Inheritance tax and law
May 27, 2011
Inheritances, legacies and gifts are not taxable in Honduras.
Thanks to Garcia & Bodan Honduras
Which inheritance law applies?
Honduras's inheritance laws affect everyone who owns property in Honduras. Foreign nationals are not treated differently, nor is any distinction made under the Honduran Constitution between foreigners of different nationalities or religions.
The main laws are: The Civil Code, The Constitution and the Civil Procedure Code.
The general principles concerning jurisdiction over property are:
- The principle of lex rei sitae i.e. property is regulated by the laws where it is situated.
- Issues arising from property rights are resolved by the judge of the department where the property is situated
Competent judges to handle property inheritance rights are located in the last domicile of the deceased person; if no known domicile, then where the real estate assets are located. If the foreigner's national law states that the applicable law is Honduran law, it is up to the foreign judge to apply Honduran substantive law, but if the foreign law sends the competence to Honduran judges, then they are competent.
Inheritance issues in Honduras are handled by a civil court. Decisions are expected to be made in the deceased's last domicile; therefore, to execute a foreign resolution in Honduras, it must pass as well through Honduran courts. An inheritance procedure without conflicting interests between the heirs may last from 1 year to 2 years, and in case of a conflict it make take several years.
According to article 938 of the Civil Code, in every succession by death, in order to execute the dispositions of the deceased or by the Law, there will be deducted from the estate: 1) the funeral expenses; 2) the costs of publication of the will, if it exists, and other costs related to the succession opening; 3) hereditary debts; 4) fiscal taxes that will burden the inheritance; 4) unavoidable nutritional allocations 5) the conjugal (spouse) portion.
The Honduran inheritance system allows persons to leave their estate to anyone they wish in the will, and a person may freely dispose of his/her property. However the estate must cover the obligations of the deceased (alimony, if applicable, children support, taxes and debts).
In the case of intestacy, when there is no will (as know in Spanish ¨Ab- Intestato¨), then the law designates the heirs in the following order:
- The descendents of the deceased (the children)
- In the absence of children, then the parents or grandparents will inherit
- In the absence of descendants or parents or grandparents, then the estate goes to the collaterals (brothers)
- In the absence of brothers or closest relatives, it will go to the spouse
- In the absence of these relatives, the estate goes to the municipality of the deceased's domicile.
It is not advisable for a foreigner to make a will in Honduras, unless there are specific circumstances (minor children in Honduras or other issues not related to property) because the inheritance process tends to be long, with many formalities. Sometimes it can get to a point where a requirement is not met, and then the process stops.
People in Honduras use many alternatives to the inheritance procedure. Most common is to have a Honduran corporation as owner of the property. It is relatively easy to establish a corporation, and administer the legal requirements to maintain it. Also it is easy to transfer the corporation's shares from one individual to another.
If a foreigner wants to make a local will, his/her presence in Honduras is required, and the will has to fulfill specific formalities. The notary public assesses the capability of the person. The will has to be in Spanish.
To handle an ordinary inheritance process in Honduras, heirs who are foreigners must give a power of attorney to a lawyer or a relative. The process takes time, during which they will not be able to sell the property. Foreign heirs must present birth certificates (with all the legal formalities and legalizations needed to be effective in Honduras), among other documents.
Despite the disadvantages of making a will, it may be better to follow an inheritance process in Honduras than to execute a foreign decision, which will take twice the time.
During the lifetime of the property-owner.
The owner may freely give the property to anyone prior to his death. No restrictions apply.
Problems of inheritance
Honduran laws look at registered ownership and registered rights to determine the owner of real property.
Honduran laws apply only to property located in Honduras. The property owner is the person registered in the Property Registry. If the foreigner is married but the spouse does not appear as joint owner in the registered title deed, then the registered owner may transfer, sell or give the land to anyone. The spouse can make a claim against the owner and this will not affect the property.
If the property (or part of it) is inherited by a child, or children not of legal age (under 21), or to others not considered legally as adults, a guardian must be appointed. The guardian is appointed by the deceased to manage the property, if not, then the legal guardian (the parents, the surviving parent, grandparents).