Property Rights in Uruguay - Part 1 - Inheritance laws
Posted by urufish on May 6, 2007
There are a few extremely important concepts a northerner has to learn if you own or are going to purchase real property here. My wife and I are no experts on this matter. We’re neither lawyers or escribanos, nor do we have experience with hundreds of properties all over the country. But we have had a few very important learning experiences that you should know. If someone reading this posts is aware of others, please comment and we’ll adjust the post and credit you.
The two that we have had experience with are inheritance laws and what we would call in english, squatters rights. This post deals with the former.
Inheritance laws in Uruguay apply to all real property, whether you’re a resident here or not. Real property is for all intents and purposes, real estate. If the property is in the name of a person, Uruguayan law applies. If you own property, or even more important, if you intend to purchase property, and you have children, discuss this with an attorney or an accountant, before you close the property. You can make any changes you want to the ownership afterwards, but you’ll pay taxes twice and they are significant as a % of the purchase. The key issue we’re aware of is that upon death of a parent, children automatically inherit 50% of that parent’s real property. In the most common case, when property is owned jointly by the husband and wife, the children will inherit 25% of the total property value, automatically. Should the surviving parent resist, the courts will hold to this strictly. Whatever is owned that isn’t lived in, as in permanent residence, the courts will liquidate upon petition of the child or children. The exception to liquidation is the equivalent of a northerner’s principal residence. They wont throw the surviving parent out in the cold, so to speak. But if that parent decides to sell the property, eg. to downsize, 25% comes off the top of the sale for the ninos. If you need more detail, speak with an attorney.
May 6, 2007 at 2:32 pm
Interesting subject. Actually there are two very different subjects covered in the article. You should consider splitting them into two posts.
If the Uruguayan Inheritance law works the same way as in Brazil, you can create a will and assign “all that is possible” to your spouse. This way, only 25% will inevitably go to the children when one parent dies.
May 7, 2007 at 9:34 am
According to my contador, wills are a recent phenomenon in Uruguay as it applies to inheritance laws. There has been no test case yet, so no one knows whether the courts will rule in favor of the will or the children.
If property is held jointly, and one parent dies, the children get 25% of the total property, because they get 50% of the deceased’s 50%. If property is held in separate names, and the parent with the property dies, the child will get 50% of 100%, which means they get 50%. I suspect the will you’re talking about comes into play in this case…. Could be that’s what the ‘will’ issue is about here in Uruguay. The question will have to wait until I find myself out to dinner with an abogado who specializes in this area. It’s such a specialty that the few abogado’s and contadors I know, tell me they really dont undersand the fine points of what the specialists are trying to do with the wills.
The common method of protecting the surviving parent from the children in this case is to hold most or all real property in an SA. Foreigners benefit from using a foreign corporation, usually a Panamanian, BVI or equivalent corporation. Locals will open a Uruguayan SA, and pay yearly taxes on the company. I’m not an expert in this variation, but I assume the taxes on the SA for the properties are in line with patrimony (wealth) tax paid if a peson owns the properties.
May 7, 2007 at 10:50 am
I just spoke with my brother in Brazil (a lawyer) and he confirmed your assumption. The 25% situation occurs when you have a will AND everything is owned in joint ownership. In that case only 25% of the total UY assets would go to the children.
Unfortunately creating a local (or foreign) company to own the assets is not a great solution since the IP rate then is a flat 1.5% on the purchase price. Which is far higher than for joint ownership by a couple.
I think this is a BIG issue for anyone retiring or investing in Uruguay. So much so that I will write an article about this on my blog and link here.
May 7, 2007 at 11:39 am
Good idea.. look forward to reading it…
I’ll also doublecheck the will thing.
From what I’ve been told, the children get 50% of the deceased’s real holdings whether there’s a will or not. If all real property is held jointly, the net effect to the children is 25%, will or not.
I was told that the reason for the wills here is to somehow moderate the effect… to either ‘disinherit’ the children (you’ve lived in the US long enough to know where that comes from), or to modify in some way shape or form, either in value or time, the actual transfer of the 25% to the children.
July 11, 2007 at 2:55 pm
[...] I read a post from another blogger on inheritance laws in Uruguay and was motivated to research the subject a bit more to see how it [...]