Abu Dhabi wills that claim to avoid Sharia law ‘ripping off’ expatriates



ABU DHABI // Law firms that offer to draft wills guaranteeing that the assets of non-Muslim expatriates will not be subject to Sharia in the event of their death are duping their customers, experts say.

Presently, there is no registry of wills for non-Muslim expatriates in Abu Dhabi, which means that law firms’ claims that they can secure their clients’ assets in the emirate are misleading.

One law firm registered at Dubai International Financial Centre was shocked by the number of invalid wills it saw.

“Previously, there was no clear mechanism for the registration of wills for non-Muslims in Abu Dhabi,” said Hesham Elrafei, a legal expert and founder of legal video channel Lex Animata.

“Instead, Sharia determines how a deceased non-Muslim’s assets in Abu Dhabi are distributed.”

However, non-Muslim expats could request the application of the law of their home country, in keeping with the UAE’s personal status law, said Mr Elrafei.

Few expats are aware of this clause. In any case, “they still have to bring in a certified last updated copy of the law in their home country, have it translated and then certified. It is an uncertain, lengthy and expensive process”, said Mr Elrafei.

In most cases, Sharia would apply and the court would immediately freeze the assets – including the end of service gratuity – of the deceased to ensure that all the heirs are contacted before the estate is distributed.

In one incident, a non-Muslim, western expat spent more than a year on a legal battle to get her late husband’s end-of-service benefits.

“She tried to avoid the application of Sharia on her late husband’s inheritance but that was in vain,” said Mr Elrafei.

“The court gave her a small percentage of her husband’s benefits and distributed the rest to his heirs abroad, seeing that no registered will was in place.”

Joseph Law, 45, was told by a law firm in Dubai that his will would cover his assets in both emirates.

Mr Law said that he drew up a will to ensure that his wife and children would be taken care of.

“You hear all these horror stories of accounts being frozen and wives and children being left with no money or a place to stay.

“That’s a harrowing experience that I don’t want my wife or anyone to go through while they are grieving.”

Indian K T, whose husband died suddenly of cardiac arrest three years ago, was hit hard by the experience.

“I was suddenly alone with two young girls. My late husband’s accounts were frozen and his assets seized,” she said.

“I had just lost our main breadwinner and had no funds. If not for a few good friends, we would have had nowhere to go. It’s a traumatic experience.

“It took me months to get a hold of my husband’s funds, and I consider myself extremely lucky and fortunate for that.

“It’s taken years for many women in similar situations. There needs to be a clear system in place to deal with inheritance of non-Muslims living here.”

Mr Law’s lawyers advised him that his will was under the jurisdiction of the UAE’s federal law, but this is not possible.

Even for non-Muslim expats who have assets in Abu Dhabi and Al Ain, they must have their wills registered exclusively in the capital, said Mr Elrafei.

The Dubai International Financial Centre’s wills and probate registry, a Dubai Government entity, is the only registration system for wills in the Middle East and North Africa.

Sean Hird, the registry’s director, said that 2,500 wills had been registered since its inception in 2015.

“Abu Dhabi didn’t have a registration system. They followed UAE-wide policy on inheritance, which is Sharia that provides for fixed distribution of assets when someone passes away,” he said.

“The registry is the first of its kind – a system that allows eligible non-Muslims to register a will with us and have it enforced in the DIFC courts.

“The registration system we have here is limited to assets in Dubai and Ras Al Khaimah. We do not extend to Abu Dhabi.”

This year, Sheikh Mansour bin Zayed, Deputy Prime Minister and Minister of Presidential Affairs, announced the establishment of a court in Abu Dhabi to deal with non-Muslim family law and inheritance affairs.

Legal experts hope that it will address the inheritance matters of non-Muslim residents.

“The establishment of a new family court dedicated to non-Muslims is a unique and great initiative that not only reflects the UAE values of tolerance and modernisation, among others, but it will also facilitate the registration of wills for non-Muslims in one official hub,” said Mr Elrafei.

“We are hopeful that non-Muslim expats will feel more secure as Abu Dhabi Courts will protect their registered wills according to their choice and not Sharia, as previously was the case.”

salnuwais@thenational.ae

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Other workplace saving schemes
  • The UAE government announced a retirement savings plan for private and free zone sector employees in 2023.
  • Dubai’s savings retirement scheme for foreign employees working in the emirate’s government and public sector came into effect in 2022.
  • National Bonds unveiled a Golden Pension Scheme in 2022 to help private-sector foreign employees with their financial planning.
  • In April 2021, Hayah Insurance unveiled a workplace savings plan to help UAE employees save for their retirement.
  • Lunate, an Abu Dhabi-based investment manager, has launched a fund that will allow UAE private companies to offer employees investment returns on end-of-service benefits.

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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