Ecuador: Inheritance
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Inheritance tax and law
The Global Property Guide looks at inheritance from two angles: taxation, and what inheritance laws apply to foreigners leaving property in Ecuador: what restrictions there are and whether making a will is advisable.
INHERITANCE TAX
How high are inheritance taxes in Ecuador?
Impuesto sobre la renta sobre herencias, legados y donaciones
There are no inheritance or gift taxes in Ecuador. However, capital gains derived from inheritances, gifts, and donations are subject to a special income tax. The recipient or the heir is liable to pay this tax.
The taxable inheritance is computed by deducting the final expenses of the deceased and his debts from the gross inheritance. A tax-free amount is set every year and all inheritance exceeding the threshold amount are liable for the 5% inheritance tax. In 2007, the tax-free amount is US$7,850.
2008 INHERITANCE TAX RATES |
|
| TAX BASE, US$ | TAX RATE |
| Up to US$50,000 | nil |
| US$50,000 - US$100,000 | 5% |
| US$100,000 - US$200,000 | 10% |
| US$200,000 - US$300,000 | 15% |
| US$300,000 - US$400,000 | 20% |
| US$400,000 - US$500,000 | 25% |
| US$500,000 - US$600,000 | 30% |
| Over US$600,000 | 35% |
| Source: Global Property Guide | |
INHERITANCE LAW
Thanks to Gallegos, Neidl & Asociados – Alexandra Velasco
What inheritance laws apply in Ecuador?
Which inheritance law applies
The relevant inheritance law for foreigners and for property owned by foreigners in Ecuador is Ecuador’s national law. This inheritance law applies to everyone in Ecuador, without distinction of religion, nationality or country of residence. Property can be inherited by anyone who is entitled by law.
Ecuador’s Civil Code is the ruling law, especially the “Third Book of Successions because of Death” and “Donations among the Living”. The principal laws that apply to foreigners are: Art.1035 and Art.1036. Foreigners who are intestate are entitled to the same rights, laws and rules as Ecuadorians.
The competent authorities to deal with inheritance issues are civil judges, who also take inheritance cases of non-residents and foreigners. Notaries can also intervene in certain inheritance affairs as a result of recent reforms to statutes which pertain to notaries. Inheritance cases typically average from one to two years.
The only people who cannot inherit are those who are disabled or unworthy, the deceased’s last treating doctor, the priest of the community where he attended, and the notary who authorized the will, or anyone who is related to the notary. Disabled people include deaf-mutes, the mentally ill, under-age children and substance addicts; for whom a curator or a tutor is assigned by the appointed judge, if none has been previously provided. Unworthy to inherit are people directly involved in the homicide of the deceased, or who have intervened in the crime, or who were able, but did not help the deceased, or who illegally hid the will.
Reserved Portion
The reserved portion covers 75% of the estate. At death of one spouse the spousal estate is divided into two, and one half of the estate is distributed as follows:
- Spouse's portion: 25%.
- Legitimate Descendents: 50% to parents and children (both in or out of the marriage), nieces and nephews. If there are no nieces and nephews, to the next nearest family members.
- "Fourth of Improvement”: 25% of the estate to chosen people.
The Fourth of Improvement is that portion of the estate outside the reserved portion. The deceased can benefit descendants, or anyone outside the family circle, such as friends. In the absence of a will the Fourth of Improvement cannot be gifted.
The Will
It is not unusual for middle to upper class groups to write wills. It is advisable for a foreigner to make a will, to avoid long hazardous proceedings for inheritors and family members.
There are two types of will:
- The open will. This has to be presented either to a notary and three witnesses, or before five witnesses.
- The closed will. This has to be presented to a notary and three witnesses. The difference between the two types of will is that the content of an open will is made public to the witnesses, while the content of a closed will is a secret, even to the witnesses, until the inheritor is dead and the will is opened.
Witnesses are people who are not identified as incapable, or of the family of the testator, or who have any relation with the notary.
Non-resident foreigners have to be in the country to make a will; someone else cannot be delegated to make a will. Foreigners who are residents in Ecuador can make a will through the consulate where they are located. The following paperwork is needed: marriage license and birth certificates of children and identification that legitimates residence in Ecuador.
Any will written as a result of the use of force is null and void.
The will is opened at the time of death at the last domicile in Ecuador where the diseased left his/her will to a notary.
Under-age children who inherit property under a will are appointed a curator (under 14) or tutor (under 16) until they come of age, when they can administer their own estate. If none has been appointed, the civil judge provides him/her with one. If there is a condition in the execution of the will, an executioner is appointed until the condition is fulfilled.
If an inheritor has not received his rightful percentage and has been left out of the will on purpose or by mistake, they are entitled to reform the will on their behalf within a period of four years in order to obtain their part.
If there is no will, a representative of the state or procurator takes the case. Family members of the deceased must come to Ecuador and prove their lineage and make a formal claim or petition to open the case. The will is distributed in the same way as before, except that the government takes a percentage, and there is no Fourth of Improvement.
During the lifetime of the property-owner
The law considers the owner of a property to be the person whose name is written on the title deeds. This does not exclude or neglect the spouse which name is not written in the title if a community property exists because of marriage. The only case where there is exclusion is when there is a prenuptial agreement or a separation of marital property. The law that applies is the law of the country where the non-resident foreigner got married.
An owner can freely give his/her property prior to death. This freedom does not apply to property which is not entirely owned, or which is part of the spousal estate, i.e., it applies to anything that you had before getting married or agreed to keep separate in a prenuptial agreement.
Donations between the living (transfers, in a free and willing way, of part of an estate to another person in an irrevocable way) can be challenged if the property is donated to a non-family member, and weighs more than the Fourth of Improvement. To avoid this problem, the owner should know how much of the estate s/he can dispose of as the Fourth of Improvement, and should leave behind enough for his/her legitimate heirs.
Ecuador - more data and information
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Your Comments
posted by Carson Manier | 2008-01-06
Tourism, Cuenca, Ecuador
The inheritance laws were just changed and now, on a sliding scale based on property value, the inheritance tax ranges from 35% to 70% with properties of more value being subject to higher percentages.
posted by our Editor: Matthew Pollock | 2008-01-06
Thank you this is very useful.