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The primary beneficiary is the owner, the person who purchases the property and sets up the trust. The secondary beneficiaries are that person’s heirs. Upon the death of the primary beneficiary, the property transfers to the heirs without probate, probate taxes, and very minimal paperwork or expense. It is a safe, secure means of holding property in México. That’s the good news. Unfortunately, problems can arise when the primary beneficiary’s life changes.
Let’s say John and Jane Doe, a married couple from Iowa, fall in love with San José and buy a deluxe condo on the beach there. When they set up the trust, they are both named as primary beneficiaries with right of survival. A few years later, they unfortunately divorce. In the settlement, John gets the beach condo. Thinking the Iowa divorce decree is definitive, he never changes the Mexican trust. After all, now that he’s divorced he can avoid unnecessary expenses, right? However, in the event that John wants to sell the condo, Jane could create problems. The bank may require her signature on listing agreements, offers and the transfer of title, even though John had been awarded the condo in the divorce settlement.
After the divorce, John re-marries. He and his new wife enjoy the Los Cabos lifestyle and give no thought to the old trust. But then, John passes away, and his current wife is shocked to learn that she doesn’t own the condo. Jane does! Jane and John were the primary beneficiaries on the original trust that was never changed after the divorce. Under Mexican law, Jane owned half of it all along and now is John’s heir of the property. A long and costly court process may give John’s widow some relief, but most lawyers don’t even want to think about it.
Recently, I was reminded of the importance of changing the trust’s secondary beneficiaries. In this case, the owner was advised to alter the trust during divorce proceedings. His Mexican attorney drew up an irrevocable power of attorney, which was duly signed, notarized and apostiled as part of the divorce proceedings, giving the husband the absolute right to the property in México and any proceeds from future sales. The Mexican attorney worked with the bank to update the trust, removing the ex-wife as primary beneficiary. However, the secondary beneficiaries were not changed.
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One thing being another, the owner became estranged from his children by the first marriage. Before his death, he had executed a perfectly valid will in his home country renouncing these children and naming other heirs to all his worldly goods, including the Cabo vacation home. Those were his wishes. But upon his demise, just the opposite occurred. Within a few days of the funeral, both sets of heirs rushed to Los Cabos, armed with copies of the death certificate and, on one side, the will; and on the other, the trust. Although there are certainly going to be more court proceedings in both countries, it looks like the estranged heirs, because they are still named in the trust, will prevail. The attorneys I consulted agreed that the trust is the definitive document under Mexican law. The children named in the trust own the home and furniture. The vehicles, Mexican bank accounts and other personal effects are perhaps up for grabs, but in the opinion of these experts, the trust is the stronger document.
Changes to legal documents from your home country may not trump your Mexican trust. If your life is prone to change (or your family contentious), there are ways to safeguard your Mexican assets. Only a Mexican attorney can advise you properly, since Mexican laws are significantly different from those in your home country. Most people re-evaluate their legal documents (wills, insurance policies, bank accounts, etc) at any significant life event. Marriage, divorce, or the birth of a new child are generally opportunities to bring all your assets up to date, and your Mexican trust should not be excluded.
Should you be the heir to a Mexican property, whether or not contested, it is imperative to notify the bank as soon as possible after your loss. You will need three original death certificates, with apostile, for the bank. The trust department of the bank, or your Mexican attorney, will arrange for you to be designated as primary beneficiary, and then you will have the opportunity to name your own secondary beneficiaries. Select them carefully. As unbearable as the trust department of Mexican banks may be, and as long as the process may draw out, the fees for this service are generally reasonable.
If you are buying property in México be sure to name secondary beneficiaries, as it is difficult, time-consuming and costly to have a Mexican court ratify a will from another country. In one memorable sale, one of my clients went to court three times to sell the property he had inherited. Often, and understandably, my clients are so happy about their Cabo home purchase, they don’t want to pay attention to this ratification: but it’s critical. As these cases illustrate, proper planning at purchase prevents potential post-mortem problems.
Carol Billups and Los Cabos Magazine would like to thank attorneys Mauricio Saenz of the firm Cossu and Saenz, Pedro Perichart of P&H Closing Services, and Jorge Rodríguez of International Land Title, for providing information for this article.
By Carol Billups
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Cabo San Lucas, Baja California Sur, Mexico - Last Revision - January 27, 2009 - fap
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