Probate in Chile: Costs of Probate and inheritance Procedures
- Category: Family Law
Probating an estate in Chile for a foreign inheritor or estate may be a costly and slow process, so it is important to first determine is it worth the time and expense. We will for the present purposes, set aside any emotional value, which may be a considerable consideration when it comes to deciding to probate an estate in Chile, and we only focus on determining the financial implications. That said, an emotional motivation for assuming the cost of probate in Chile, is a very legitimate reason to push forward with probating an estate in Chile even if the value of estate is less than the costs.
First, it needs to be understood, that in most cases any inheritance involving a foreign jurisdiction or a foreigner with assets in Chile, with very few exceptions, must go through the court system in Chile rather than the simpler procedure completed through only the civil registry in Chile.
The first thing to be applied is the international legal principle of “last domicile”, to determine the jurisdiction that will have authority over the estate of the deceased. Essentially, where the estate is to be probated. Certain things in Chile are exempt from this legal principle such as real estate as this is covered by principles of national sovereignty, as well as other property located within the territory of the country.
That said, the constitution of Chile expressly protects the rights of foreigners over private property, in an equal manner to that of Chilean citizens and residents. Thus, for example, a foreigner that buys or owns land in Chile, even after their death outside of Chile, will have the same rights as Chilean citizens and permanent residents in regards to probate of the property in Chile.
In terms of determining return vs. costs, for most estates in Chile, if it includes some sort of real estate or other major asset (e.g. stocks or investments), the value of the asset will generally justify the cost and time involved as long as they have a reasonably good market value. For smaller inheritances, for example a collection of furniture, frequently the costs involved will be far too high to justify the costs of a full probate.
Still, it is important to have the real estate or other assets evaluated and / or appraised to insure you have sufficient margin for error to cover the expenses you may incur during the inheritance probate process, and that you reach an agreement with any other inheritors or parties involved for reimbursement of those expenses incurred by the estate.
Just some of the costs involved before you take possession of the assets in an estate in Chile, beyond fees for your attorney:
Estate Tax: This is calculated in a complex formula by the Chilean tax authority based on many things. Among some of the things they look at is, value of the estate, relationship to the inheritor, number of inheritors, legal value of the property (not the same as market value), economic status of the inheritors, and so on. This estate tax calculation is typically conducted by the Chilean Tax authority (SII), at a rather late stage in the probate process in Chile. In many cases the inheritance tax is very low, to nothing. Some assets of an estate, purchased with funds earned outside of Chile, may not have any tax associated with probating the estate.
Debts: Any property tax or other debts associated with the property to third-parties may need to be paid, prior to completing a transfer. For example, a pending mortgage that must be negotiated with the bank.
Will and Estate Attorney: Depending on the structure of the estate, and stipulations of the will (if there is a will), you may need to pay a third-party attorney charged with the distribution of the assets by the deceased. By law, this is typically capped at 20% of the value of the estate. An estate being required to use a specific attorney for probating the assets of the estate is not very common anymore in Chilean wills; however, this attorney will represent the estate, and is not the same as having your own attorney to represent your interest. Again, this will depend on if there is a will, and how the will was drafted.
Courts: Court costs and official document registration and publications.
Title transfers: In the case of things like real estate or cars, there may be new title registration involved, prior to the property being sold.
If a property is to be liquidated, and cash distributed to the inheritors, there may be also standard sales costs of the property such as commissions to a real estate agent.
When determining the economic viability of initiating a probate case in Chile, below is the general formula that is applied. Again, there may be many other factors involved, but this is a good place to start when evaluating the process of probate in Chile.
Value of assets / (number of inheritors and their percentage rights to the estate) – estimated costs = viability of probate
For example, let's say there is a property in Chile worth $100,000 U.S. There are three inheritors. Under Chile's mandatory inheritor laws, let's say one spouse is alive, and three adult children. All would be considered “mandatory inheritors” under Chilean law. The wife is entitled to half. The two children are entitled to one third each, of the remaining half of the estate. In this case, it might be a close call regarding costs, as long as all parties are in agreement regarding sharing costs and common goal of expediting the probate process and sale as efficiently as possible, the costs should be fairly reasonable.
If you have any questions regarding your rights to an estate in Chile, please contact us to conduct an evaluation on the value of the estate and an estimate of costs of probating the estate. Also, if you own property or assets in Chile and are concerned about conducting proper estate planning, please feel free to contact us for assistance with protecting your assets.
