Creating wills and trusts in the UAE: what you need to know

Many people forget something important for the future: making sure their money and belongings go to the right people when they are gone. Although we work hard to earn money and take care of family finances while we’re alive, it’s surprising that not many of us think about what happens to our things after we die.

The figures show a worrying trend. a study of Life in Canada found that half of adults in the UK do not have a will. That means more than 31 million people leaving everything they own to chance, letting the law decide who gets what when they’re gone.

There are different reasons for this. Some think they don’t have enough stuff to bother writing a will (24%), while others think their family will automatically get their stuff anyway (17%).

But it is not so easy. No matter how much money you have, planning ahead for what will happen to your belongings is important for everyone.

But what exactly does it mean to have your affairs in order?

Beyond a will, what other legal documents should you consider and how can you ensure that your family members have access to your bank accounts, investment portfolio and any other assets, not only from a legal perspective but also from a from a practical point of view?

Wills and legal considerations

A will is the foundation of your estate plan. Not only does it articulate your preferences for the distribution of assets after your death, but it also appoints an executor responsible for carrying out your wishes.

Here in the UAE, wills have additional importance as, until recently, both Muslims and non-Muslims were subject to the same inheritance regime in relation to assets located in the UAE. This meant that when a non-Muslim foreign citizen died intestate (without a will), his assets were divided among his heirs in accordance with Sharia law, and family members could be subject to a forced inheritance situation that did not align with your individual preferences. or family dynamics.

Intestacy also has implications for the time it may take to recover assets. The timeline may depend on several factors, including the complexity of the estate, the number of heirs involved, and potential disputes. However, it goes without saying that the process could drag on for several months or even years.

Fortunately, that doesn’t have to be the case anymore. The DIFC Wills and Estates Registry (WPR), established as an official mechanism for non-Muslims to register their wills and enforce them through the DIFC courts, has removed much of that uncertainty. .

The rules on DIFC wills have also been continually updated to better protect testators and their assets. Amendments such as allowing all assets worldwide to be included have been a positive move and a departure from the previous restriction of only allowing the inclusion of assets in Dubai and/or Ras Al Khaimah.

However, it is important to be aware of certain limitations of DIFC wills and take steps to safeguard your plan. For example, guardianship provisions contained in wills remain applicable only to minors residing in Dubai and Ras Al Khaimah, so additional provisions may be needed for minors living elsewhere.

Furthermore, the requirement that testators present two independent witnesses who are neither beneficiaries nor closely related to them underscores the need for careful selection of witnesses.

Finally, as the DIFC WPR no longer retains copies of original wills and only stores electronic versions, it is crucial that you securely store your original will documents to safeguard their authenticity and accessibility.

Preparing a will and appointing an executor is, of course, a crucial step, but it is far from the only consideration. It’s just the starting point. It is essential to address other important issues, such as healthcare preferences, digital asset provisions, tax optimization, and regular updates to account for important life events.

Living wills and powers

A living will and power of attorney play important supporting roles. Too often today, unexpected health crises or unforeseen circumstances can leave people unable to express their preferences or make critical decisions. In such situations, the living will becomes a guiding document that ensures your health care wishes are known and respected.

In the United Arab Emirates, a living will can be established through the DIFC Wills Service Centre. This process involves drafting the will with clear instructions on medical treatment preferences and registering it with the DIFC, which provides legal recognition and enforcement through the Dubai courts.

Granting power of attorney is another valuable step in this regard. Having a designated person to make crucial decisions on your behalf when you are unable to do so can give you peace of mind and the assurance that your interests are safeguarded.

Digital asset management

Today, provisions for digital assets are also an important consideration. In the UAE, more than a third of residents now have a digital bank account and around 90 percent use mobile banking apps, so having clear instructions for accessing online accounts, passwords and other digitally stored information It is essential to ensure that your family can access your digital bank account. digital assets effectively.

Failure to do so may result in loss of access to important financial accounts and personal data and complicate legal proceedings. Additionally, it poses identity theft risks and can disrupt the continuity of any online business. Ensuring clear instructions for accessing online accounts and passwords is essential to safeguarding financial and sentimental digital legacies.

It may seem daunting to know where to start, but a good first step would be to create a complete inventory of all your digital assets, including online bank accounts, investing platforms, email accounts, and any subscriptions or services linked to digital accounts.

With this information in hand, you can move on to managing all of your passwords and creating a secure digital storage system and a clear emergency access plan that outlines the steps your family should take to access digital assets in the event of an event. unexpected.

You should also consider legal mechanisms, such as including digital asset instructions in your will or creating a specific document for digital asset management. Implementing encryption tools and security protocols and ensuring your family members know and have access to them is another worthwhile measure.

Trusts: Controlled asset management

Trusts are another valuable and versatile part of an estate plan. As a legal arrangement in which assets are held by a trustee for the benefit of a beneficiary or beneficiaries, trusts are crucial to estate planning as they provide controlled management and distribution of assets, which is particularly important in the complex legal environment of the UAE.

They provide a level of certainty and protection, ensuring that assets are managed and distributed according to the settlor’s specific instructions.

In the United Arab Emirates, trusts are often created in financial free zones, such as the Dubai International Financial Center (DIFC) and the Abu Dhabi Global Market (ADGM), which have their laws and courts based on law. common English. These jurisdictions offer a familiar legal framework for international and expatriate investors, making them popular options.

In the absence of a well-structured trust, beneficiaries in the UAE could face several problems. For example, there could be disputes between heirs over the distribution of assets, especially if the terms of the trust are ambiguous or if the trust does not adequately consider UAE laws.

Additionally, the assets could be subject to creditor claims or there could be unintended tax consequences that affect the value of the estate. Additionally, without proper documentation, the legal process to access assets can become slow and complex. Beneficiaries may have to go through a lengthy probate process and there is a risk that the trust will be contested or misinterpreted.

To avoid these problems, it is essential to work with legal experts experienced in UAE trust law to ensure that the trust is established correctly and complies with local legal requirements and to ensure that the trust documents are meticulously drafted, clearly defining the terms, beneficiary rights and conditions. for the distribution of assets.

Regular reviews and updates are also important to reflect any changes in circumstances or laws that may affect your operation.

Act now, rest easy

While creating a comprehensive estate plan may seem overwhelming, the peace of mind and security it offers are invaluable. Whether it’s writing a will, managing digital assets, or establishing a trust, each step is a crucial part of safeguarding your legacy and ensuring your loved ones are cared for in accordance with your wishes.

News source: Gulf Business