MEXICO Law and Practice Contributed by: Javier Díaz de León, Monica Ramos and Martín Cortina, Díaz de León Abogados
Code establishes that the testator must provide ali - mony and living expenses to the following persons: • descendants who are younger than 18 years old; • descendants with incapacity to work, despite any age; • surviving spouse when she is unable to work and has no sufficient assets (this right is preserved by the surviving spouse while she is not married and lives honestly); • ascendants; • concubine (partner) who lived with the testator dur - ing the five years before the death event; and • brothers and sisters and other collateral relatives in fourth grade, if they have any incapacity or until they reach the legal age of 18 years, if they have no assets to cover their basic living expenses. 2.4 Marital Property Mexico recognises two legal regimes: (i) marital part - nership; and (ii) separate assets. Under the marital partnership, the assets acquired during the marriage period are deemed to be common property regard - less of the spouse who acquired such assets. As a result, both spouses must consent to any transfer or disposition of the assets and, in the event of divorce, the spouses are seen as co-owners of said property. The terms and conditions around the marital partner - ship are generally specified in the marital provisions ( capitulaciones matrimoniales ), which are registered with the competent Civil Registry. These marital provi - sions are treated in practice as a limited pre or post - nuptial agreement. When it comes to marital partner - ship, the agreement must be produced in writing in the presence of a notary public, including the following covenants: • listing of assets of each spouse and existing col - laterals, if any; • listing of debts of each spouse and payment pro - gramme; • revenue derived from labour activities of any spouse; • management guidelines on the common property; • express mention on whether the common property includes assets received by inheritance or gift; and
• liquidation process for the common property of assets. In contrast, the separate assets regime allocates individual ownership of assets between the spouses without any requirements. Each spouse is exclusive owner of acquired assets by any means. In the event of divorce, the Mexican federal and state courts rec - ognise that a portion of the assets may be claimed by the other spouse if she did not work in previous years due to household responsibilities. Different compen - satory thresholds apply but the courts have ruled up to 50% of the assets to be allocated to the benefit of the plaintiff spouse. 2.5 Transfer of Property Under the Income Tax Law, resident or non-resident individuals retain the cost basis of transferors’ assets in the case of tax-free gifts or inheritances. The cost basis of the received property may be further increased in the hands of the transferor depending on additional expenses incurred or investments made. There are no classification elections in Mexico (check-the-box elections) to have a step-up basis on these assets. 2.6 Transfer of Assets: Vehicle and Planning The gift agreement is an effective way to dispose of and transfer any type of asset from one person to another on a tax-free basis under the relative condi - tions highlighted in 1.1 Tax Regimes . This agreement is generally formalised in the presence of a Mexican notary public and registered in the Public Registry, if applicable. The gift agreement may establish the full and free transfer of property or only a portion of it: for example, when the transferor transfers only the own - ership of the assets, while retaining the use of them for their entire life or a restricted time period. Inheritance Trust The transfer of assets by an inheritance trust along with a written will constitutes another effective mecha - nism to dispose of and manage assets for the benefit of future beneficiaries. In Mexico, the role of the trus - tee relies on a Mexican banking institution, which pro - vides a trust preserving the testator’s wishes relating to their own assets and family members’ duties. In the Mechanisms Gift (Donación)
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