This week on Cachando Chile on the Air we had a very interesting guest who led us through Chile’s rather confusing laws on inheritance. If you live in Chile—as in like “forever” and “til death do us part”—there are some things you’d better wrap your mind around right now. As in YOU do not get to decide who inherits your estate.
Got your attention now? Read on…
If you’re from continental Europe, chances are that this will all make perfect sense to you, BUT, if you’re from the UK, US or any other common law country, it’s time to pay attention here because otherwise you could be in for some very rude surprises indeed. Not only can you not take it with you–but you can’t decide where it ends up either.
As a Chilean tax attorney, Darío Romero of the Albagli Zaliasnik law firm deals with these things every day. When I sent out a cry for help with understanding these issues, he gallantly stepped forward and volunteered to walk us through the different twists and turns of the Chilean inheritance maze.
It turns out that the system is far more complicated than I thought, and I panicked at the thought of trying to fulfill my promise of writing it up for Cachando Chile, so I crossed my fingers and gave another shout out… and wouldn’t you know it? Darío rode in to the rescue once again. And based on what I’ve seen and heard, I would say that if you find yourself in need of tax and/or inheritance-related legal services and want someone who can lay it all out for you in impeccable English, Darío is definitely your guy! (You can contact him by clicking on his name above).
So let’s get on with the grill & drill:
Margaret Snook: What is the most straight-forward explanation of Chile’s inheritance law? My understanding is that it’s based on quarters; that the surviving spouse gets 1/2, the children share ¼, and that the individual has the option of designating the destination of the remaining ¼… Is that true?
Darío Romero: There are different scenarios depending on the number and type of heirs and whether a will is involved or not. This is kind of complicated, but let’s start with a more in-depth look at the spouse with children scenario.
First things first:
If the deceased does not have a will, 100% of the inheritance is divided as provided by law, as follows:
- When the deceased is survived by a spouse and children, the general principle is that the spouse gets twice as much as the children, i.e., if there are 3 children, the spouse receives 40%, and each child gets 20% of the estate. However, there are 2 caveats:
- If one child and a spouse are involved, each gets half of the estate; and
- The minimum part of the inheritance a surviving spouse is entitled to is 25% of the estate, no matter how many children are involved. This rule would apply if there are more than 6 children and 1 surviving spouse.
- If there are children but no surviving spouse, then the inheritance is divided equally among the children.
- When the deceased is survived by a spouse and his/her parents (this also applies to grandparents and great grandparents, however unlikely this might sound), but no children, the spouse is entitled to 2/3 of the inheritance, and the parents receive 1/3.
- If only the spouse is alive, and no children or parents survive, he/she is entitled to 100% of the inheritance; the same is true when the deceased’s parents are alive, but there are no living children or spouse.
- If at the moment of the person’s death, there are no surviving spouses, children, or parents, then the estate passes to the siblings of the deceased. The inheritance is generally split in equal portions, unless the decedent had half-brothers or half-sisters, in which case they receive half of the inheritance that the full siblings receive.
- In the case that no spouse, children, parents, or siblings exist at the time the decedent passes away, then the inheritance can go to other relatives (uncles, cousins, up to the 6th collateral degree) of the decedent.
- In absence of all of the above, the Chilean state receives the entirety of the estate.
If the deceased has a will, then 50% of the inheritance is split up according to the rules set forth above—which cannot be changed by the will—and the remaining half is split into quarters
One quarter is called “de mejoras” and can be freely assigned to the person’s spouse, children or parents (any of them can receive the full quarter if the will stipulates it);
Another quarter is called “de libre disposición” and can be assigned to whoever is deemed fit, regardless of whether or not that person is a relative.
Issuing a will in Chile is a highly formal procedure that requires the presence of a Notary Public who reads the will out loud in the presence of the grantor. Wills issued abroad can be recognized as long as they have been issued in accordance with the laws of the place of issuance.
MS: As someone from the US, my personal feeling is that in a traditional marriage, a couple works together to earn their money, raise their family, and build their assets together over the course of their lifetime together, so why should the surviving spouse lose any of that because they have become widowed?
DR: This question has several answers.
1) A lawyer would reply that you are mostly (and not completely, please note) incorrect if the couple is married under Chile’s communal goods [joint property] or “sociedad conyugal” status…
MS: Wait a moment please. We should explain that when people marry in Chile, the law requires them to specify which of three options they prefer with respect to their property.
- Sociedad Conjugal (joint property)
- Separación de Bienes (what’s yours is yours and what’s mine is mine)
- Participación de los gananciales (something of a combination of both)
- More info is available (in Spanish) at the Library of Congress on Civil Marriage
DR: So, when a couple is married with “sociedad conyugal,” when one of the spouses passes away, the communal goods are split in half before determining the estate the rest of the people will inherit
Suppose a spouse passes away and has assets of a net worth of $100. The communal goods are split before the inheritance, and the spouse should be assigned $50 on this account. The remaining $50 is split according to the rules set forth above. So, if the couple has 3 children, out of $100, the spouse would receive $50 for the communal goods and $20 (twice the children’s share, which in this case is 40%) for the inheritance, while the children should receive $10 each. Therefore, in this case, the spouse would still own $70, which is not that awful.
If the couple is married under any other system, the spouse would only receive $40 of the original $100.
2) I know this does not solve your moral question, but a frequent tax recommendation is to bequeath as much wealth to your children as possible. There is a very good reason to do this, as the same estate would be taxed twice if the estate were passed on to the spouse and then the children.
Estate tax is progressive, with a maximum rate of 25%. If a significant amount of the estate is bequeathed to the surviving spouse, when the spouse passes that on to the children, it is taxed again, which could result in a substantial amount of the family’s estate being paid to the government in a short time.
3) These legal provisions have a historical explanation. In Chile, there used to be a rather nefarious system called “mayorazgo” in which the eldest male descendant inherited 100% of the estate, ran all of the family’s business, and provided for the family (including the widow). This of course caused the surviving spouse (assuming the spouse is a woman, as women did not inherit much wealth in those days) to become dependent upon the benevolence of their eldest son.
There are also more profound cultural reasons behind our current inheritance system. The message to Congress for the approval of the new Civil Code, back in 1855, spoke of “providing for those to whom you have given life or those who have given life to you.” This may respond to a very deep notion that wealth should remain within the family, despite the owner’s intentions.
MS: In other, more complicated family situations, it seems that the parties involved are best able to determine who in the family is in greatest need and/or most deserving of an inheritance.
Here’s a hypothetical situation. What happens in Chile in the case of an older woman with no income of her own who becomes widowed. Does she have any recourse to be able to hang on to the money that she and her husband earned and saved over the course of their marriage? One person left a comment on the blog about a woman who was forced to sell her home so that her children could receive their inheritance. Is there any way to prevent that?
DR: That would depend on the amount and type of heirs and whether or not her husband left a will. The case of the lady who was forced to sell her home is not uncommon.
Suppose the husband only left a house, no will, and there are 3 children. Each child would be entitled to 20% of the house, and the widow would get 40%. Chilean law states that any heir can request the partition of the estate, which means that the house would have to be sold, and the proceeds would then have to be given to each of the heirs.
There is some recourse; the surviving spouse has preference for the reception of the family home. Also, if the spouse’s quota is less than the value of the home, he/she can request to be granted a lifelong right of use.
MS: Where does life insurance come into this equation? Is it considered part of the estate and therefore factored into the inheritance amount?
DR: No, life insurance is not considered part of the estate, as the decedent never owned the indemnity—it is paid by the insurance company to the spouse or children upon his/her death. Life insurance payments are not subject to income tax either.
MS: What are Chile’s laws about financial gifts during life? The Economist article talks about “clawback laws” that can override gifts made years prior.
DR: Clawback laws exist in Chile when the minimum statutory portions of the inheritance are infringed by financial gifts, or in other words, when the donor has given a larger part of his/her estate than he/she could legally have disposed of by means of a will, i.e. larger than the family ¼ “de mejoras” and the free disposition ¼ “de libre disposición.”
For example, if a decedent gave 80% of his/her assets to one of 4 children (plus a surviving spouse), then the other heirs would be entitled to request the annulment of these donations. Remember that whenever a will is involved, the maximum amount a decedent can freely bequeath is up to 50% of the inheritance.
MS: What happens to any assets the couple has in another country, where the inheritance laws are different? Can those assets be separated and protected?
DR: That is a very complicated question, as several factors have to be analyzed and weighted in order to give an answer:
- Where the decedent was last domiciled (i.e. where the decedent resided with the intent to remain in that place) at the time of death.
- The nationality of the decedent. The Chilean relatives of Chilean nationals who pass away abroad cannot be deprived of the amount they would have received if Chilean law had applied.
- If a will is involved. If a foreigner passes away out of Chile and does not leave a will, his/her Chilean relatives would have the same rights stipulated by Chilean law.
- If any Chilean relatives are involved.
- Where the assets are located.
In these international matters, the interaction between the laws of the other country and the laws of Chile must be analyzed in depth. The same situations can have very different effects depending on what other country is involved
MS: One last question (for now): What happens in the case of a married couple, both foreigners, who have permanent residency in Chile, live here, and have no Chilean relatives. Does Chilean law control their estate or that of their home country?
DR: In that case, if Chile is their last place of permanent residence at the time they passed away, Chilean law would control their estate. Of course it is possible that their country of citizenship could claim control of the estate.
MS: So there you have it. The tip of the inheritance iceberg. Got assets you want to protect? Sounds like the time to talk with someone in the know and get your will drawn up pronto!
Wow…lots to think about. Really good advice especially since I’ll be getting married and living in Chile! Thanks for all the great info!
Hi Lucie- Congrats on your upcoming wedding! And really do look into the 3 different marriage options before you do your civil wedding. Each has its pros and cons, and each couple needs to figure out which is right for them.
This was really interesting and loved the pun in your title. Great job to you and Dario!
Thanks! I have to admit, I had fun with the title… wanted something a bit catchier than a dry old “Inheritance take 2”!
While all very interesting. Why this obsession with inheritance? When you’re dead, you’re dead.
How about something relevant to the living like trying to buy a house/apartment or perhaps divorce.
There’s quite a few wide eyed Gringas that are married to or planning to marry their pololos. Bless. Statistics are against them. What do they need to consider when it goes belly up? Especially if kids and property are involved?
Good morning Shark.
Obsession with inheritance? Naw- just wanted to do a more thorough job on this one before moving on to something else… And speaking of relevance–statistics DO show that as far as topics go, death & inheritance is something that is relevant to ALL of us, where as buying property, marrying, having kids, and divorce are a toss up…
Hmmm….a slight contradiction there. While death is not voluntary unlike buying property, marrying, having kids, and divorce. It is those latter issues that complicate the very issue you are writing about.
True, we all die but we don’t all have something to bequeath. (Can my kin inherit my genius?)
But inheritance laws WILL affect us all in one way or another.
In life, most of us are likely to inherit something at some point in our lives, and Chilean law guarantees that,
After death, something WILL happen to our estates after death, and whether we have heirs or not, those assets will go somewhere… however little that may be, and we will not be the ones who decide where it goes.
Last point well taken… it looks like your genius is something that you DO get to take with you!
Thank you Margaret and Darío! It’s all so much clearer now than the vague notion I previously had. I’ve seen posts on buying property and getting married (I’ve written a few myself, actually). Neither is a particularly complicated process, although of course you have to do your research to get to know an unfamiliar system, and there isn’t that cultural clash you mentioned here of common vs. civil law. That to me was the most llamativo part of this issue, that the Chilean approach is SO different from what makes sense to me and almost unfair because of that. Divorce is more complicated, especially depending on the kind of marriage you had, and that could make for an interesting post. Although between death and divorce, Cachando Chile might start to be a bit depressing!
Ha-ha… yes, I think I’ll hold off on more death and divorce stuff for a while, but we’ll get back to that eventually!
This different notion of common vs civil law makes such a huge difference on things, and it sheds new light on many aspects of Chilean culture–for example, it always struck me as odd the way people say, “our farm” when in fact it belongs to their grandparents… but under this system, they know that one way or another they do share in that property and gain from its well-being, if not directly now, then at some point in the future. They all share in the earnings in one way or another from any family endeavor.
BTW- next week’s show is on Kiltros- street dogs, which should be fun!
Ayayay! complicated. My husband is Chilean and we will be living in Chile, but we were married in the U.S. I wonder where that leaves us.I heard a lot about these issues when my mother-in-law passed away, but didn’t really know all the laws and details. Very informative.
Poor Sharky–I don’t have any assets either, but someday we’ll have something to bequeath–you might find it more relevant then (or when you get married and/or have kids–wills definitely become an issue)
and some might find it a relief that you will take your “genius” with you … haha 😉
The important point here seems to be the last place of residence. If you are living here in Chile, Chilean law will preside. Darío addresses that a bit toward the end and mentions that the laws from the home country may also be involved, but then I suppose at that point, each case is different.
And speaking of genius, DOCTOR Annje! That brand spanking new PhD is yours for keeps! You can pass along the diploma but the DOC is yours for eternity!
Really interesting Margaret.
Thanks for this post, and to Dario as well for the information. We are dealing with this now as my husband’s parents are old and are starting to think about wills and that sort of thing. So very relevant information, even to the living.
Sorry, back with another thought. It’s strange to me that for a couple married under separación de bienes the spouse has any mandatory share. The whole idea of separación de bienes is that there is no sharing of property (in a legal sense, obviously you share things on a daily basis), so it doesn’t really make sense to me that when you die suddenly the surviving spouse has a claim to things that he/she was legally prevented from owning in life. You can’t, for example, sell your spouse the car that’s in your name, but he/she might end up being legally required to accept it as the rightful share of your estate.
Actually separacion de bienes applies to property owned before the marriage or inherited. I would recommend this system to anyone. Usually foreigners married abroad are automatically separado de bienes.
Emily, as I understand it, the idea of “separación de bienes” is not that there is no sharing of property, but rather that it separates some of the liabilities. For example, if a couple is married under the sociedad conyugal system and one of them has a business that goes under, the family could lose everything, so many couples have either switched (or opted for initially) separación de bienes to keep family assets separate from business assets.
Remember too that one of the tenets of marriage is to “provide mutual aid to each other” (see more on this at http://wp.me/plPiG-ty ).
Emily- question for you… why couldn’t you sell your spouse a car?
A lawyer friend was talking to me the other day about separacion de bienes and property. He said that if you have property in one spouse’s name, you can’t just put the other person’s name on the deed – you have to do an entire new contrato de compraventa and actually sell the other person part of the property. He then said that once you’re married under separacion de bienes, you can’t do this because selling to your spouse is illegal – I understood it as part of the “separateness”, but we didn’t go into why.
Now, it’s possible he was wrong/I am remembering wrong or missing details/this only applies to property and not, for example, cars, but that’s why I said this. Another legal question to look into!
Hmm- I don’t know for sure, but I suspect that it refers more to property as in real estate than it does to cars. But by the same reasoning of “separateness” it would seem absolutely logical that you COULD sell to a spouse under separación de bienes but not under sociedad conyugal.
Any lawyers out there want to tackle this one?
Someone mentioned that separación de bienes applies to assets that are inherited or acquired before the marriage. This is true, but it also applies to assets acquired during the marriage. In this respect, it is no different to not being married at all.
It is true that people married abroad (not foreigners necessarily) are assumed to be married under “separación de bienes”. If this is not the case, they have to inscribe their marriage in the Chilean Civil Registry and register their property system as “sociedad conyugal” or “participación en los gananciales”.
Regarding sales between spouses, the Chilean Civil Code considers any sale of any asset to be null and void. This also applies sales between parents and children under their tuition (usually children under 18).
I can only speculate as to what the reason for this is, but I suspect it must relate to the idea that couples should share their wealth while they are married – regardless of who the legal owner of the asset is – instead of selling things to one another.
Wow- this just keeps getting more and more enredado! It just seems odd that if 2 people get married saying, what’s mine is mine and what’s your is yours for now and forever, that they should at least be able to sell things to each other! I’m thinking of a specific car situation… a rather big ticket item… At the time that Juan & Juanita get married (with separación de bienes), she has a car and Juan does not. Life is good. A few years later, Juanita is lugging a couple of kids around and needs a bigger car, but needs to sell her car for the down payment on the new one. Juan decides that it’s about time he had a car of his own and he rather likes the car he’s been using all along–Juanita’s… So the logical thing would be to transfer her car to his name and he hands over the lucas so she can buy a new car… right? But you’re saying that Chilean law says ix-nay? As in she has to sell her car to a stranger and he has to buy another car from another stranger?? Now I know there’s got to be some common sense in this picture somewhere… laws are not just made arbitrarily to cause headaches! What am I missing?
I read your blog religiously, as a Chilean who has been living in the United States for 14 years and is incredibly nostalgic for my country. I came across your blog several months ago and really enjoyed reading your entries as a reminder of what my life in Chile was like. I also really like your sense of humor when describing the quirks of Chilean culture and the Chilean way of doing things…
Today, however, I came across a very pleasant surprise while reading your article on Chilean inheritance laws and seeing a familiar face in the picture at the very top of the blog entry. Dario Romero has been a close family friend of ours for many years. I cannot emphasize enough what a great, genuine person he is. He also comes from a bicultural background and is completely bilingual in English and Spanish. I highly recommend him.
Thanks for your kind comments about the blog. I don’t know if you remember that many years ago, when the Sábado magazine (a supplement in El Mercurio) started up, there was a Chilean journalist, Samuel Silva, who lived in the US and wrote about his life as an insider-outsider there. I used to enjoy his articles so much because I felt the same way but “al revés.” I think about him and his stories even more now that I’m doing this blog. I’m glad you enjoy it.
And Yes, I know that Darío’s mother is from the US and that he’s studied both here and there, so he really understands the cultural differences and was the perfect person to try and explain all this complicated inheritance business! He was great on the show and extremely helpful and knowledgeable about the material! (and a very nice guy too!)
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My father died in spain in sept 2009, he was of chilean descent. He left myself nothing , other than a small amount of cash. His ex defacto has the bulk of his estate to use until the time of her death. Leaving me nothing ( essentially). Is this legal, or am I being cheated out of my sharte of his estate. There are no other children and no wife, his parents are dead, leaving me , yet I receive nothing, does this firt with Chilean I nheritance Laws , or not?
Hi Christian- I’m sorry to hear of your situation. I wish I could answer your question, but you really need to consult an attorney. You could start with Darío (just click on his name in the 3rd paragraph). I’m sure he can point you in the right direction. The best of luck with this difficult situation!
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Very helpful information! Believe it or not I was lead here by a dream. I live in the us and my dad lives in Chile, I had a terrible dream that he passed away and I was dealing with his assets and it occurred to me that I knew nothing about Chilean laws. He has a long time girlfriend but they are not legally married so I guess I would be the heir to everything as I am his only child. Terrible dream, but educating myself makes me feel better. My dad is very happy and healthy and only in his 40s.