Money

On Your Side: Parent not liable for debts unless they are guarantors

When someone dies, their debts are paid out of their estate, but relatives are not responsible unless they were jointly named in any liabilities.

Keren Bobker

March 05, 2011

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I have three unsecured loans with two different banks in the UAE for fairly large amounts of money, and am interested to know if my parents in Spain would be personally liable for paying them back if I died. I am working hard to pay them off, but this is concerning me. FB, Abu Dhabi

When someone dies, any debts they leave are paid out of their estate (the money and property that they own) before any money can be passed to their beneficiaries. Anyone else is only liable for their debts if the liabilities were in joint names or if they acted as a guarantor. Note that in the case of a husband and wife, the monies owed to creditors take priority in the distribution of assets, so they must be repaid before other assets are passed to beneficiaries, including the spouse. Please also note that you are trying to pay off the debts as interest payable over a long time and this can significantly increase the amount you end up paying in total.

I read your column a few weeks ago about the issue a reader had with Emirates NBD. It is identical to the issue I faced with them some time ago. I paid for a car loan with post-dated cheques, which all cleared. But when I went to get a clearance letter for the loan, the bank said I owed an additional Dh1,343, an amount that was neither the rate of my instalments nor a reasonable fee. When a loan is settled with post-dated cheques and they are cashed, there should be no question as to whether the loan is paid or not. Sadly, I paid the amount they insisted I owed because I couldn't re-register my car without doing so. I spent from November 2008 to March 2009 going back and forth until it got to the point that I had to register my car or start to pay the police a fine of Dh100 a day. I decided to pay the fixed cost rather than take the risk of incurring a new daily cost from the police. Probably a mistake since the likelihood of getting any money back from Emirates NBD is slim, but what is a better option in that case? Despite the time elapsed, I would like to get to the bottom of this. KE, Dubai

While this problem is quite an old one, KE was not dealt with properly by the bank. Following my intervention, KE was contacted by the bank and, after omitting it from their initial correspondence, they sent her the loan-repayment schedule, which shows that the payment dates matched her cheque stubs. The bank was unable to explain why it accepted one cheque too few, returned her blank guarantee cheque and issued a clearance letter when a sum of money was owed. Neither has it explained why it took two years, numerous personal and electronic complaints and finally intervention by this newspaper to explain exactly what had happened. Emirates NBD's letter to KE stated: "At the time of changing the repayment option from direct debit to post-dated cheques, you had submitted 22 post-dated cheques whereas there were 23 instalments outstanding." This is an error on the bank's part that really should not have occurred. KE was sent a box of chocolates and Dh250 in shopping vouchers, but she really would have preferred proper service in the first place. The bank said: "Emirates NBD treats customers as individuals with their relevant expectations and restrictions. As such, we review each and every case related to us with utmost care and consideration and try to resolve any complaints in the best interest of all parties involved. Occasionally, the resolution does not meet the expectations and requirements of an individual customer."

I am leaving Dubai in a couple of months and want to sell most of my furniture and other items before I go. Rather than have the hassle of selling things piece by piece, I would like to do a couple of garage sales to sell items en masse. I do not want to do anything illegal, so do you know if I need a licence or permit to do this? AH, Dubai

It has taken me a while to obtain an answer to this query. I initially contacted Dubai Municipality and was asked to put my query in writing because it now only responded to e-mailed enquiries. Three e-mails later they still hadn't replied, so I called them, but they were unable to explain why they had instigated a non-call service but ignore e-mails. I finally managed to speak to a member of the staff who directed me to the Dubai Economic Department, which is responsible for the licensing of any business or trade activity. They have confirmed that provided the sale is not a regular event and is not run as a business, there is no problem in hosting a garage sale and no permit is required.

Keren Bobker is an independent financial adviser with Holborn Assets in Dubai. Write to her at onyourside@thenational.ae

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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