For non-Muslim British expatriates, having Sharia applied to their estate can result in a significant increase in Inheritance Tax. This is due to the loss of important exemptions which would normally be used in estate planning.
Distribution of an estate under Sharia Law is a form of forced heirship. Forced heirship regimes require benefits to be distributed according to a structure laid down by the state or religion. Other forms of forced heirship exist in mainland Europe under civil law.
In UAE, Sharia law is automatically applied to all assets. This can quickly become very complex and so a Sharia scholar is appointed to advise on the distribution of assets. Once the scholar is appointed, the court orders the payment of all debts owed by the deceased before any payment or transfer is made to the beneficiaries.
There are important differences between Sharia law and other forced heirship jurisdictions. For example, Sharia provides the deceased with the discretion to bequeath up to one third of their estate to whomever they wish. The remaining two-thirds must be distributed to those of the same religious faith as the deceased. Another important difference is the treatment of children: adopted and illegitimate children are excluded from the list of potential heirs.
In the case of a married couple, where the husband dies first and there are no children his widow receives ¼ of his estate automatically. Where children exist the wife’s benefit is just one eighth. Where the survivor is the husband his benefit is double that of his wife: ½ and ¼ respectively. The balance is distributed down the male line of the family tree, known as the asaba.
For non-Muslims living in a jurisdiction which automatically applies Sharia law, such as UAE, the law allows for treatment of the estate under the ‘law of the deceased.’ This is usually interpreted as meaning the law of the home country or community at the time of the deceased’s death. This is subject to:
1. The will clearly stating which law is to govern the estate; and
2. The foreign law does not contradict any fundamental Sharia principles.
Without a Will the situation is less clear and likely to cause additional delay and expense. For this reason, it is important for all non-Muslims resident in UAE to have a Will written under the law of their home country.
If you have not got a Will or not reviewed it since arriving in Dubai, I would encourage you to make an appointment with a qualified professional to make sure it meets your requirements. For more information on Wills please see here.