New laws of inheritance

Laws of inheritanceNita Maru

In a landmark move, the Dubai International Financial Centre (DIFC) has set the ball rolling for the introduction of new rules relating to succession and inheritance matters of non-Muslims owning assets in the emirate.

On November 16 last year, the DIFC’s Dispute Resolution Authority launched a month-long consultation with the UAE legal community on a new English-language DIFC Wills and Probate Registry, which is expected to come into effect early this year.

Once implemented, these much-anticipated rules and procedures will provide certainty to non-Muslims in passing their assets in Dubai to their chosen heirs, avoiding the need for their executor and/or heirs to be involved in complicated, costly and uncertain proceedings often encountered in the Dubai Courts.

Resolution Number (4) of 2014 has been signed by Shaikh Maktoum Bin Mohammad Bin Rashid Al Maktoum, Deputy Ruler of Dubai and President of DIFC, providing the legal basis required for the establishment of the DIFC Wills and Probate Registry. With its impending launch, DIFC will become the first jurisdiction in the region where a non-Muslim individual can register a will under internationally recognised common law principles. Currently, the distribution of assets of a deceased is guided by UAE federal laws such as the Personal Status Law and Civil Transactions Code, as well as public order.

Behind the regulations

As a general rule, inheritance issues for Muslims are dealt in accordance with Sharia, whereas for non-

Muslims, the law of the deceased’s home country can be applied.

Succession under Sharia law principally occurs through a system of forced heirship or reserved shares. Sharia is not a codified law and capable of adaptation, development and further interpretation. Whereas the Civil Code states, in one part, that the law of the home country applies to matters of inheritance, in another part it states that where a will made by a non-Muslim refers to the disposal of real estate in the UAE, then this country’s law applies. This is consistent with the fact that, in general, the law of the state where property is located applies to real property rights.

This conflict has caused confusion among non-Muslims as to the inheritance of their property upon their demise. The Personal Status Law (2005) was passed to add clarity to the terms of the Civil Code.

The Personal Status Law is widely thought to proceed on the grounds that an expatriate non-Muslim with an estate in the UAE is entitled to elect by will the application of his or her national law to govern succession to his or her UAE estate instead of Sharia-based rules.

However, the Personal Status Law does not make specific reference to immovable or real estate in foreign ownership, whereas the Civil Code clearly does. Hence there is a potential conflict between the two laws.

This new move will be welcomed in the face of the dilemma of the aforementioned contradictory legislation where inheritance matters are concerned, coupled with the legal uncertainty of expatriate wills and courts’ discretion in applying Sharia law whenever they consider it appropriate.

In order to avoid lengthy and expensive probate battles at the Dubai Court, and with the risk of estates being contested through conflicting inheritance laws, many expatriates transfer their assets into offshore structures. Such a shift is common where property is purchased as there is no right of survivorship concept in the UAE — that is property passing on to the surviving joint-owner of a plot upon death of the other owner — and this is a serious concern for many investors.

Guardianship issues for those parents who have minor children residing in Dubai are a common concern as well.

The fixed distribution of assets as per UAE law and the freezing of bank accounts, for example, tend to make expatriates uncomfortable about retaining funds, leading them to transfer these offshore and out of this jurisdiction. This naturally affects economic growth and further investment in Dubai.

The rules in detail:

• The DIFC Wills and Probate Registry will mark the introduction of a new set of rules relating to succession and inheritance matters for non-Muslims holding assets in Dubai.

• The registry will provide a mechanism for non-Muslims with assets in Dubai to pass their estates according to the wishes expressed.

• The rules governing the registry will complement existing UAE laws regarding inheritance for non-Muslims, while providing them with the option and right to choose the way in which their estates are distributed.

• The DIFC Wills and Probate Registry are to be within the DIFC jurisdiction and will work with the DIFC Courts for the production of grants and court orders for the distribution of assets. As the grant is issued by DIFC Courts, it will be directly enforceable in Dubai without the need to go through the Dubai Courts.

How to proceed

After having participated in the working group involved in formulating and contributing to the DIFC Wills and Probate Registry rules, I believe that the registry would register the wills of non-Muslims and, upon receipt of evidence of death, issue the necessary court orders to allow the distribution of the deceased’s Dubai-based assets — and matters relating to guardianship — in accordance with the registered will.

Also, as a common law jurisdiction, the use of the DIFC procedure would allow for testamentary freedom of disposition for non-Muslim expatriates and the speedy and orderly administrative processing of a deceased non-

Muslim’s estate in Dubai.

Once the registry has come into place, precedents would organically evolve and provide a greater degree of certainty in the handling of such cases in the future.

It is hoped that the registry would be functional and officially open sometime early this year. Should you wish to prepare a DIFC will or if you want to review your existing will in light of the aforementioned developments, it would be prudent to seek the advice of a lawyer registered with the Government of Dubai’s Legal Affairs Department.

Source: Nita Maru, Special to Property Weekly
The writer is a UK-qualified solicitor and Managing Partner of TWS Legal Consultants, with more than 16 years’ experience in senior positions held in London and the UAE. She holds a full legal consultancy licence from the Government of Dubai Legal Affairs Department and her firm is registered with the Dubai International Financial Centre Courts’ Register of Legal Practitioners.

Al Nisr Publishing accepts no liability for the views or opinions expressed in this column, or for the consequences of any actions taken on the basis of the information provided

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