We’ll look at some important information about Ecuador wills and Ecuador’s legal system in a moment.
Plus see below how asset protection benefits in the LLC you use may have changed.
Here is a group of indigenous farmers that our foundation Land of the Sun (LOTS) is helping. They created a mingo (working circle) to clean out their water system that feeds a school that LOTS is helping to renovate. Merri and I and some friends visited to check on their progress.
Everyone works, men…
Well… not everyone works.
But everyone gets involved in helping. Here is our hotel manager Franklin Sandoval conferring with the head of the village.
I mentioned our foundation here because it helps us gained fulfillment in our business, plus creates tax and asset protection benefits plus is part of our estate planning to make sure that the people of Ecuador are helped even after we pass.
Making sure that your assets held abroad are protected and properly conveyed in your estate requires extra planning.
Yet many Ecuador Living subscribers have been buying real estate or are moving to Ecuador without giving thought to the added complexity in their estate plans and other legal requirements.
I strongly suggest that you review you entire estate with both a local and Ecuadorian attorney. Here are some excerpts from an Ecuador Living report on why.
The Western world operates on two systems of law, the civil law of ancient Rome, and the common law of England. These two systems have a lot in common, yet in many important areas they differ.
These differences can create legal conflicts in contracts, wills, trusts, parental rights and even residency.
The passing of wealth to heirs for example is one area that differs.
Few people coming from North America (which operates under a British common Law system), understand that US, Canadian or Ecuador wills do not work in Ecuador if challenged.
Many legal systems have evolved from The Roman civil code. The Napoleonic Code is the French version, established under Napoléon I in 1804. The Napoleonic code was not the first legal code to be established in a European country with a civil legal system though. The Codex Maximilianeus bavaricus civilis was reated in Bavaria arund 1756). The Allgemeines Landrecht formed in Prussia, around 1794. The West Galician Code, began in part of Austria around 1797.
Many of the civil codes in Latin America are based on an original work derived from the French code and Castillan law. Chile was the first to accept this type of legal system in 1855. Ecuador followed in 1858. El Salvador, Venezuela, Nicaragua, Honduras, Colombia and Panama are other countries with a legal system based on this foundation.
In this Ecuador legal system, the will is called the testament and allows the testor to direct the disposal, in whole or in part, of their property, upon death. The testor retains the right to revoke the provisions in the testament anytime during his or her life.
However there is a difference in common and civil law as to what is a person’s property is. In most civil codes, the wife automatically owns half of all property unless otherwise stipulated in a formal way. The children own the other half. Period. A will cannot supersede this fact.
If a person’s will leaves all of his or her property to his or her spouse, the will works fine UNLESS the children contest the will. If they do the testament will not be valid.
This can create complications in simple circumstances. If the circumstances become complicated… for example children from two or more marriages… then problems could mount. There is even a concern in my mind that a surviving spouse could lose investor residency status if the inheritance falls below required minimums. A spouse could lose residency and a house!
In a common law country a person can write a will on a scrap of paper, throw it in a drawer (not advised) and that may be enough. Though it also might not. In a civil code jurisdiction such a will definitely will not work!
So if you create a will in Ecuador and then write another later… be sure to make the change official. Otherwise the new will may not work.
In a common law legal system wills do not have to be recorded and often the act of writing a new will allows the new document to supersede the old.
Ecuador’s Act reforming the Civil Code, of August 17, 1989 updated a number of areas relating to covers relationships between a children and their parents, marriage, divorce, the status of wives, marital property and marital agreements.
Having an attorney to help you with estate planning in every country where you hold property makes sense… especially if two of the countries have different legal systems.
The US attorney we use is our friend (and trustee of LOTS) Joe Cox.
Joe’s firms specializes in cross border tax and estate planning, asset protection and real estate.
He provides an incredible system called The Strategic Snapshot which is an easy to use, color coded visualization of a person’s structures, corporate entities, estate plan and assets. We use the snap shot and have found it incredibly useful in seeing how everything from a legal point of view should fit.
You can ask Joe about the Strategic Snapshot at email@example.com.
Joe’s law firm also provides an excellent estate planning newsletter that I read regularly.
A recent letter at his archive shows how and says:
Conversion to Manager-Managed LLC Format
Many individuals concerned with asset protection have formed a Limited Liability Company (“LLC”) in an effort to protect their assets. In fact, most people do not know that Florida was the second state in the United States to draft LLC legislation (dating back to 1982). Most LLCs we see in our daily practice have been formed as member-managed LLCs, that is, when the members (i.e., owners) of the LLC control and manage the LLC as well. However, due to recent changes in the law regarding LLCs, we are now recommending that any Member-Managed LLC be converted into a Manager-Managed LLC format.
The intent of this recommendation is to increase the creditor protection of the LLC should the Member be involved in a lawsuit.
For example; under a Member-Managed LLC, if a creditor of the Member is able to obtain the LLC membership units (by court order, for example), the creditor could obtain management rights and make decisions for the LLC. At least one recent court ruling (from Colorado) makes this result a possibility. However, under a Manager-Managed LLC format, the Manager retains control of the management of the assets held by the LLC even if someone else “controlled” the LLC membership units. In a Manager-Managed LLC, an elected Manager (pursuant to the Operating Agreement) manages the LLC. Note, that an existing member can act as the initial Manager of the LLC, and an independent Manager can be elected at a later time, if desired. Under a Manager-Managed LLC format, if a member was successfully sued, and the creditor obtained the member’s LLC membership units, the Manager could withhold distributions from all Members and the creditor would receive nothing. This result could deter a potential creditor from filing an unjustified or otherwise frivolous claim.
Plus Joe’s website offers an easy to use internet questionaire. See Questionaire.
We live in a complicated world often made more frustrating by the legal system. Legal systems are problematic enough when one lives and resides in one country. Difficulties can compound when living and or holding assets in two countries or more… especially if both legal systems…common and civil become involved. So get an attorney and get advice so you, your spouse and your heirs never find your results uncivil.
The text above is an excerpt from a more complete report sent to Ecuador Living subscribers that describes Ecuador legal system, how to create wills there and provides legal contacts in the US, Canada and Ecuador that can help.
Join us in Ecuador at a 2009 course or tour.
Take Two for One. Attend any of the three international business & investing courses below and select any one of the tours above free.
July 24-26 IBEZ North Carolina + Tangled Web
Oct. 9-11 IBEZ North Carolina + Tangled Web
Nov. 6-8 IBEZ Cotacachi + Tangled Web
Sign up for our three May 2009 tours and attend any of the IBEZ Cotacachi + Tangled Web seminar above FREE.
Attend any two Ecuador courses or tours in a calendar month…$949 for one. $1,349 for two.
Attend any three Ecuador courses or tours in a calendar month…$1,199 for one. $1,799 for two.
Learn about our July 2009 Ecuador export tour 2-4-1 deal here.
May 29-31 JGAM Multi Currency investment Seminar Naples Florida
July 24-26 IBEZ North Carolina
Oct. 9-11 IBEZ North Carolina
Oct. 21-24 Ecuador Import Export Expedition