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 Mexican Wills for Foreign Residents By Raoul Rodríguez-Walters, CFP® Managing Partner
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US and Canadian citizens living in Mexico frequently ask, "Do I need a Mexican Will?" While there is no legal requirement to have a Will executed in Mexico, our recommendation, even for people whose only asset in Mexico is their real property held in a Mexican real estate trust, is to be proactive and draft a Mexican Will. The principal reason is that Mexican property is often caught outside of the trust arrangements: automobiles, jewelry, objects of art, shares in golf clubs, business interests, etc. The second reason is that intestate laws in Mexico are not always favorable to surviving spouses and seldom distribute property in the manner in which the decedent would have liked.
If you have property in Mexico and die without any Will, the state courts will look to the intestate provisions of their respective civil code to determine the disposition of assets and establish guardianships.
If absolutely all of your property in Mexico will pass by operation of law or contract, then a Mexican Will may not be required. For example, if you hold property in a fideicomiso (Mexican Trust), the trust document will determine who inherits the beneficial right to the property. Another good example is bank accounts that have beneficiary designations. In either case, property will avoid probate.
Here are some of the most common questions foreign nationals ask about Mexican Wills and estate planning in general:
"Is my US or Canadian Will Valid in Mexico?"
US and Canadian Wills are valid in Mexico. However, getting the US and Canadian instruments recognized here can entail a relatively lengthy and expensive process. In the case of US documents, these need to be apostiled and notarized in the US. These documents also need to be converted into Spanish by a court-approved translator before the file is brought to the Notario, who will initiate probate. In the case of Canadian Wills the process is a little more complicated because apostils are not issued in Canada pursuant to the appropriate Hague Convention. Therefore, a Mexican Will generally provides for a quicker transfer of assets to the heirs, in a more cost efficient manner.
Mexican Wills are also valid in the US and Canada. However, for ease of administration we usually suggest that if property is owned in those jurisdictions, that an appropriately executed document be prepared in the US or Canada. As an example, Mexican Wills do not contain the signature of the testator and this fact can cause delay in having the document accepted in common law jurisdictions.
"If I own property jointly with my Spouse, he or she will get the other half when I pass away, right?"
Wrong! There is no such thing as rights of survivorship in Mexico. At the first death, assuming that the partners own the property 50/50, an undivided half will be transferred pursuant to either the decedent's Will or pursuant to state intestate provisions.
In the event that the couple does not have a Mexican Will and that they have surviving children, it is possible that the surviving spouse may be disinherited.
"Do I need an executor?"
Yes, the executor or executrix is the person in charge of locating the property, preparing an inventory, paying all debts, and is generally in charge of administering the estate and supervising the transfer of title. Some Mexican states require that the executor post a bond.
We suggest that, when possible, the executor live in Mexico, but this is not a requirement as the executor could always grant a power of attorney to a lawyers or other trusted advisor to act on his or her behalf.
"What is Probate like in Mexico?"
Probate is the legal process of transferring title to those properties that do not transfer some other way, after a person dies. If there is a Will, probate in Mexico is generally carried out in private and at a Notario’s office with very little court intervention. And while the Notarios are often in charge of the process there is no reason that you cannot hire a regular attorney to guide the executor and the heirs through probate. If there is no Will, if the Will is contested, or if there are guardianship issues, the Mexican courts take on a much more active role. Court proceedings in Mexico are in practice private matters and only parties in interest would be able to consult the court’s proceedings.
"Does Mexico have an estate tax?"
Mexico does not have an estate tax for residents. However, Mexican income tax law does have provisions when assets are transferred by non-residents to others without requiring payment. Therefore this provision would apply equally to gifts as well as estates. The estate of a non-resident is liable for a 25% tax on the value of assets transferred by inheritance or bequest. Interestingly enough, few Notarios, the persons responsible for calculating and withholding this income tax, are aware of the requirement. As a result many estates belonging to non-residents are transferred tax free. What we have seen in practice however is that more and more Notarios are applying the tax and so it is something to be aware of.
"Is it expensive to draft a Mexican Will?"
As with anything else, you get what you pay for. A simple Mexican Will can cost anywhere from $150 to $250. However we strongly suggest that you have an independent advisor familiar with the issues assist in reviewing the Mexican document as well as coordinate with the foreign estate planning attorneys. This may increase the cost of the estate plan.
"Do you recommend any other estate planning documents?"
We suggest a Mexican durable power of attorney be executed. This document would allow another party, typically a spouse or significant other, to make decisions with regards to property that is not in your name. This may come in handy if the person who has title to property is disabled or otherwise unavailable. For example, if a person has Alzheimer’s the unaffected spouse may need to rent a home or even sell the property in order to finance healthcare costs or pay for a move back to the US or Canada. If the unaffected partner does not own the property, or have a valid power of attorney, little could be done with the asset.
We also suggest that “medical directives” also be prepared to give possible caregivers an idea of the level of healthcare that is desired, also during incapacity. While the medical directive is not legally binding in Mexico, it does provide the caregiver with guidance at a critical time. This document is especially important when the person is not married and is dependent on family, doctors, friends and neighbors for care. Further, many of our clients go back home if there are seriously ill. A healthcare directive drafted in the US state where care is mostly likely to be given can serve dual purposes. It can help guide caregivers in Mexico while at the same time provide legal basis for care if and when medical care is provided back home.
"Any other tips?"
Estate planning, as we know the concept the US and Canada is not practiced in Mexico. The burden is on you to be more proactive in first knowing what you want and need from your plan and then making sure that the plan gets correctly implemented in Mexico. In most states, when a foreigner who does not speak Spanish goes to a Notario to prepare a Will he or she is told to write their testament by hand, which is then translated word for word. You tell the Notario what you want and your wishes are given legal form but with practically no strategic input from the Notario. The problem with this approach is that little thought is often given to the legal and affective complexities of any estate plan: the subtleties of planning around international estates: family relationships, ancillary probate processes, US estate taxes, survivorship issues, special planning situations, etc. Here are a few tips:
- Have your estate plan reviewed by a competent party, with expertise in international estate issues. Just as Mexican Notarios are not familiar with US estate planning issues, not all US and Canadian estate planning attorneys are experts on international planning. Make the effort to hire a specialist.
- Carefully coordinate the US or Canadian plan with the Mexican estate plan. For example, Mexican Wills often revoke any prior Wills either explicitly or implicitly. Prior Wills are explicitly revoked with a revocation clause. If there are prior Wills and the Mexican Will is silent on the matter, the Mexican Will revokes all prior Wills by operation of law. Often, this is not the testator’s intention, especially if they have a Will in a country other than Mexico that they want to keep in force. Make sure that your plan works well on both sides of the boarder to achieve your goals.
- Valid Mexican Wills must be expressed in Spanish. Make sure that the translation accurately reflects what your intentions are. In most states the person that translates the Will from your native language into Spanish is not required to be a certified or otherwise qualified translator. Errors in translation could prove costly. Hire a professional translator or a person that is thoroughly familiar with Mexican legalese to assist you and since the Spanish version will be read back to you by the translator pay close attention to what is said.
- Be mindful of the beneficiary designations in Mexico. Wills do not control the disposition of assets with beneficiaries already assigned. Examples of arrangements with beneficiaries in Mexico are: trusts, accounts with financial institutions and life insurance polices. Some states in Mexico also allow you to assign a beneficiary to your share of real property when you take title. Keep in mind whom these beneficiaries are when preparing an estate plan.
- If you have had a change in life circumstances, such as a death in the family or a divorce, immediately update your estate planning documents and beneficiary designations, on both sides of the border.
- Often times we do not want to clutter a Will with too many details. A letter of intent is the perfect instrument to place many of your bequests, especially as regards items that may not have significant monetary value but may have tremendous affective value. A letter of intent may prove to be invaluable to avoid family disputes and guide the executor as the disposition of certain personal items such as works of art, furniture, clothing, jewelry etc. Letters of intent are not part of the Will and are not legally binding in Mexico, so care and thought should go into what is put in the Will and what is itemized in a letter of intent. These instruments are also helpful if you tend to change your mind a lot especially considering that there is no such thing as a codicil in Mexico. Every time you want to change your Mexican Will, you need to draft an entirely new document, a process that can be a hassle. The letter of intent allows you to add, eliminate or change your wishes as to certain dispositions without the need of any legal formality.
Summing it all up, unless all of your Mexican assets are held in a Mexican Trust, the relatively small cost of having a Mexican Will is money well spent. It gives you the peace of mind gained from knowing your wishes will be carried out with nothing left to chance – or to the unique provisions of Mexican laws.
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Raoul Rodríguez-Walters, CFP ® is the founding partner of Mexico Advisor, the only company in Mexico offering financial management, legal, tax and title services under one roof, to Englishspeaking foreigners wanting to live, retire or set up a small business in Mexico. Read more about the comprehensive, integrated services provided by Mexico Advisor at: www.mexadv.com. |
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