Tim Elliot: Welcome to Lawgical, the Gulf Region’s first and still the only legal podcast. Lawgical is a regular weekly podcast from the Dubai-based law firm, HPL Yamalova & Plewka. Tim Elliot, here again at the firm’s offices on the 18th floor of Reef Tower in Jumeirah Lakes Towers with the Managing Partner, Ludmila Yamalova. Nice to see you.
Ludmila Yamalova: Pleasure to be chatting with you again.
Tim Elliot: So today is estate planning for expatriates here in the United Arab Emirates. Now at some point, we all have to prepare for the transfer of wealth and assets, whether the assets are life insurance, a pension, real estate, cars, whatever it might be. Now let me start by just setting the scene kind of personally. A wise man once told me I didn’t need a will, I didn’t need life insurance, I didn’t need health insurance. I was 24 at that time. But he did say to me, one day I would need a will, I would need health insurance, and I would need life insurance, and I would also need a plan, particularly if I was going to get married and have children. What I did is I followed his advice for more years than I probably should have done. I had a lot of fun however, and then I got married. I had children. I had two, and I realized at that point, and some people would say it’s a growing up point, that I had to decide to prepare, and that’s when estate planning kicked in. I had to make a plan, and that’s really the first step, isn’t it?
Ludmila Yamalova: Interestingly enough, you are correct, but there are two other elements that are at play in this day and age and in particular where we are based. One is, let’s face it, many young people these days make great fortunes. Let’s look at the big startups, the Ubers of the world, and the Apple, perhaps less of Apple, but Google, lots of very young talents come in and create huge fortunes very early on in life. Perhaps that advice that you received back then could be scaled back these days 10 years earlier. Age is no longer perhaps as much of a factor as it was when you were being given that advice. That’s one.
The other one is the region where we’re based, and from where we are doing this particular recording, and that is, you mentioned in your intro, the word expats, expatriates. The very definition means we are foreigners in this country. We are outsiders, and for the majority of us, this is not where we will end up – as I say that, I pause – perhaps until the end of our lives. For some whose lives perhaps end prematurely this will be the place, but for many of us this is not the only place where we have interests because we come from somewhere else and most of the time we also have some kind of interest, commercial or otherwise, in those countries. But being here, many of us are away from our families, away from what we know, away from the legal and the cultural framework that we know. Therefore, let’s say even if you are 24 in this day and age and all you have is just a bank account and a car and something happens, now your family is left behind to try to figure out what to do with that. Because your family is far away and they don’t know this jurisdiction, they don’t understand this culture, and on top of that there could financial restrictions for them to fly in here and figure out how things in this country work, so you can imagine the complications and the complexities that the family, that is already grieving, will now have to deal with just by virtue of the fact that the person died in a place that is not his or her home. That’s a significant factor. We’ve seen many cases like that where unexpectedly a family member dies, and the family from Canada, for example, reaches out: So what do we do? We don’t know what he owned, what happened, where he lived. It’s very, very complicated. Those are the two reasons today where those of us who live away from home perhaps should consider planning our estate earlier than would otherwise have been back in your days or if we were still living in our home countries.
It’s also because the home countries, even if you don’t have a will, there is a legal system that by now most likely has a pretty clear framework as to how the estate will be disposed of or distributed and that general framework perhaps works for most people without even having to draft a will. Now, in the U.A.E. it’s a Muslim country, so the default law here that applies to personal status law is sharia. So you always right away, off the bat, potentially have a conflict of laws. You have sharia if the estate is being distributed as per sharia, and you have potentially laws that you could rely on that would be the laws of your home country, if you can establish what your home country is, because again, there are so many couples here living with multiple nationalities and when you mix that and add another spouse or children and the children have different nationalities, so sometimes it is even difficult to figure out which nationality would apply to the disposition of an estate.
Tim Elliot: Each case is unique clearly, but let’s assume you decide to plan. There are a number of things that you have to do, that you have to put into place, for example, insurance, a will, perhaps a trust, but let’s just run through some of those points. Let’s start with, I guess, life insurance.
Ludmila Yamalova: If I may, let’s just start the list of suggestions we’ll cover, and it certainly may apply to non-Muslims because with anything to do with Muslims there are limited options in terms of what Muslims can do away from sharia.
Tim Elliot: Right.
Ludmila Yamalova: But I will cover the Muslim couples only or a Muslim case because it obviously applies. In general, under sharia, the estate will be distributed as per sharia which means not as per a will. Now, it is possible for Muslims, however, to will one third of their estate, and a lot of people don’t know that. You can have this will drafted beforehand. Now obviously when the time comes, the matter will be how do you prove that that will refers to one third of the estate. But it is possible and it’s advisable that all Muslims who may consider giving a will, that they do so early on in the process. Otherwise, the rest of their estate will be adjudicated as per sharia.
With regard to non-Muslims, the law in the U.A.E. does allow for reliance on the laws of the testator’s, the deceased’s home country for the application of the estate. That would depend on whether you were using the will or using actually a court order from the home country. It can be quite complex, but in general terms, having a will is highly advisable, and that is one instrument for estate planning.
The other, like you said, is life insurance. Life insurance is an instrument that’s very frequently used in certain other jurisdictions, and it’s also available in the U.A.E. In fact, if you were to take a mortgage in the U.A.E., as part of the process the bank requires for you to have life insurance, the proceeds of which will go to the bank. Those instruments are available and certainly should be considered, but I will tell you from experience they are very rarely used or relied on in this country, but certainly something important to remind and to at least consider or avail yourself of.
You mentioned the word trust. A trust is more complicated in this country because as a general rule trusts are not really enforceable or recognized in the U.A.E. There is separate free zone called the Dubai International Financial Centre, the DIFC, they have recently introduced trust law. Apart from the DIFC, trusts are not really recognizable here, but you can do a trust that resides outside of the U.A.E. That’s certainly another tool that’s available, but trusts can be expensive. You need to really have enough money to make it worthwhile for you to hire lawyers, accountants, and various consultants to set up these highly complicated legal structures.
You also mentioned, and this is very relevant, pensions. In the U.A.E., unless you’re an Emirati citizen, pensions are not usually available in just ordinary employment cases or circumstances, and that’s because we don’t really have a pension system here that’s available to expats yet. However, there are discussions of a system to that effect being introduced, so something to wait and see, but for the time being, it’s not available in the greater U.A.E. A pension, while otherwise is a good instrument to use elsewhere, it may not be an option here.
Also, there is another instrument called the power of attorney, or POA. Many people deem a POA to be an equivalent, if you will, of a will, but it is not so because a power of attorney by its very nature, its very existence, depends on or is based on that person being alive. The minute the person dies, the power of attorney dies with that person. That’s in legal terms. Now, in practical terms, unless somebody knows that the person is no longer alive, you can use the physical copy of the POA and continue to use it, but it is against the law and it is considered fraud. Yet, we are often being approached by people saying, hey, listen, I’ve got a POA and so and so, a family member has passed away, I’m planning to use this as the basis for the POA. Well, it’s very important to highlight that that is illegal and constitutes fraud.
Tim Elliot: Let me ask you about that. I was going to ask you about financial power of attorney. How does that or can that be under U.A.E. transferred to a trusted person who would effectively be seen, I guess, in other jurisdictions as an executor of an estate?
Ludmila Yamalova: In short, no. Apart from doing it through the formal wills structure, you can’t do just a power of attorney, in particular related to your finances. I will tell you even more in the U.A.E., even if the person is living, banks do not accept a power of attorney. It doesn’t matter how well or specifically you draft them, which may include the expressed authority for you to use my bank account, the banks will not accept it. As far as finances are concerned, even in the case of the living, a power of attorney is not acceptable. No, it’s not an instrument that is available here. If you do want to trust somebody to use it and to be your guardian and trustee, it has to be done through a formal system of a will. There are a number of options to do so now.
Tim Elliot: Talk to me about those formal options here in the U.A.E.
Ludmila Yamalova: Well until recently, there was one and really the only choice, and that was the Dubai International Financial Center Wills and Probate, or the DIFC Wills and Probate Center, and that is a center allowed expressly by law for non-Muslim expats to draft wills and have those wills registered to ensure that their estate is being distributed as per their wishes. This was away from sharia, and that particular law allowed expats to include real estate assets. The reason that particular center was introduced was because until such time there was a conflict of law or an uncertainty in the application of laws in the U.A.E. One law, the federal law, allows for a non-Muslim expat to choose the law of his or her country to apply to their estate. The other law, on real estate, provides that for anything immovable, being real estate, sharia applies. There it is. You have a conflict of law. One law that is a specific law which is the real estate law that says fine, everything related to properties is subject to sharia, so all of a sudden you may have a court judgment for all other assets that may apply the laws of your country, but as far as your real estate is concerned, that would be subject to sharia. There are a lot of people here in the U.A.E. who have invested tremendous resources into exactly that property, so for them that’s not really a very workable scenario. It was because of this ambiguity in the laws that the DIFC introduced the special system called the Wills and Probate that allows parties to lay out how they want their estate, all of the estate, real estate included, to be distributed.
Furthermore, that particular system introduced a provision and option for testators to include guardianship of their children, which is huge. I will tell you, that kind of goes back to your earlier point. When do you consider doing estate planning? My advice, especially give it the DIFC option of including provisions for guardianship of your children, is to certainly do it when you have children. We see a lot of clients who say, well, the idea of a will, sort of, works for them, but they don’t have substantial interests here, so they don’t really think it’s necessary. But it’s important to remember it’s not just for the financial interests. It is about children. If you have minor children in this country, you certainly should consider doing a will at the very least, and the DIFC actually does offer this. At the very least, you can just do a guardianship provision which essentially lays out what happens to your children on a temporary and a permanent basis in the event the parents die.
Tim Elliot: When you say minor children, what stipulates the minor?
Ludmila Yamalova: Below 21 for the DIFC.
Tim Elliot: Okay. Now let’s get back to the options.
Ludmila Yamalova: In the last year or year and a half, a few other options have arisen. One, in the greater Dubai, it’s also now possible to register a will in Dubai courts. This is away from the DIFC and the DIFC courts. It’s possible to register a will that will in particular include both real estate and guardianship. Historically, it was possible to do a will in the Dubai courts as well, but you couldn’t include real estate or guardianship, at least you couldn’t do so with a certainty that it would be enforced in the courts. Now, this specific law allows the courts to expressly include those provisions and for those provisions to be enforceable, so now you have Dubai courts. Also, Abu Dhabi recently included an option for expats to do the same, not only that, Abu Dhabi expressly said that the wills registered with Abu Dhabi courts can actually also include global assets, so it’s no longer limited to just Abu Dhabi. The language presupposes that it actually can include any of the emirates in the U.A.E., and on top of that, you can include whatever other global assets you may want to include. This is a huge development and since then has led and influenced other options, including the DIFC in Dubai. So since then, even the DIFC now has introduced the option of making of wills global. Until literally just a few months ago, you could only include your Dubai-based assets and then later it became Ras Al Khaimah, which is one of the emirates in the U.A.E., but all the DIFC wills were limited to your assets in Dubai or in Ras Al Khaimah, not even the rest of the emirates. Then Abu Dhabi said, well, we don’t really care. You can include any assets in any part of the country, and on top of that, you can now also include your global assets. Since then, the DIFC has also expanded its jurisdiction and now allows the wills to include global assets and Dubai court system, the same.
As of now, there are at least three different options for doing it in the U.A.E. and any one of those options can work, depending on the framework of a person’s life. If you have a lot of assets in Abu Dhabi, perhaps Abu Dhabi is a more reasonable place to start. If you have lots of assets in the DIFC or your estate is quite complex, the DIFC is probably a good option. This is because both in Dubai and in Abu Dhabi courts, the wills also have to be drafted in Arabic. Anytime you draft anything in Arabic, there is some loss in translation and the idea of using two versions perhaps may be difficult for someone to comprehend, especially when you’re talking about figuring out how to dispose of your estate. But the plus of those options is the cost. It’s much more economical than the DIFC. The DIFC is more expensive of an option, but it is much more elaborate and more complex. It allows and has been tested to enforce very complex estate planning, so for now that is probably the most tested option for expats available.
Tim Elliot: I have my will drafted in English. That’s my mother tongue. I need to have my will translated, obviously, into Arabic. How do I make sure that a will that I am happy with would be utilized here in the right way in the Emirates?
Ludmila Yamalova: Well, the translation is not just an Arabic translation. It has to be a legal translation. For legal translations to take place, actually it has to be translated by someone who has been appointed or licensed by the court to be a legal translator, so in Dubai or in Abu Dhabi there are certified translators and they will attest that the Arabic translation is actually a formal legal translation of the English, for example. However, even that needs to be reviewed carefully because, let’s face it, any time you deal with translations of languages, especially languages as different as Arabic and English, it’s always good practice to have that translation vetted by another Arab speaker and perhaps even a lawyer to ensure that all the legal nuances have been properly translated.
Tim Elliot: So that’s in place. How can I be sure that the will then will be recognized here in the Emirates?
Ludmila Yamalova: This is why these options exist. If you’ve done one of those wills through any one of those options, at least in theory, first of all you’ve drafted a will, second of all you have registered with a particular government authority. Just by virtue of that alone, you already have evidence or proof that it has been registered with the right authority that at least that instrument was meant to happen, that it wasn’t some kind of a document that was drafted 20 years ago or by somebody else. At least by that, you’ve verified the authenticity of the document.
Now, challenging the will is a separate question and the idea of the DIFC and these other wills is that they should not be challenged. You do this so that you have the certainty of this will being enforced. However, as we say that, in practice in any jurisdiction there are always ways to challenge. For example, if you have a will in the DIFC or in the Dubai courts that could potentially conflict with the laws of your home country, you can see how, for example, the beneficiaries from your home country can come here and challenge that will because, after all, the will was supposedly based on the laws of the deceased’s home country. Because it’s not sharia, it’s some other law, and the law is the law of their country, so if now someone comes from that jurisdiction and challenges the validity of that will because it conflicts with those laws, then you can see how it opens up Pandora’s box. It’s a real scenario, so therefore our advice to all testators out there, those who are planning to draft a will, is to bear that in mind. It’s always better to have an instrument than not, but bear in mind that, for example, with certain laws and in certain jurisdictions, you cannot disinherit your children. If you have a will here that whereby virtue of this will, you’ve given your assets to everyone through your estate, everyone other than your children, and in your country that’s against public order, you can see how that will can fall apart. If you were thinking of doing a will, you should have at least some general framework and understanding of your laws from your home country. The idea about doing this will is that you can have some certainty about what happens after your death. A little bit of due diligence and a little bit of consultation with the right authorities should always be done before you invest in drafting this instrument here and relying on it.
Tim Elliot: Scratching the surface, I think, of estate planning is a subject we’re going to come back to in a future podcast. Ludmila Yamalova is the Managing Partner of the Dubai-based law firm Yamalova & Plewka. As ever, thank you.
Ludmila Yamalova: Thank you. Always a joy to be chatting with you.
Tim Elliot: That’s it for another edition of the Lawgical podcast. Don’t forget, if there’s a specific question you need an answer to, not just estate planning, get in touch via lylawyers.com or any of our social channels, and we’ll try to answer it in a future edition of Lawgical.
