Many people forget an important thing for the future: making sure their money and belongings go to the right people when they're not around anymore. Even though we work hard to earn money and take care of our family's finances while we're alive, it's surprising that not many of us think about what happens to our stuff after we die.
The numbers show a concerning trend. A study by Canada Life found that half of adults in the UK don't have a will. That's over 31 million people leaving everything they own up 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 with a will (24%), while others believe their family will automatically get their things anyway (17%).
But it's not that easy. No matter how much money you have, planning ahead for what happens 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 do 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 practical standpoint?
Wills and legal considerations
A will is the foundation of your estate plan. It not only articulates your preferences for distributing assets after your passing but also designates an executor responsible for carrying out your wishes.
Here in the UAE, wills have added significance since, until recently, both Muslims and non-Muslims were subject to the same inheritance regime concerning assets located in the UAE. This meant that when a non-Muslim foreign national died intestate (without a will), their assets were divided among their heirs according to Sharia Law, and family members may be subject to a forced heirship situation that doesn’t align with their individual preferences or family dynamics.
Intestacy also has implications for how long it may take to retrieve assets. The timeline can depend on various factors, including the complexity of the estate, the number of heirs involved, and potential disputes. However, needless to say, the process could extend over several months or even years.
Fortunately, that no longer has to be the case. The DIFC Wills and Probate Registry (WPR), established as an official mechanism for non-Muslims to register their wills and have them enforced through the DIFC Courts, has removed much of that uncertainty.
The rules around DIFC wills have also been continually updated to better protect testators and their assets. Amendments such as allowing all worldwide assets to be included, have been a positive move and a departure from the previous restriction of only allowing assets in Dubai and/or Ras Al Khaimah to be included.
However, it’s important to be aware of certain limitations with DIFC wills and take the necessary steps to safeguard your plan. For instance, guardianship provisions in wills remain applicable only for minors residing in Dubai and Ras Al Khaimah, so additional arrangements may be needed for minors living elsewhere.
Additionally, the requirement for testators to bring two independent witnesses who are not beneficiaries or closely related to them underscores the need for careful selection of witnesses.
Lastly, with the DIFC WPR no longer retaining original will copies and only storing electronic versions, it’s crucial that you securely store your original will documents to safeguard their authenticity and accessibility.
Preparing a will and assigning an executor is, of course, a fundamental step, but it’s far from the only consideration. It’s just the starting point. Other important issues such as healthcare preferences, provisions for digital assets, tax optimization, and regular updates to allow for significant life events are all essential to address.
Living wills and power of attorney
A living will and power of attorney play important supporting roles. Far too often nowadays, unexpected health crises or unforeseen circumstances can leave individuals incapable of expressing their preferences or making critical decisions. In such situations, a living will become a guiding document, ensuring your healthcare wishes are known and respected.
In the UAE, a living will can be established through the DIFC Wills Service Centre. This process involves drafting the will with clear instructions regarding 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 may not be able to can provide peace of mind and the reassurance that your interests are safeguarded.
Managing digital assets
In this day and age, provisions for digital assets are also a major consideration. In the UAE, more than one-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 held info is essential to ensure your family can access your digital assets effectively.
Failing to do so can result in lost access to important financial accounts and personal data and can complicate legal proceedings. Additionally, it poses risks of identity theft and can disrupt the continuity of any online business. Ensuring clear instructions for accessing online accounts and passwords is essential for 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 comprehensive inventory of all your digital assets, including online bank accounts, investment platforms, email accounts, and any subscriptions or services tied to digital accounts.
With this information in hand, you can then move on to managing all 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 case of an unforeseen event.
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 are aware of and have access to these is another worthwhile measure.
Trusts: Controlled asset management
Trusts make up another valuable and versatile part of an estate plan. As a legal arrangement where assets are held by a trustee for the benefit of a beneficiary/beneficiaries, trusts are crucial for estate planning as they offer 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 UAE, trusts are often set up in financial free zones, such as the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM), which have their laws and courts based on English Common Law. These jurisdictions offer a familiar legal framework for international investors and expatriates, making them popular choices.
In the absence of a well-structured trust, beneficiaries in the UAE could encounter several issues. For example, there could be disputes among heirs about asset distribution, especially if the trust’s terms are ambiguous or if the trust does not adequately consider UAE laws.
Additionally, assets might be subject to claims from creditors, or there could be unintended tax consequences affecting the estate’s value. Moreover, without proper documentation, the legal process to access assets can become time-consuming and complex. The beneficiaries might have to undergo a lengthy probate process, and there’s a risk of the trust being contested or misinterpreted.
To avoid these issues, it’s essential to work with legal experts experienced in UAE trust law to ensure the trust is correctly established and compliant with local legal requirements and to ensure that the trust documents are meticulously drafted, clearly defining terms, beneficiary rights, and conditions for asset distribution.
Periodic reviews and updates are also important to reflect any changes in circumstances or laws that might affect its operation.
Act now, rest easy
While creating a comprehensive estate plan might seem overwhelming, the peace of mind and security it offers are invaluable. Whether it’s drafting a will, managing digital assets, or setting up a trust, each step is a crucial part of safeguarding your legacy and ensuring your loved ones are taken care of according to your wishes.
News Source: Gulf Business
