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The United Arab Emirates government on Saturday the 7th of November announced sweeping changes to personal status laws.
One of the most significant changes to the legal system has been the change to how inheritance laws are interpreted in the UAE.
Prior to the changes, upon death, the law in the UAE dictated that the estate of the deceased would be distributed as per Sharia Law.
In many cases, this was not in line with the wishes of the deceased. In certain cases, this led to frozen bank accounts, guardianship not automatically being passed to parents and assets being distributed as per Sharia Law often with an unequal male/female split.
Because of this, many non-Muslim residents in the UAE opted for a Sharia-Compliant Non-Muslim last will and testament. This meant that their assets and the guardianship of their children could fall in line with their wishes.
As the National commented ‘If a non-Muslim expatriate had not petitioned for their home country’s laws to be applied to their will on their death, then the UAE’s courts would automatically apply Sharia’.
The UAE’s inheritance laws have changed significantly. Now, instead of a person’s assets being distributed as per Sharia law, assets are automatically distributed as per the inheritance laws in their country of citizenship.
With that change, the local courts will no longer apply Sharia-law through the local courts when distributing the assets of a resident who has citizenship in a country where Sharia-law does not apply. Because of this, non-muslim residents no longer require a Sharia-compliant will. However, it should be noted, it is still advised, residents create a will in their country of citizenship to ensure the guardianship of their children and the distribution of their assets is done in line with their wishes.
Whilst the UAE does not apply any estate or inheritance taxes to its residents, this does not mean that residents who pass away in the UAE are exempt from potential inheritance or estate taxes for their country of citizenship/domicile.
As an example, those with a UK domicile will have their estate tested against UK inheritance taxes upon their death irrespective of where they are resident.
Many other countries have similar laws meaning those living in the UAE with assets in excess of Inheritance Tax thresholds in their country of domicile should seek advice on how to potentially mitigate these taxes.