FAQ About Trust For Foreigners: Part 3

With residential purposes. (RZT), Part 3
BY: RAUL LEON

6.- What benefits does the restricted zone trust  provide?

Besides being the only legal way of acquiring a real estate property for residential purposes in restricted zone for a foreigner, it provides the following benefits:

 

Discretion: In real estate transactions with nationals, the names of the purchaser and seller are public and can be known by everybody because the purchase is registered on the Property and Commerce Public Registry and in the inscription the relevant information of the transaction appears and if property is owned trough a trust, Public registry only shows that the property is under trust number “X” and the beneficiary information stays confidential. This benefit is so big that many Mexican nationals make trusts just to keep their patrimony and assets information private.  

Protection of patrimony:  The legal owner of the property is a trustee, not the foreigner and because of that, so no lien can be placed over the property for debts of the foreigner or a Beneficiary and his creditors cannot know who the owner of a certain property is.    Many Mexicans hold their properties in trust for this reason as well.

The free ability to designate substitute beneficiaries: It doesn´t matter what a will establishes in Mexico or a foreign country, the designation of substitute beneficiaries in a trust prevails.

Support of a Financial Institution: The trustee, by law, must be a financial institution, a bank is the owner and in case of any legal situation, he´s involved as legal owner and defends the title in court.

All trust are regulated in Mexico by mercantile, federal laws, so most trials or legal disputes has to be under Federal Laws and in Federal Court, so this avoids confrontations on the local level or local domestic regulations in local trials.

 

7.- Who can be designated as beneficiary in a Restricted zone trust?

 

A trust can be executed in behalf of the following:

  • One or more individual persons even it they are under legal age.
  • An incorporated foreigner person (an INC, LLC, etc.)
  • A foreign trust (family or living trust in a foreign country)
  • A Mexican incorporated person that allows foreigners as partners of the company.

It´s important to notice that if more than one person acquires a real estate property in restricted zone for residential purposes, they´ll need a trust if only one is a foreigner. If you have a Mexican partner, but you are foreign, you need a trust.

 

8.- What happens if a foreigner becomes a Mexican citizen?

The trustee can immediately transfer the direct title to the beneficiary and there is no taxation regarding the acquisition or capital gains taxes, if requested.

 

9.- What restrictions apply for the constitution of a Restricted Zone trust?

There are only two restrictions to have in mind:

 

If the real estate property is subject to an “ejido” (a Mexican special type of communal ownership originally established for farming communities), such property must pass through the legal process of Derecho Al Tanto or it may not be legally transferred and may be subject to nullification of the transaction.

If the total land surface of the real estate property is more than 2000 square meters, the foreigner is obligated to subscribe and grant to the Foreign Affairs Ministry a Promise of Investment Letter, through which he legally obligates himself to invest certain amount of money into the property in a certain time frame according to the following table:

 

SURFACE    (AMOUNT)

2,001 M2 to 3,000 M2               $250,000.00 U.S.D

3,001 M2 to 4,000 M2               $300,000.00 U.S.D

4,001 M2 to 5,000 M2               $350,000.00 U.S.D

5,001 M2 to 6,000 M2               $400,000.00 U.S.D

6,001 M2 to 7,000 M2               $450,000.00 U.S.D

7,001 M2 to 8,000 M2               $500,000.00 U.S.D

8,001 M2 to 9,000 M2               $550,000.00 U.S.D

9,001 M2 to 10,000 M2             $600.000.00 U.S.D

10,001 M2 to 11,000 M2           $650,000.00 U.S.D

11,001 M2 to 12,000 M2           $700,000.00 U.S.D

Increasing successively each 1,000 M2 or fraction.

 

By Raúl León, Attorney At Law, Expert in Mexican Trust (Fideicomiso), Commerce & Real Estate Attorney.From US: Cel. 011 521 624-151- 6332,, Local Cel: (624) 151-6332,

 

e-Mail: posaideon@prodigy.net.mx posaideon@gmail.com