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Trusts and Succession  A
lady called me the other day and asked what she should do as her parents had died
and she and her brother had inherited a condominium in Puerto Vallarta. The escritura,
or deed, named the siblings as substitute beneficiaries of the property. The daughter
had received advice from a family friend: She and her brother were going to have
to pay for a new trust at a cost of over $5,000US, plus assorted fees. This friend
told her that her parents' trust ended with their death and a new trust would
have to be applied and paid for by the surviving heirs.
This
was bad advice, which fortunately, the daughter did not follow. Sister and brother
learned what they needed to do to keep the current trust intact, and saved a lot
of time and unnecessary expense. When a fideicomiso is
established, the bank becomes the titleholder of the property and acts on behalf
of the buyer, following his or her instructions. It is
important to remember that trustees are required to provide their services on
a fiduciary basis. The trustee is held to a higher standard in handling the asset
than handling a bank asset. The bank trustee must always put the interest and
wishes of the buyer or creator of the trust, first. The
assets or property in the trust do not belong to the bank. Trust assets belong
to the trust and are maintained for the beneficiaries. One
of the primary advantages of having a property held in trust is the flexibility
with beneficiaries and secondary beneficiaries and avoiding probate. In the trust,
the bank is the owner on paper and the beneficiaries are the original purchasers.
If a couple is named as beneficiaries and one of the two passes away, it is a
relatively simple process to eliminate one name from the trust. If one beneficiary
is named, the property immediately passes to the substitute beneficiary or beneficiaries,
without the need for probate or transfer taxes. If there
are no substitute beneficiaries named and the primary beneficiaries die, there
will need to be a process of probate in order to establish inheritance of the
property.
The bank administers the property in accordance
with the instructions of the buyer/beneficiary. The buyer/beneficiary enjoys the
same rights of ownership, as does a Mexican national. He may build on the property,
tear down the existing buildings, modify them, rent, lease or sell at anytime,
while still confirming with the internal bank regulations of this type of trust
and the general laws of the country. The beneficiary may finance the purchase
and instruct the trustee bank to enter into the security agreement with the lender.
In
the succession of rights in property that is in a trust, the following procedures
may be followed:
If a primary beneficiary dies, the substitute
beneficiaries notify the bank, which holds the trust. The survivor presents the
death certificate of the deceased beneficiary, along with acceptable identification
to the bank that he or she is the survivor. The bank amends the trust to show
that the substitute beneficiary is now the primary beneficiary. It
is a good idea at the time this paperwork is being done, to also give the bank
the new substitute beneficiary information. This right of survivorship becomes
the will for inheritance of the property under the trust, or chain of inheritance,
if you will. The new primary beneficiary should obtain
an FM3, or permanent visa with the address of the property listed and keep this
visa current with the annual renewal. The new primary
beneficiary should learn what is needed to keep the trust current. There are yearly
property taxes to pay and the bank charges an annual administration fee.
If the new primary beneficiary wants to sell the property, he may do so after
he or she has completed the proper transfer with the bank.
Renewal of the trust must be done by request in writing to the bank a certain
amount of time before expiration. Prior to 1993, the term of the trust was thirty
years. Since this time, the new permits have been obtained for 50 years. Up
until 1989, the title of all property bought by foreigners in Mexico needed to
be held in the trust or fideicomiso. Now foreign buyers are only required to keep
property in trust that is located with 100 kilometers of a Mexican border or 50
kilometers from the ocean, known as the restricted zone.
The trustee bank may not, without express written consent from the beneficiary,
sell, transfer or encumber the property. When a foreigner
is required to apply for and hold their real estate in a bank trust, they agree
to be considered as a national regarding the asset and not to invoke the protection
of their government. The penalty for violations of this provision is forfeiture
of the subject property to Mexico. It is important to
learn when the trust expires and leave directions to the heirs to contact the
bank and start the renewal process a year before the expiration date. This
article is based upon legal opinions, current practices and my personal experiences
in the Puerto Vallarta-Bahia de Banderas area. I recommend that each potential
buyer or seller conduct his own due diligence and review. Harriet
Murray, Broker
For additional information on properties for sale
or lease within the bay, please call or e-mail me at: harriet@pvmirror.com
Thanks and until next week. Archives
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