Substitute beneficiaries: Is your Mexican land trust in accordance with your last will?
If you own a home in Puerto Vallarta, then you are fully aware that foreigners must use a land trust to acquire property on the Mexican shores. You might complain that this trust is unnecessary and expensive, but having this trust also brings benefits. One of the benefits is the designation of substitute beneficiaries and the mechanism established in the same trust agreement which will allow your heirs to acquire the rights over the property without going to probate. However, you should make sure that the names of your substitute beneficiaries are clearly stated in the testamentary clause of the trust agreement, otherwise some problems may arise when you are not here.
So what can happen if the testamentary clause of my Mexican land trust does not include the names of my heirs?
The first scenario would be that your trust does indeed include the names of your heirs but these names have spelling mistakes or are not their current full names. If the full names of your substitute beneficiaries have changed since you first set up your trust or if they are written incorrectly, your trust should be amended to include the correct and current full names of your substitute beneficiaries as they appear on their current passports, otherwise the bank holding your trust will request more documents to your substitute beneficiaries in order to verify that they are the same person than the one stated in the trust.
What if my trust has no testamentary clause at all or if the substitute beneficiary I designated is already deceased?
Any of these two scenarios can represent a serious problem for your heirs because having no designation of substitute beneficiaries or if the beneficiary you designated is already deceased at the time of your death will mean that your rights over the property have to go to a Mexican probate and if you don’t have a will valid in Mexico then these rights will go to an intestate (open) probate where anyone who is considered as your next of kin or descendant under Mexican law can claim the rights on the property. Moreover, this proceeding (if resolved) can take years.
Leaving everything in order regarding your estate, will bring you peace of mind and will eliminate conflicts among your relatives that can last for years. That is why the testamentary clause of trust represents a big benefit, but you have to make sure that this clause reflects your intentions as to who is to acquire your property in Mexico upon your death.
This article is written by Roberto Ortiz Montellano, a licensed attorney who is a member of the Mexican Bar Association and the Mexican Association of Corporate Attorneys. Check his website here.