Legacy Planning

Legacy planning is the process of preparing for the distribution of property and assets to loved ones after one’s demise. While it involves creating a will, legacy planning goes beyond that to ensure a lasting legacy. It requires considering various options and ensuring a cohesive plan that avoids unforeseen issues or excessive taxes.

What are the key elements of good legacy planning?

Legacy planning is arguably the most confusing and complex element of sound financial planning, from the complexity of the legal documents required to the challenge of maximising the legacy left to your heirs.

A thoughtfully considered legacy plan involves five critical components:

Will:

A will is a crucial document when it comes to estate planning. It outlines how your assets will be distributed after your passing and designates a guardian for your children.

In the UAE, registering a will is of utmost importance. Without a registered will, inheritance matters are handled by the UAE Courts according to Sharia Law. This can result in substantial complications for non-Muslim expats, impacting dependent visas, guardianship of minors, and the distribution of their estate.

Trusts:

Trusts are legal arrangements that hold assets on behalf of beneficiaries. Although less commonly used in UAE legacy planning, trusts are valuable for tax planning and asset management both domestically and internationally. They provide control over how and when assets are distributed to beneficiaries, avoiding probate and potentially reducing estate taxes and court fees. Expats can benefit from trusts in jurisdictions like ADGM and DIFC, where common law ensures legal protection and distribution according to their wishes. Read more here in our latest blog.

Foundations:

Foundations share similarities with trusts in asset management and financial support to designated individuals or organizations. However, there are key distinctions. Trusts are established by trustees who manage assets for beneficiaries, while foundations function like companies, owning assets in their name and having contractual capabilities.

In terms of succession planning, foundations provide more control over asset management and investments, while trusts solely manage assets for beneficiaries.

By understanding the nuances of trusts and foundations in legacy planning, one can make informed decisions for preserving wealth and ensuring the desired distribution of assets.

Taxes:

Having a clear understanding of your tax position is crucial when developing a comprehensive legacy plan, especially for business owners and individuals with substantial wealth. Without a suitable business structure to support your succession plan, you risk losing control over your company, reputation, and assets.

Creating a robust succession plan that takes into account your residence, domicile, and any double taxation agreements between the UAE and your home country can help minimize or eliminate unnecessary taxation on your business and estate.

Power of Attorney (POA):

Power of Attorney is another critical aspect to consider and an essential component of legacy planning. It establishes who will have the authority to make decisions on your behalf if you become incapacitated or are unable to make decisions for yourself.

Power of Attorney can cover two main areas: financial matters and healthcare. By granting someone of your choosing a POA, you empower them to handle your finances in the event of physical incapacity. Under a POA, you can also authorize someone to make decisions regarding your medical treatment, including the specific treatments you receive, where you receive care, and even whether you receive life-sustaining treatment.

What Are the Challenges of Legacy Planning in the UAE?

Legacy planning in the UAE presents unique challenges for expatriates due to the country’s legal framework. While legacy planning is crucial for anyone, it holds even greater significance for UAE expats. In the absence of a will, the distribution of assets is determined by forced heirship rules under Sharia Law. This can result in various complications, including frozen bank accounts and assets, potential dilution of wealth, cancellation of dependent visas, and disputes over guardianship of minors.

Fortunately, recent amendments to the Personal Status Law and the UAE Civil Code provide a solution for non-Muslim expats. They can now register a will that sidesteps these issues and aligns with the laws and practices of their home country, providing greater control and certainty in legacy planning.

How Knightsbridge Can Help

Thoughtful legacy planning is essential to safeguard the assets and wealth accumulated throughout a lifetime, ensuring their seamless transfer to loved ones in a tax-efficient manner. This provides a sense of security that one’s desires will be carried out and shields family members from undue stress or uncertainty.

Knightsbridge brings over 20 years of invaluable experience to the table, along with unparalleled knowledge of UAE business practices, legal requirements, an extensive global network, and a deep understanding of the unique needs of high-net-worth individuals and international businesses. For further assistance, please don’t hesitate to reach out to us at info@kbgroup.ae.

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