As a result of its political, institucional and economic stability, Uruguay is a country which attracts foreign investments.
Except for the already known specific cases of financial crisis, quietness and safety in Uruguay have led foreigners from different parts of the world to invest in Uruguayan lands, real properties, companies, etc.
Therefore, for all who have invested in the country or wish to do so in the future, it is quite interesting to know some theoretical and practical aspects of the succession regime in Uruguay.
I) Applicable law
The Uruguayan Civil Code, a set of laws which, among others, has rules of substantive law related to succession proceedings, establishes in its Appendix, that the law of the place where the assets of a decedent's estate are located, at the time of the death of the person, shall govern all matters related to the succession proceedings. (Article 2400 of the Uruguayan Civil Code.)
That means that, with regard to all the assets located in Uruguay at the time of the death of the decedent, Uruguayan succession laws shall be applied, no matter if the decedent was Uruguayan or foreigner, or wheter he/she resided in Uruguay or not.
Besides, Uruguayan courts shall be competent for hearing the succession proceedings related to such assets.
II) Filing of succession proceedings
According to the Uruguayan laws, from the very same time of the decedent’s decease, succession proceedings start and the ownership and possession of a decedent's estate are automatically conveyed by operation of law to the decedent’s heirs, who are also bound to pay inheritance debts.(Articles 1037 and 1039 of the Uruguayan Civil Code.)
III) Types of Succession procedings.- Intestate or ab-intestato succession and Testamentary succession or probate proceedings
In Uruguay there are two types of successions: testamentary and intestate successions.
Please find below some practical aspects.
a) Testamentary succession. This is the succession in which the decedent granted a will, prior to his/her death, establishing his/her will after his/her death. In a separate chapter we will especifically make reference to the regulation of wills in Uruguay.
Although the testator may grant a will in favour of any person, there is a part of his/her estate (called legitimate) which necessarily corresponds to forced heirs or legitimate heirs which are the decedent’s legitimate or born out of lawful wedlock children, and his/her ascendant relatives; the testator may not deprive his/her forced heirs of the part of the decedent's estate called legitimate, except for the cases of just cause for disinheritance of heirs; and in the event of disinheritance the heir may claim the part he/she was deprived of. (Articles 884 and following of the Uruguayan Civil Code.)
For instante, in the event that the testator has only one child, he/she may dispose of a half of the assets located in Uruguay (the part of the estate that the testator is free to dispose of at will); the other half of his/her assets is called legitimate and necessarily corresponds to his/her child. The disposable portion will vary depending on the number of children orascendant relatives that the testator may have.
As we said, any breach of the legitimate by the testator may be amended, on demand of the interested party, by Uruguayan judges by means of a legal procedure of amendment of will.
It is important to note that a trust following the decedent’s death may also be created through the will; such trust operates like a will, but in no case the testamentary trust may affect the legitimate of forced or legitimate heirs according to the foregoing.
b) Intestate succession. This is the succession in which the person died without leaving a will.
In this case, the following persons will inherit the decedent’s estate in the following order.(Article 1025 and following of the Uruguayan Civil Code.)
i) in the first place, the decedent’s legitimate or born out of lawful wedlock children;
ii) if the decedent has no legitimate or born out of lawful wedlock children, a half of his/ her estate is inherited by his/her ascendant relatives (parents, grandparents) and the other half by his/her spouse.- In the absence of any of the aforementioned classes (ascendant relatives or spouse) the other party will receive the entirety of the estate.- It is important to make it clear that the decedent shall not have children for the ascendant relatives or spouse to inherit his/her estate, since if he/she had children but they died before the decedent’s death, the heirs of the decedent's deceased child will inherit his/her estate, on behalf of the decedent’s deceased child;
iii) if the decedent had neither children nor spouse, or the latter died, and his/her ascendant relatives also died, the decedent’s sibblings and adopted children will inherit the decedent’s estate, thus dividing the estate equally between both classes (sibblings and adopted children); in the absence of any of the aforementioned classes, the other class will receive the entirety of the estate;
iv) if there are no children, ascendant relatives, spouse, adopted children or sibblings, then adoptive parents, collateral relatives, will inherit the decedent’s estate;
v) finally, in the absence of any of the above mentioned persons, the Uruguayan State will inherit the decedent’s estate.
IV) Surviving spouse’s rights
We have seen above that, for the case of intestate succession, the surviving spouse inherits the estate along with the decedent’s ascendant relatives equally as long as the decedent has no legitimate or born out of lawful wedlock children.
However, the surviving spouse also has other rights in the succession, whether testamentary or intestate succession, even when he/she does not inherit the estate as stated above.
Firstly, if the assets of the decedent's estate were acquired during marriage and were owned by both spouses as community property (that is, there is no separate ownership of property during marriage), then, the surviving spouse is entitled to a half of the community property (subject to succession proceedings), but this right is not created by the succession itself, but by the marital partnership maintained with the decedent; upon death of one of the spouses, the marital partnership existing at that time is dissolved, and a half of the community property goes to the surviving spouse, and the other half, that is, the one corresponding to the deceased spouse, goes to his/her heirs.
Nevertheless, in the event that the surviving spouse lacks sufficient property needed for his/her maintenance -even when owning a property of his/her own or which is part of the community property- he/she will be entitled to the "Marital portion." (Article 874 and following of the Uruguayan Civil Code.) The marital portion is a part of the inheritance which may correspond to the surviving spouse in the event that, as we stated before, he/she has no property for his/her maintenance or such property is not sufficient. Such portion will be a quarter (1/4) of the value of the decedent’s estate, except when the decedent has children, in which case the spouse will be counted as another child for the purposes of setting the value of the marital portion.
It must be taken into account that, in those cases in which the surviving spouse owns a property of his/her own or which is part of the community property, for a value lower than the value of the marital portion that would correspond to him/her in the succession, he/she may receive a supplementary marital portion or may waive his/her own or community property, and receive the entirety of the marital portion corresponding to him/her in the succession.
Finally, we should make reference to the right to use and habitation to which the surviving spouse is also entitled as the case may be. (Article 881-1 to 881-9 of the Uruguayan Civil Code.) In fact, in the event that once all the succession debts have been paid, and there remains in the estate a real property which had been the marital home, the surviving spouse will be entitled to stay in that house and use its chattels, within his/her lifetime and for free. In this case, the spouse shall expressly state his/her will to exercise such right during the succession procedure.
V) The will
As we said, successions in Uruguay may be testamentary or intestate, depending on whether the decedent granted a will or not, which is a document whereby a person establishes his/her will after his/her death.
Wills in Uruguay may be nuncupative or under cover duly closed, and each one of them must comply with strict formalities, under pain of nullity; in both cases the involvement of a Notary Public and witnesses is needed. In the nuncupative will, the Notary and witnesses know the contents of the will, while in the under cover duly closed will, although a Notary and witnesses are involved, they do not know its stipulations.(Articles 793 and following of the Uruguayan Civil Code.)
In our country the will is revocable and a person may grant as many wills as he/she may wish, complementing previous wills and even revoking them in whole or in part.
With the limitations established in connection with the testator’s obligation to respect the part of his/her estate which necessarily corresponds to forced heirs or legitimate heirs (decedent’s children and ascendant relatives), the testator may freely dispose of his/her assets though a will; in the same, the testator may appoint a person to be in charge of enforcing the provisions of the will (executor) and in the absence of such appointment the heirs will be responsible for fulfilling the testator’s will.
Finally, it should be noted that each will granted in our country must be communicated to the Registry of Wills, although its contents and existence will not be known until the person who granted the will dies.
VI) Release from decedent’s debts by heirs
It is important to know that, if there are succession debts, heirs are not in principle responsible for them, even with their own property.
However, heirs may release from such debts if they accepted the inheritance on condition that they be liable for the charges and debts of the succession only up to the value of the assets of the succession ("bajo beneficio de inventario") in which case, the debts of the succession will be paid with the assets of the succession and will never affect the assets of heirs which were obtained outside the succession.
The acceptance of the inheritance on condition that they be liable for the charges and debts of the succession only up to the value of the assets of the succession is mandatory in the event that there is a minor heir (under 18 years old), therefore, in no case a minor shall be responsible for the debts of the succession with his/her own property.
VII) Succession proceedings
Succession proceedings are governed by article 407 and following of the General Code of Procedure, and Family Courts (in Montevideo) and First-instance Courts (in the remaining departments) shall be competent.
It is a procedure that, except for complex cases, takes around 6 and 8 months, - including the time of the mandatory service of summons to the possible interested parties- and must necessarily be carried out by a lawyer or a notary duly qualified to practise in Uruguay.
In order to carry out the succession proceedings, the decedent’s death certificate, and the certificate from the Registry of Wills as well as any further documents proving heirship of the interested parties shall be neded. In short, all certificates proving the capacity as heir of the interested party shall be included in the succession proceedings.
In the event that documents are from a foreign country, they shall be duly legalized in the corresponding manner and translated into Spanish by a Uruguayan official translator.
The succession proceedings, in which the Public Prosecutor will mandatorily participate, will end with the ruling acknowledging the legal heirs and the issuance by the Court of the Certificate of the outcome of the proceedings (Spanish acronym: "CRAS"), which will contain all the information of the succession file and must be recorded with the Public Registries of the location of the assets of the estate.
Once the succession proceedings have finished and the Certificate of the outcome of the proceedings has been recorded with the corresponding registries, the assets of the estate will be jointly owned by the heirs (and the spouse, if applicable), and they may be sold or distributed among them, individually; however, if the parties do not come to an agreement, such assets may be distributed through the legal procedure called Partition.
VIII) Estate Tax
At present, the only tax to which successions are subject is the Tax on Conveyance of Property, if there is real property (houses, apartments, lands) and as long as the fee simple of the same is conveyed, total or partialy; for example, in the event that the surviving spouse has decided to exercise the right to use and habitation, as the fee simple is not transferred, then the payment of such tax is not applicable.
The Tax on Conveyance of Property is 3% the assessment value (Cadastral Value) of each real property of the estate (updated at the time of the death) in the event that heirs are the decedent’s children or parents; in the other cases, the rate of such tax is 4% the updated assessment value (Cadastral Value) of each real property.
Heirs have one year from the decedent’s death to pay the above mentioned tax. After such term, fines and surcharges shall be accrued.