and they are what apply throughout Mexican territory. So if you own property, have substantial belongings, or have a business in Mexico, it behooves you to set up a Mexican will (or testamento) to dispose of your assets in Mexico the way you want to.

To be legal, the will must be in Spanish. And it should be drawn up by a notario, a lawyer with advanced, specialized training who represents the government in property transactions. It’s easiest to have your will written up by a reliable notary in the area of Mexico where you live or own property; other expats there should have recommendations on whom to use.

Drawing up a will, unless your estate is particularly complicated, should cost only $150 to $200. Worth noting: In some parts of Mexico, September is “will month,” when notaries will give you a price discount on setting up your will.

To find out more about having a will drawn up in Mexico, contact Ernesto Arrañaga.