Estate Planning in Mexico

Wills and Estate Planning - Mexico

This article was prepared for general information only. It is not to be relied upon for legal advice or for decision making purposes. You are advised to consult a lawyer familiar with appropriate estate legislation.

Q.    I have a Will in Canada and own properties in both countries. Do I need a Will in Mexico?  Should I have more than one Will?

Generally, people moving to Mexico have sufficient assets to warrant serious consideration, and have drafted estate-planning documents, including a Will, that customize a plan to meet their needs and wishes.  If you have not bothered to put a Will in place, however, not all is lost.  The governments of Mexico and the Canadian provinces have legislation that will govern how your estate is handled.  Unfortunately, these are cookie cutter, one size fits all plans, that may not fit your needs or wishes, and certainly do not take advantage of the tax planning tools available to you and your heirs. Let’s analyze the pros and cons of Wills and what you need to do if you own property in Mexico.

Intestacy Problems

Dying without a Will is referred to as dying intestate.

A will that is properly signed and witnessed gives legal effect to the disposition of property upon death.  In other words, it ensures that your wishes are carried out under the supervision of the courts.

Wills are useful documents because:

  • Wills spell out how you want your property to be divided;
  • If you have underage children, or are caring for an adult that has been declared  incompetent, you can use a Will to appoint a guardian;
  • Wills can lower Canadian probate costs by giving clear instructions as to the disposition of your assets;
  • Wills can help avoid problems and conflicts between family members; and,
  • If coordinated with your financial planner, a Will can result in significant tax savings on the final tax return of the deceased, as well as for the heirs of your estate.

A very good reason to have a Will is to prevent the law and/or a judge from deciding matters that ultimately are private affairs.  The law will impose a plan upon you, and your family, disposing of your property for you if you have not done so in a Will.  This is as true in Mexico as it is in Canada.  Here are some of examples of dispositions that could be forced on your family if you pass away intestate (without a Will):

In most Canadian provinces, if you pass away survived only by your spouse, and you do not have a Will, your spouse will be entitled to your entire estate.  Conversely, in most states in Mexico, if you pass away without this document, survived only by your spouse, the decedent’s estate must be divided equally between the parents of the deceased and the surviving spouse!

Another example: in most Mexican states, if a person passes away without a Will, survived by a spouse and children, most laws require that the decedent’s estate be divided in equal portions between the children and the surviving spouse.  (And, although most people don’t realize it, most Canadian provinces have some form of the same sort of thing.) However, in most Mexican states, if surviving spouse owns assets in his or her own right that are equal or exceed the portion of the children, the surviving spouse will inherit nothing.  That’s right, the surviving spouse may get nada.

Obviously, the division of property becomes much more complicated if there are children from prior marriages, if the heirs do not agree to the disposition of property, etc.  In short, if you do not plan ahead by drafting a Will, a difficult situation can become a nightmare.

Probate

Unfortunately, Wills in Canada are subject to a court process known as probate.  Probate can be expensive because it generally involve legal and accounting fees in addition to the government probate fee....and the proceedings are a matter of public record.  Probate can also be time consuming.  Thus the true value of a Will, besides making sure that your wishes are taken into consideration, is to make the probate process in Canada proceed more smoothly, saving time, money and hassles. Otherwise, if the estate has to be distributed by the courts, it may take a year or more for assets to be distributed to your loved ones. 

More complex estates, involving real property and businesses, can be tied up in the courts for years.  Additionally, assets are restricted in the court’s jurisdiction, not allowing the family to access chequing accounts, to sell real property, or to liquidate assets.  Attorney and court costs could deplete smaller estates.

Another little known fact is that probate in Canada makes the Will a fact of public record, meaning that anyone can access the information about how the estate is distributed. This can become a sensitive issue, for same-sex couples for example, leading to challenges to overturn your wishes.  This doesn’t mean you shouldn’t have a Will.  It may mean that you should discuss these concerns with your financial planner before you put a Will in place to explore alternative ways of distributing or owning assets in order to protect privacy as much as possible if you feel this is important.

In Mexico the probate process is generally carried out before a Notario, and is always a private affair.  However, in the event that the heirs are underage, or if there is a court challenge, the probate process must involve the courts.  In this case, the Will would be made available only to the judge and the interested parties, not to the general public.  Usually, the probate process in Mexico is quicker and much less expensive.  Most estates are settled in 3 to 6 months.

Problems arise if you own property in Mexico and you do not have a Mexican Will.  Ironically, in this situation it would be simpler if there was no Canadian Will either.  The reason for this is that if there were no foreign Will, Mexican property would simply be apportioned per Mexican state law (but your surviving spouse might have to share your home with your mother-in-law!).  On the other hand, if there is a Canadian Will, the process to get your Canadian Will accepted as valid in Mexico can be long and involve significant amount of attorney resources.  That is, it can cost mucho dinero.

Canadian Wills in Mexico?

Is your Canadian Will valid in Mexico?  In a word, “Yes”.  Mexican states accept foreign Wills as long as the country where the will was drafted would accept a Mexican Will as valid, and as long as the documents were drafted in accordance to the laws of the country in which the document was granted (i.e. Canada).

If you only had a Canadian Will, the probate process in Mexico would be carried out per Mexican customs, but the Canadian document would control.  Remember however, that the process to get your Canadian Will accepted could take time and cost money.  We have heard varying opinions concerning the need to translate your Canadian Will into Spanish and it is probably safe to assume that you would need to hire a certified translator to translate the Canadian will into Spanish. But the bottom line is that the process works fairly well although there is some additional expense.

How many Wills do you need?

Do you need more than one Will? Technically speaking the answer is NO. The reason is that Wills in both countries usually contain language revoking previous Wills, so you could move to Mexico and write a new Will.  As a matter of practice however, it is often suggested that two Wills be prepared, one from each country, so that you have one in English for your Canadian assets, and one in Spanish for your Mexican assets. (We have heard reports of some Mexican lawyers with the opinion that only one Will is allowed.  That simply is not true, and if your lawyer tells you it is either a Canadian Will or a Mexican Will, not both, then start looking for better advice.)

When two Wills are written, these documents more often than not are identical in their distributive provisions.  “I leave all my worldly goods to my wife Linda”, is not usually written. Each document states that the Canadian property will be handled in Canada by a Canadian executor and the Mexican property will be handled in Mexico by a Mexican executor.  Furthermore, and this is what makes this strategy interesting, the most contemporary document, usually the Mexican Will should NOT contain language revoking prior Wills.

Another option when owning Mexican property is to draft a Mexican Will that applies only and exclusively to property in Mexico, with no mention made of Canadian property.  Even so, provisions of the Canadian and Mexican Wills would normally be coordinated to avoid any problems down the line.  You need to ensure that your Mexican will contains language so as to not revoke your prior (Canadian)Will either.

Codicil for Canadian Will

A word of caution: If you intend to have two Wills, a Canadian Will and a Mexican Will, you want to ensure that your Mexican Will does not accidentally override the Canadian Will. You should have a Codicil (one page amendment) prepared in Canada and attached to your Canadian Will. It will confirm that your Canadian Will governs your "general estate" and the Mexican Will is to govern your "Mexican estate". In effect you will have two separate but DISTINCT estates.

Summary

Wills are a necessity in order to guarantee that your wishes will be respected.  They are also relatively inexpensive and having a properly drafted Will (or two) saves time, lowers expenses and helps avoid intra-family problems. If you need help with your Will, we work with Canadian lawyers who are familiar with the need for international Wills and we can provide guidance in the financial planning aspects. Contact us for assistance.

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