What If You Die Owning Real Estate In Mexico?

Don’t leave a mess for your survivors to sort out
BY: ORLANDO GOTAY

I have come across several situations where U.S. individuals run into various problems with regard to Mexican real estate they owned by someone who dies.   These people may have a foreign will executed outside of Mexico, or even have no will at all.  Both situations present challenges in Mexico and may result in your property distributed in a way inconsistent with your wishes.

Each Mexican state has a civil code that provides, among many other things, the matter of wills and successions.  In Baja California, the Civil Code provides that a will that is validly executed under the laws of a foreign state shall take effect locally.  But I ask you, do you want to risk it to be deemed defective for any reason, held locally inapplicable, or its provisions misunderstood or misapplied?

Not having a will may cause the disposition of locally owned real property to the defaults contained in the Baja Civil Code.  Do you know what those are?  You may or may not want those defaults for your situation.

A better option could be to write out a will in accordance with local law and formalities that deals with the property and debts owned in Mexico (or in Baja, in my example). Such a will may be coordinated with other testamentary dispositions executed elsewhere (like a California will, for example).

For folks who do not speak Spanish, local law requires the presence of two interpreters with a Notary (and required witnesses) at the time the will is executed.  It is possible to write out a will in long hand in English, but be warned—it is remarkably easy to fail to comply with specific procedures required, ending up with a document with little legal effect, or legal fights you can watch from afar later on.  Saving a few pesos here is not a wise move.

If your property is in a Mexican land trust, (a fideicomiso), it is critical that instructions with regard to it are prepared and included in a will.  Important tax reporting obligations will ensue, with incredibly steep penalties for not complying.  You wanted to give your property to your loved ones, and not to the IRS, right?

Orlando Gotay is a California licensed tax attorney (with a Master of Laws in Taxation) admitted to practice before the IRS, the U.S. Tax Court and other taxing agencies.  His love of things Mexican has led him to devote part of his practice to the tax matters of U.S. expats in Mexico.  He can be reached at tax@orlandogotay.com.