Death is a subject that few of us want to broach, but it’s an essential part of life that we must all prepare for. It is not uncommon for legal predicaments to arise in the case of an unexpected death of a spouse, parent, or business partner. This guide aims to outline how to prepare for or prevent them, particularly for retirees who are already or are planning to become expats in Costa Rica. To ensure the accuracy and relevance of this guide, we’ve sought the expertise of Alberto Saenz and Andres Rodriguez, lawyers with Invicta Legal, who specialize in real estate and corporate and commercial law. Our real estate office, Osa Tropical Properties, works with their team often, and we highly recommend them to our clients. Their insights have been invaluable in crafting this guide to address the unique legal challenges and considerations in Costa Rica.
Understanding the Costa Rican Legal System
Engaging a Costa Rican attorney who specializes in inheritance law is an invaluable first step to becoming an expat in Costa Rica. An attorney can help draft wills, set up corporations, and provide advice tailored to your unique situation.
It is important to understand that Costa Rica operates under a Civil Law system, which differs from the Common Law system found in many English-speaking countries. Legal procedures may be unfamiliar to expats, and professional legal guidance is often recommended.
Civil Law (Costa Rica)
Primarily based on written statutes and codes. Legal decisions are guided by codified laws rather than previous judicial decisions.
Inheritance and will processes are usually more strictly regulated, with specific rules outlined in legal codes. There may be forced heirship rules, mandating certain portions of an estate to specific heirs (e.g., children).
Common Law (United States, Canada)
Relies heavily on precedent, meaning that previous judicial decisions help shape the interpretation and application of the law. Property ownership and transfer may be more influenced by contractual agreements, trusts, and individual will provisions.
The probate process can be more court-driven, with judges often playing a central role in overseeing the administration of the estate.
Wills and Inheritance
Costa Rican law doesn’t require a will, but having one can simplify the probate process. Wills can be executed in Costa Rica or your home country but should be translated into Spanish and notarized. There are also instruments different from wills (e.g. Costa Rican trusts or specific ownership structures involving foreign trusts or entities) that could also be considered with the specific legal advisor.
Costa Rican wills are drawn up by a Costa Rican Notary Public and are registered with the National Archives. A foreign will can be valid in Costa Rica, but it might require additional steps to be recognized.
The primary factor in deciding where a will should be executed or where the probate procedure (the legal process of administering a deceased person’s estate) should be followed is the last real domicile of the person who has created the will. This factor is crucial and must be taken into account when deciding where to sign the will. In other words, when choosing to sign the will in Costa Rica (CR) or abroad, the last real domicile (permanent home) of the person granting the will should be considered.
While it is always advisable to consult with a Costa Rican attorney who specializes in inheritance law for specific guidance, here are some general steps to make a foreign will valid in Costa Rica:
- Translation: The will must be translated into Spanish by an official translator, and the translation should be certified.
- Authentication: The foreign will must be authenticated in the country of origin. This usually requires a notary’s signature and an apostille or consular legalization, depending on the country. Registering a foreign will in Costa Rica isn’t necessary. However, what is crucial is the authentication of the will (or the final award from a probate process in the home country) if it is to be executed in Costa Rica. This authentication can usually be achieved through an Apostille or a similar method.
- Local Notarization: Once in Costa Rica, the will needs to be notarized by a Costa Rican notary public.
- Compliance with Costa Rican Law: It’s essential that the foreign will does not contradict Costa Rican inheritance laws. If the will is in conflict with local laws, certain provisions may not be enforceable. Example of these inheritance laws include:
- Forced Heirship: Unlike many common law countries, Costa Rica has rules around forced heirship that require certain portions of an estate to be reserved for specific heirs (particularly minors and disabled children). This can conflict with a foreign will that distributes assets differently.
- Community Property Rules: In Costa Rica, assets acquired during marriage are typically considered community property, to be divided equally between spouses upon death. This might conflict with a foreign will that stipulates a different division of marital property.
- Recognition of Foreign Wills: If the proper procedure for recognizing a foreign will (including translation, authentication, and notarization) is not followed, the will might not be valid in Costa Rica. Local laws governing the recognition of foreign legal documents must be observed.
**There are numerous complexities of validating and executing foreign wills or awards in Costa Rica. The Invicta Legal team emphasizes the potential need for a judicial process, the time-consuming nature of this process, and the importance of exploring different legal strategies, including the use of trusts or ownership structures, to make the process more manageable.
- Tax Considerations: Though Costa Rica does not have an inheritance tax, there may be other tax considerations that conflict with provisions in a foreign will. This could include capital gains taxes or other local taxes that apply to the transfer of assets.
- Hiring Local Legal Representation: Engaging a local lawyer who specializes in Costa Rican inheritance law is strongly advised. They can ensure that all local legal requirements are met and can represent the interests of the estate during the probate process.
- Consideration of Bilateral Agreements: Costa Rica may have bilateral agreements or treaties with certain countries that affect the recognition of foreign legal documents, including wills. Consult with a legal expert to determine if any such agreements apply to your situation.
- Potential Tax Implications: Although Costa Rica does not impose an inheritance tax, there may be other tax considerations that need to be addressed, both in Costa Rica and in the country where the will was executed.
- Time Considerations: The process of recognizing a foreign will in Costa Rica can be time-consuming. Starting the process as soon as possible and following the guidance of local legal professionals can prevent unnecessary delays.
- Review and Revalidation: It may be prudent to periodically review and, if necessary, revalidate the foreign will to ensure it remains compliant with any changes in Costa Rican law.
In Costa Rica, the probate process can be time-consuming and expensive. Without proper planning, your loved ones may face a complicated and painful process.
There are two potential paths for probate in Costa Rica: the standard court process and an alternative option through a Notary Public, provided certain conditions are met, like no minors, disabled person, or disputing heirs.
Many expats choose to hold properties within a Costa Rican corporation, which can bypass the probate process. Properties held jointly with rights of survivorship can pass directly to the surviving owner without going through probate ONLY IF your have a specific instrument for how to handle the shares after death (e.g. an estate planning trust)
Avoiding probate through the use of a Costa Rican corporation is a common strategy employed by expats and locals alike. Here’s how it typically works, along with some of the considerations that should be kept in mind:
Setting Up a Corporation
In Costa Rica, it’s possible to establish a corporation (often a Sociedad Anónima or S.A. or a Sociedad de Responsabilidad Limitada or S.R.L.) and transfer assets such as real estate, vehicles, or business interests into that corporation’s name.
The ownership of the corporation is determined by the shares held by individuals or other entities. If a person dies, the shares can be transferred without the need to go through the traditional probate process, as the assets are owned by the corporation and not the individual. Again, this is only true if there is a specific instrument implemented to handle the shares of a company after death (e.g. an estate planning trust).
While some jurisdictions may use shareholder agreements to outline how shares will be transferred upon death, including pre-arranged agreements with co-owners or heirs to allow for an efficient transfer of ownership, it’s worth noting that this approach may not be universal. In some practices, especially in Costa Rica, legal professionals may advise against using shareholder agreements for estate planning purposes.
Instead, the preferred options with lawyers like Andres and Alberto from Invicta Legal often include:
(i) Wills, which detail how assets, including shares, will be distributed upon the grantor’s death.
(ii) Trusts, which can provide more control and potential benefits such as avoiding probate or minimizing taxes.
(iii) Specific Ownership Structures with Foreign Trusts or Entities, which may already have estate planning provisions in their home country, allowing for tailored solutions that align with the individual’s unique circumstances.
Taxes and Fees
Unlike some countries, Costa Rica does not have an inheritance tax. However, legal and notary fees can add up and capital gains taxes, corporate taxes, and other taxes* may apply. Planning in advance with a legal professional can help minimize these costs.
*There is a specific tax consideration that can arise in estate planning or inheritance situations involving real estate owned through a company. If more than half of the company’s shares are transferred to heirs or beneficiaries (such as upon the original owner’s death), a tax of 1.5% of the real estate’s value would be payable.
Health Care Directives and Power of Attorney
Health care directives and power of attorney documents are essential for expats. Without them, medical decisions might be left in the hands of someone unfamiliar with your wishes.
When Parents Pass Away: Navigating Legal Issues from Abroad
Losing a parent is always a painful experience, and it can be particularly challenging when it happens while you are living outside Costa Rica. Here are some steps you will need to take:
- Immediate Steps: Contact the nearest Costa Rican consulate. They can provide support and guidance on how to proceed, including legal, funeral, and repatriation matters.
- Hiring a Local Representative: If your parents owned property or had legal obligations in Costa Rica, it might be wise to hire a local lawyer to act on your behalf. They can navigate the Costa Rican legal system and communicate directly with the relevant authorities.
- Probate Process from Abroad: If your parents left assets in Costa Rica, the probate process would still apply. Engaging a Costa Rican attorney specializing in inheritance law can make this process smoother, especially if you are unable to travel to Costa Rica. It is often advisable for Costa Rican attorneys to work jointly with the attorneys from the home country of the testator. This collaboration can help to align legal strategies across different jurisdictions and move the process along as efficiently as possible.
- Documents and Translations: Ensure that all relevant documents, such as death certificates and wills, are translated into Spanish. Certified translations (that are apostilled or certified by a similar authentication system) may be necessary for legal proceedings.
- Bank Accounts and Financial Matters: If your parents had bank accounts or other financial obligations in Costa Rica, you would need to work with the banks directly or through your legal representative to settle these matters.
Death is an inevitable part of life, but preparing for it shouldn’t be overlooked, especially when living abroad in Costa Rica. By understanding the legal landscape, engaging professional help, and taking proactive steps, you can ease the burden on your loved ones and ensure that your wishes are respected.
Remember, every situation is unique, and this guide is a general overview. Always consult with a Costa Rican legal professional to ensure your specific needs and circumstances are addressed.
Living as an expat in Costa Rica is a beautiful adventure, but like all adventures, it requires careful planning. Embrace the local culture, enjoy the stunning landscapes, and rest easy knowing that you’ve taken the necessary steps to prepare for the future.