LEGAL MATTERS

Beneficiary designation in real estate property transactions
By Mauricio Garcia Guerra • Robles, Lazo y Gallardo Law Firm • September2010

Since 1995, and as a consequence of a variety of improvements made to Civil Code of the State of Jalisco, it is now possible that in a real estate property transaction the buyer can exercise the legal figure named “beneficiary designation”, that allows the purchasing party to designate beneficiaries of the real estate, in case of his/her demise. This prerogative has certain requirements in connection with its exercise and in connection with its conclusion, both of which are very simple. This is why, in our legal system, this figure is also known as a “simplified will”.

Contrary to an ordinary or common will, this specific clause only makes reference to the real estate property transactions, and does not have all of the formal requirements of an ordinary or common will.

Beneficiary designation on transactions is very useful for low income persons, as well as for those who only want to preserve said property as family patrimony. It also represents significant savings for those who have been selected as beneficiaries, when the death of the grantor occurs, because the beneficiaries will not have to carry out the testamentary proceedings in court.

The particularities that rule the designation of beneficiaries on real estate property transactions are regulated by the Civil Code of the State of Jalisco, and are the following:

• The beneficiary designation can only be established in real estate purchase and sale agreements.

• The only beneficiaries allowed under this figure are wife, husband, ascendant and descendant.

• It can be created, canceled, or modified at any time, as long as those modifications are done in the form of a public deed before a Notary Public, or through a will.

• This benefit is limited to only one real estate property.

When the buyer appoints beneficiaries more than one time, the last one will prevail; this is a very essential issue, because in case that the buyer designates beneficiaries twice, the former one will have no legal effects, even though it is the same beneficiary.

When the acquisition is made for an economicmarital or in co-ownership, this benefit can only be exercised in connection with the “pro rata” interest of the grantor.

In order for the beneficiary to exercise his/her rights upon the decease of the grantor, and therefore become the legal owner of the subject real estate property, it will be necessary to follow the next steps:

• Exhibit before the Public Registry of Property evidence of payment of applicable transfer tax. This tax is calculated at a rate of 2.5% on the appraisal value of the real estate property, as of the date of the grantor’s death.

• Certified copy of the death certificate.

• Certificate issued by the Public Registry of Property and by the Director of the Notarial Archives, in which it is evidenced that the designation has not been revoked or amended.

• A letter duly ratified before a Notary Public, directed to the Public Registry of Property requesting registration of change of domain of the subject property.

It is imperative to point out that three of the special characteristics that govern this designation of beneficiaries, as already mentioned, are that:

 (i) it must be done only as part of a real estate purchase and sale agreement; (ii) it can only be exercised once; and (iii) it can only be exercised in connection with a single property. In case the beneficiaries are from a foreign country, the next should be considered:

If the real estate property is located in Mexican territory outside the Restricted Zone, meaning more than 50 kilometers away from shore and more than 100 kilometers away from international borders, then the foreigner must execute an agreement with the Mexican Government in order to be considered as Mexican in connection with such property.

If the real estate property is located within the Restricted Zone (within the limits mentioned above), the foreigner must acquire the property through a trust with a Mexican entity authorized to act as trustee (i.e. banking institutions), which also allows the appointment of beneficiaries in case of death. Email to a friend

Robles, Lazo y Gallardo - Law Firm
E-mail: jgallardo@rlg.com.mx

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• Robles, Lazo y Gallardo, S.C. is a Law Firm of specialists in various areas of Law, including Corporate Law, Real Estate, Immigration, Foreign Investment, among others. The Firm is integrated with a group of highly qualified attorneys and has offices in Guadalajara (Privada del Niño No. 676, Fraccionamiento Camino Real, telephone number  33-3121-3010  33-3121-3010 ) and Puerto Vallarta (Carretera a Mismaloya No. 479 interior 107, Edificio Scala. Telephone number  322-223-3218  322-223-3218 ).E-mail: jgallardo@rlg.com.mx

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