MAURITIUS Law and Practice Contributed by: Johanne Hague, Ashwin Mudhoo, Medina Torabally and Yushrah Bayjou, CMS Prism – in association with CMS
In recent years, foundations have also become popu - lar tools of asset protection planning. 4.2 Succession Planning As well as for asset protection, trusts are commonly used for estate planning purposes. Although the distributions through a trust may still be challenged on the basis of the forced heirship rules, the risk is fairly low as opposed to other options, given that the trustee may be instructed to make the dis - tributions by ensuring that each child receives their reserved portion upon the parent’s death. In the case of families where one parent is deceased, the trustee may be instructed not to distribute the properties of the deceased spouse immediately upon their death. Instead, the instructions may require the trustee to pay each child their corresponding reserved portions in cash and subsequently distribute all properties according to the rules of succession at the time of death of the other spouse. In the case of a trust, the reserved portion of each child may be calculated at the time of death (instead of prior to death) so as to ensure a more precise cal - culation. The distributions can also be made free of any dispute, as the protected heirs would have little to no reason or motivation to challenge it. Further, the determination of the reserved portion and compensa - tion to each heir will be made by an independent and objective party (ie, the trustee). Having an independ - ent party who is not linked to the family to make the distribution is always better than letting the heirs do this among themselves. The clear advantage of this option is that instructions given to the trustee will not include a reference to spe - cific amounts, which will grant the trustee flexibility to make distributions based on the reserved portions determined at the time of death of a spouse. The only disadvantage of this option is that it is more costly, as there are expenses involved in the creation and maintenance of the trust. 4.3 Transfer of Partial Interest There are no taxes on capital gains in Mauritius.
Transfer taxes are normally levied on the fair value of the real estate that is being transferred. This fair value is not adjusted to take into account a lack of market - ability and control. Further, transfer taxes do not apply to transfer of prop - erty as part of a succession.
5. Wealth Disputes 5.1 Trends Driving Disputes
The majority of wealth disputes relate to forced heir - ship disputes and the reserved portions of heirs. Many citizens are not aware of how the forced heirship rules apply. Traditionally, Mauritian families tend to invest in immovable property and pass it on to their heirs, rather than structure their wealth through trusts or foundations. As a result, the majority of disputes relate to the division of these immovable properties or the division of the estate of the parents between siblings. Disputes regarding the division of estates also relate to the interpretation and/or application of Wills, which often were not drafted before a notary and did not take into account forced heirship rules. These disputes almost inevitably come before the Supreme Court of Mauritius by way of complaint with summons. These proceedings are, in general, lengthy. On the other hand, to date, there have been very few disputes in Mauritius in relation to trusts or founda - tions established in Mauritius. This may be because the legislation relating to trusts and foundations is still fairly recent and because families setting up trusts and foundations are typically of high-net-worth/ultra- high-net-worth and have taken specialist advice prior to setting up their structures, thereby minimising the risk of future disputes. 5.2 Mechanism for Compensation In view of the nature of the types of disputes (which tend to concern the application of the forced heirship rules), the damages usually awarded to the parties are compensatory. The assets are usually sold and the proceeds of the sale divided according to the provi - sions of the forced heirship rules. There is usually no
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