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ESTATE PLANNING WHEN OWNING LAND IN COSTA RICA
Many foreigners who buy property in Costa Rica do not realize that proper estate planning for their assets in the country is as or even more important than it is for their holdings at home, because of the likely distance between their named beneficiaries and the assets in question.
If you own land or other assets in the country, or are in the early stages of formalizing ownership, bear in mind that a smart structuring of your holdings is imperative to ensure that they end up in the intended hands and in full accordance with your wishes.
Few people enjoy thinking about their mortality and the distribution of their assets after the inevitable happens. However, people generally like even less the idea of leaving their assets in the wrong hands or making things even more difficult for bereaved loved ones.
The first thing to know regarding this matter is that even if you have arranged a will, trust or similar instrument in your native country, you cannot assume that it will effectively cover your assets here. On the contrary, most foreign instruments will not be valid here, as wills in this country are regulated by Costa Rican law and must be very formal. Additionally, assuming probate procedures are initiated in your country of origin, their enforcement in this country may pose challenges for many reasons, including distance, formalities and jurisdiction issues.
The logical solution is to prepare and sign a Costa Rican will, with all the formalities required by local law, to cover your assets here.
If you already have a will or similar type of document abroad, the one prepared for you here should clearly indicate that it does not supersede or render invalid your foreign will, and that it only covers assets located in Costa Rica. Couples can create joint wills, which usually have provisions for both separate and simultaneous deaths.
The Costa Rican will should be prepared by a local attorney, and in most cases will consist of what is called an “open will,” which is issued before a notary public and entered into his “protocol book.” This, in turn, ends up going to the National Archives to be deposited until needed. If confidentiality of the document’s contents is required, other options are available as well. The will can be replaced or invalidated at a later time by the individual who issued it.
It is advisable to discuss your Costa Rican will with an attorney in your home country, so that issues such as conflicts or coordination between wills – for example, acknowledging the existence of the Costa Rican will or excluding the application of the foreign will to assets in Costa Rica – , if needed, can be taken into account.
Adequate estate planning for your property in Costa Rica should not end with a will, which should not be your sole means of protection. It is strongly advisable to ensure that you hold title to your land and all other assets by means of a local corporation (sociedad anónima [S.A.] or sociedad de responsabilidad limitada [S.R.L.]) for which powers of attorney, share ownership and certificates can be structured in a way that allows for compliance with your wishes after your death.
This goal can be accomplished in many ways under a company structure, and specific needs and conditions should be taken into account to determine the best alternative for a particular individual. Corporations do not die, so share ownership and power of attorney for the disposition of assets become the key issues here.
The use of a Costa Rican corporation would actually be the first line of defense to be relied upon after death, enabling quicker distribution of assets and a much simpler process for loved ones outside of Costa Rica. In the event this first line of defense fails or is insufficient, a Costa Rican will – though requiring a longer and more complicated process – provides a backup that will ensure appropriate distribution of assets and end any dispute regarding the wishes of the deceased.
When there will be people you care about left behind after you die, you cannot afford to not adequately provide for their needs and facilitate them to overcome this tragedy. Your investment in Costa Rica must be protected in a way in which it will get to such individuals as quickly and effectively as possible, and adequate planning and knowledge can really make a difference in this respect.
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