In recent years the United Arab Emirates, in particular Dubai has been an attractive destination for many investors. However, succession of wealth acquired in the country also presented lesser-known risks. While prudent estate-planning remained essential, with newly introduced rules these risks are reduced significantly.
On 7 November 2020 the UAE government introduced a range of changes to the country’s legal system in order to enhance a favourable investment environment. The decree issued by President His Highness Sheikh Khalifa Bin Zayed Al Nahyan not only include changes to criminal law, fundamental freedoms and family law, but also have a significant impact on the laws of inheritance.
Prior to these changes, in case of intestate succession of non-Muslim expatriates the Sharia based UAE inheritance law applied to the distribution of their assets linked to the UAE, while inheritance of Muslim residents was automatically governed by Sharia.
Religious Islamic inheritance law is effectively a very strong forced heir system, in which the deceased’s property is distributed among the deceased’s family members in the proportions specified in the “lawful” order of succession.[1] Inheritance rules under Sharia typically allocates a larger share of assets to the male than the female heirs, which distribution may well go against the non-Muslim deceased wishes and expectations.
Under newly introduced laws, the distribution of the deceased estate in the UAE, in principle, will be governed by the law of their citizenship at the time of death. From now on, the order of succession will be determined by the deceased own national law instead of the rules of Sharia law even in the absence of a will, irrespective of the deceased’s religion. It is important to note that there is one exception: in case of intestate succession the Sharia will be applicable to the inheritance of a real property situated in the UAE. Therefore importance of choosing one’s national law in a will regarding UAE real properties remains significant.
In the UAE where expatriates outnumber local citizens nearly nine to one, these changes to the laws of succession aimed at making the investment climate more predictable and attractive for foreign direct investment and expats, facilitating decision making on estate planning and investment strategies.
The strengthening bilateral economic relations between Hungary and the UAE make the new regulation newsworthy for Hungarian investors also, since it enables the application of Hungarian law to the division of their assets situated in the UAE.
[1] For more on this, see: dr. Peter Kun and dr. Oliver Spiriev: Inheritance systems in the light of testamentary freedom – or, to what extent and in what matters are we free to decide under continental, Anglo-Saxon and Islamic inheritance laws? (in: International Succession Review, vol. I issue 2)