The Benefits of Gifting Property in Dubai
One of the major concerns property owners in the UAE should learn to address head on is to decide on who to give their real estate assets to prior to their passing.
Expat property owners in the UAE might falsely assume that even in the absence of a will, the laws of their home country would immediately apply to the disposal of their UAE freehold property. This is not the case at all.
If a property owner in the UAE dies intestate (without a Will in the UAE), it usually leads to the property distribution to be under Sharia law – one with its own fixed distribution formula which could also be contrary to the property owner’s real wishes and intent. Unlike other jurisdictions, the UAE does not practice ‘right of survivorship’ (property passing on to the surviving joint owner upon death of the other, as would be the case in Commonwealth jurisdictions), and the UAE courts will make the final decisions regarding the transfer of jointly owned assets.
Therefore, if it is your desire to establish some control on who your property passes onto prior to your passing - you can take the necessary steps now.
One way to accomplish this is through a property gift transfer. When it comes to inheritance/succession planning in Dubai one of the most effective estate planning tools is the gifting of property.
What is a gift transfer?
Gifting property in the UAE typically refers to adding or removing a name from a title deed, thereby resulting in the ownership of the property being transferred into the name of another family member or company. This is typically due to the necessity to safeguard the property from certain inheritance regimes like the UAE. Properties are gifted either within families or into offshore companies.
In order to facilitate a gift transfer, there are certain legal requirements you need to meet and specific documents you have to provide.
Who can I gift my property to in Dubai?
For a gift transfer to take place, the property must be transferred only to or among first degree relatives or immediate family members.
The meaning of the term ‘immediate family’ must be clearly established here. Your immediate family relationships include your parents, spouse or children. This means that sibling relationships, ex-spouses and relationships between stepchildren and stepparents, and with other relatives are excluded.
Property owners may choose to transfer property to certain family members in order to avoid the Sharia law distribution that would otherwise result, and in order to simplify succession issues. For example, a husband may transfer his share of a property to his wife, in order to avoid his siblings from inheriting his share of the property. In other cases, a spouse is being removed as a result of a divorce settlement.
In those situations where the owners wish to maintain their ownership of the property, and yet avoid the Sharia law application, a company set up is the recommended course of action. This way, the property can be transferred into the ownership of a company outside of the UAE, and thereby avoid the inheritance laws of the UAE. The company’s shareholders are the individuals who formerly owned the property, and therefore, they continue to indirectly own the property through an entity outside of the UAE. This type of ownership structure allows existing owners to continue to exercise control, and effectively ownership, of their properties in the UAE.
Due to the very low transfer fee for gift transfers, many individuals choose to go down this route. Company transfers are an especially effective tool for setting up a permanent estate planning regime for future generations, one that your children can continue to benefit from, and even transfer their future assets into as well.
What are the benefits of gifting property in Dubai?
Through the process of gifting, you are able prevent future property inheritance issues in the UAE. Doing so not only means Sharia law distribution need not take place but you have the freedom to choose the next owner of your property, thereby simplifying the inheritance/succession process.
By gifting your property now, you are also helping your chosen beneficiary to establish ownership in advance – something that can be difficult and complicated should you die intestate or unexpectedly.
Further by conducting a gift transfer instead of a sale and purchase transfer is it allows you to save money on transfer fees. For example, in Dubai, there is a sale and purchase transfer fee equivalent to 4 per cent of the sale price. The gift transfer fee, however, only amounts to 0.125 per cent of the deemed property value or no less than AED 2,000.
Therefore, a gift transfer to your spouse or any immediate family members entails a significantly reduced transfer fee, while gifting to any other person outside of your immediate family attracts the higher standard transfer fee of 4 per cent.
How can TWS Legal Consultants help me?
The gift transfer process seems simple enough on paper. However, it can also become a lengthy and complicated affair, especially when the property owner (donor) or the beneficiary (donee) is unable to participate in or attend all the required formalities to facilitate the gift transfer.
In this jurisdiction, it will work to your advantage to have a legal expert representing and or advising you throughout the entire process.
TWS Legal Consultants can guide you during a gift transfer, whether it involves gifting property to your children, spouse, parents or company (and vice versa). We can handle the whole process for you.
Feel free to speak to us if you have any questions about the gift transfer process or require legal advice concerning wills, inheritance and real estate/conveyancing/ transfer of property matters in Dubai.
We’ll be happy to help you.
The author of this article is Nita Maru, Managing Partner of TWS Legal Consultants.
Licensed by the Government of Dubai Legal Affairs Department
Email firstname.lastname@example.org or call +971 04 448 4284.