WHAT WILL HAPPEN WITH MY MEXICO PROPERTY WHEN I DIE?
Typically, when a foreigner buys real estate property in Mexico, especially property which is located in the restricted zone, the purchase is done through a bank trust, which is a contract where the trustee bank holds direct title to the real estate, and the foreigner (buyer) is appointed as main beneficiary to such trust and has full control over the property, but must act via instructions to the trustee bank.
In addition to the appointing of the main beneficiaries, such beneficiaries appoint substitute beneficiaries who will become main beneficiaries in case of the death of the existing beneficiaries.
The clause by which the substitute beneficiaries are appointed is the equivalent to a will. So, when the main beneficiary passes away, all the substitute beneficiary needs to do is to prove to the trustee bank that the main beneficiary has passed away, so that the substitute beneficiary can be recognized before the bank as the new main beneficiary, no probate is needed.
As thus far explained above, the structure of the substitute beneficiary is a straight forward process, as it should be and as it is intended to be. However, such process sometimes becomes greatly complicated when the foreigner, while still alive forgets about existence of the substitute beneficiary clause regarding its Mexico property, and when structuring it’s estate planning in the US, gives specific instructions in a will or a living trust that also covers what will happen with the Mexico property in case his or her death. Such provisions have a different outcome than what was provided for in the Mexican Bank Trust, by either appointing a different beneficiary to the property, or even worse, by incorporating the property or its rights into a living trust, which is a trust that most of the Mexican banks will not recognize.
We have seen many cases where clients have come to us trying to enforce a US judgment or a US probate which orders the property to go into a living trust and that the assets (including the Mexico property) be dispersed in a way that conflicts with what the Mexico Bank trust establishes. All of which not only makes it difficult to enforce, but also creates a big problem to those who have been appointed as beneficiaries on one side of the border, against the others who have been appointed as beneficiaries in the other side of the border. Simply creating a problem of logistics as to how to enforce the last will of the deceased, and subsequently be able to dispose of the property or the property´s rights.
Estate planning is extremely important for many reasons, such as avoiding future conflicts among the heirs by leaving specific written instructions as to what will happen to the properties when the owner passes away. When dealing with properties located in Mexico, the foreigner and it’s US attorneys must always take into consideration that Mexico has its own laws, which in many cases are different than the laws of the foreigners country of origin. And that the laws of Mexico will most likely be the prevailing laws regarding properties located in such country. Also consider that such laws may enter into conflict with the provisions set forth in the US will, with the living trust provisions, with the living trust itself, or with the way the US estate has been planned or structured. All of which, instead of helping determine the outcome of properties when the person passes away, will greatly complicate such outcome, and make it much more costly, and much more difficult to execute and enforce.
As a consequence, when structuring your estate planning, always have your US Attorney coordinate with a Mexican Attorney so that among both professionals a clear and successful determination can be made regarding the properties located in Mexico, so that when the owner passes away, the transfer and disposing of property is smooth and safe.
If you are in the process of structuring your estate planning regarding property located in Mexico, or have an issue regarding the passing away of the owner of a property located in Mexico, please feel free to contact us for a free consultation and evaluation of your case at firstname.lastname@example.org or by calling us at (602) 266-0225.
Miguel A. Tapia
Attorney At Law Licensed in Mexico with a Masters in International Trade Law for the University of Arizona.