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Asset protection and inheritance through the UAE offshore zone

In the offshore zone of the UAE, it is possible to protect assets

This article discusses issues related to inheritance and the Protection of Assets offered by the UAE offshore zone.

The UAE is a federation of seven emirates – Abu Dhabi, Dubai, Sharjah, Ras Al Khaimah, Umm Al Quwain, Ajman, and Fujairah. In the UAE, there is the possibility of registering offshore companies, as well as registering wills based on General Law in the offshore zone.

How is the legal system in the offshore zone of the UAE?

The United Arab Emirates is a civil law jurisdiction whose main source of law is a law-based code. This system was influenced by the Egyptian legal system, whose roots come from French and Roman law.

Islamic law, known as Shari’a Law, is applied in family courts, however, it is much less obvious in the commercial sphere.

The UAE Constitution allows each emirate to have its own: legislation, judges, and courts. However, all the Emirates except Dubai and Ras Al Khaimah preferred their courts to work in accordance with a single federal model, so they are Federal Courts.

While the rules and procedures of the Dubai and Ras Al Khaimah courts are somewhat different, all courts in the UAE fall within the hierarchy of civil law of the Court of First Instance, the Court of Appeal and the Court of Cassation (Supreme Court).

All courts have a civil, criminal and family (Sharia) unit. Lawyers authorized to practice in the Federal Courts must have separate licenses to practice in the Local Courts.

How do legally significant actions occur in the UAE and in the offshore zone of the UAE?

When resolving disputes in the UAE, if the mediation procedure is used, it is possible to come to an agreement between family members, or else find a solution between business partners. If the decision is not reached, or if the mediation procedure was not used, the application is registered in the court of the first instance. Then the court of the first instance examines the case and makes a decision. If everyone agrees with the decision, then it is enforced. Or the decision may be appealed to the Court of Appeal after which, if everyone agrees with the decision, it is enforced. Or the decision may be appealed to the Court of Cassation and after that, it is enforced.

Choice of law in the UAE and in the offshore zone of the UAE

Relevant provisions under the Civil Transactions Act – Federal Law of the United Arab Emirates number 5 of 1985:

Article 17 (1) states that inheritance issues are governed by the laws of the country of the deceased at the time of his death.

Article 17 (5) states that the UAE law should apply to wills made by foreigners who own their property located in the UAE.

Article 12 (1) states that the law of each spouse at the time of marriage is applicable to the essential conditions necessary for its operation.

Article 13 (1) states that the law of the country in which the husband had citizenship at the conclusion of marriage applies to all the consequences of such a marriage, his personal status and property acquired as a result of the marriage.

Article 13 (1) states that the law of the person’s country of protection applies to all substantive matters relating to guardianship, mentoring, guardianship, etc.

UAE Offshore Personal Status Law

Federal law number 28 of 2005:

Article 1 (2) states that the provisions of this law should apply to all citizens of the UAE, except when non-Muslims among them have special provisions that apply to their community. Provisions must equally apply to non-citizens unless one of them requests the application of the law of their country

In the offshore zone of the UAE, it is possible to inherit by will and without a testament

  • Succession or inheritance is possible, both by will and without a testament.
  • If something happens to you after you develop a plan for an inheritance, which includes a will, you will be considered dead with a will and inheritance of a property that remains after you will be determined according to the inheritance plan that you applied.
  • If something happens to you without a succession plan, which includes a will, then you will be considered dead without a will and the state in which you lived, that is, for example, the UAE will determine who will receive your assets.

Succession planning in the UAE offshore zone

Inheritance planning includes the following points to consider:

  • Avoid confusion when it comes to your last wish.
  • Ensuring that your children have a legal guardian of your choice.
  • Protect loved ones, by ensuring that they receive your assets.
  • Ensuring the reduction or avoidance of conflicts between family members.
  • Minimize taxes and legal expenses related to your property.
  • Preserving welfare for your intended recipients.
  • Flexibility for life.

Who needs inheritance planning?

No matter how much money or assets you have, you have to think about what happens to your assets and who should get what you have after you leave.

How to implement inheritance planning and how easy is it?

The inheritance plan can be simple – just a will with the names of the recipients and may be complex, for example, creating several trusts for different purposes.

How does the inheritance plan in the UAE?

When an expat being a resident of the UAE leaves this world, the following steps are realized:

  • Resident visas of all dependents of the deceased are canceled.
  • The passport of the deceased is canceled after the completion of the formalities.
  • Leftovers must be repatriated after completing all formalities.
  • Local bank account, investments and assets are frozen, no further transactions take place.
  • Minor children may be taken under state custody if there is no particular guardianship.

What can happen with inheritance in the UAE, in your home country, or anywhere in the world without planning for an inheritance?

  • Regional or religious laws will be applied. 
  • Beneficiaries will be appointed by the law of this territory.
  • In some countries, up to 50% tax will be imposed on your property.
  • The local court will determine the performer and guardian of your children.

Pros of succession planning in the UAE offshore zone

  • Ability to quickly unfreeze assets.
  • Choosing the necessary distribution of property.
  • Getting emergency money for the family.
  • Avoiding legal difficulties and disputes.
  • The appointment of guardians of your choice.

Important points to use when planning inheritance in the offshore zone of the UAE

  • Open individual bank accounts where possible.
  • If possible, make a separate visa for your spouse.
  • Store money in an offshore bank account or in a fund.
  • Make offshore life insurance to protect your assets.
  • Do offshore life insurance to cover your liability.
  • Create an offshore fund for the education of your children.
  • Reduce taxes on your retirement savings.
  • Make your inheritance plan with professionals, document it, and keep it in a safe place.

The second myth is that we are postponing the restructuring and the creation of new levels of protection for our assets

After all, some legislative holes remained unpatched. It seems that it is simply unprofitable for those in power. As soon as legal mayhem loses relevance, then the lawmakers will begin to issue laws aimed at retaining control over the captured. In fact, the priority of tasks will change: it will be necessary not to rob, but to protect.

The top-level invaders, besides the state, also include oligarchs and financial-industrial groups (FIGs). By and large, in our country, it is very difficult to imagine the separate existence of these three groups of invaders. In most cases, they have an interpenetrating structure (FIGs are being introduced into the state and vice versa, the oligarch also tries to create his own empire — a financial group — and win over the position of statesmen).

We can immediately say that regardless of the reasons why someone from this “great three” paid attention to your enterprise, it will be quite difficult to resist. Neither the law nor the state will side with an unknown entrepreneur who, by “happy” chance, turned out to be the owner of undervalued assets. Most likely, you will have to rely only on yourself to give a fitting rebuff to the invaders.

Next, in the table of ranks are investment companies and professional raiders (medium level). Their fundamental difference from each other is that the professional raider always works under the order using the customer’s funds, and the investment company can seize enterprises with its own money for its “promotion” (increase in value) and further resale.

The lowest level in the hierarchy of sinks is occupied by small invaders and amateur invaders. The small ones are usually referred to as novice raiders, but they have a chance to grow to professionals – this is just a matter of time. And the ranks of amateurs are constantly replenishing the companies for which grabs are not core activities. For example, one of the fruit and vegetable factories, occupying a fairly strong position in some local market (within one or two areas), it occurred to destroy a direct competitor by purchasing it. But for this, the aggressor decided not to attract professionals, but to act as his own peril and risk. So he became a player in the mergers and acquisitions market.

The statistics of unfriendly takeover processes shows that in 70% of cases, control over assets is transferred to new owners, which is evidence of the high professional level of the invaders and their hard work in preparing each takeover project. The remaining 30% consist of unsuccessful attacks by amateur aggressors or novice invaders. Also, some of the cases are captures, in which two or more raiders participated. In such a situation, there will always be a loser and a winning aggressor (the target company, in any case, remains the loser, and for its owners, it does not matter in principle who their assets went to).

Separately, I would like to say what prompted us to such a detailed description of various market players, for what it is needed. Depending on who attacked the enterprise, the owners should develop a plan for its protection. As we have said, anyone can venture on an enterprise, and each player prefers his methods to attack. Oligarchs and FIGs can successfully use the state administrative resource, while smaller players are not available. Nevertheless, the devil is not so terrible as he is painted.

Do not rush to give up the fight. Knowing the attacker in the face is one of the necessary conditions for developing a successful defense, and you shouldn’t introduce yourself into one more delusion: it doesn’t matter who attacked me, I’ll beat you and then figure out where your legs grow from. We must act with exactly the opposite. If you are not able to carry out a deep analysis of the situation on your own, do not do fortune telling on the coffee grounds, better turn to professionals. By the way, greed is another step to the edge of the abyss. Reflections in the style of “I pay a full-time lawyer, so let him clear up his debts,” can be very expensive (loss of control over assets). The lawyer will lose the maximum that is his job and reputation.