Succession and estate planning in the Middle East is a crucial domain that has drawn the attention of various professional fronts. It’s imperative to understand the key trends and challenges of the Sharia-compliant estate structures and gain insights into the financial future of the area. From the challenges of multiple jurisdictions to the impact of technology, this edition of our newsletter offers a complete idea of the evolving dynamics in wealth transition. With these valuable insights into evolving strategies that individuals and families are adopting, you can secure your future in the Middle East.
Challenges in Sharia-Compliant Estate Planning
Sharia-compliant estate planning is not a novel concept in the Middle East, but it presents unique challenges. Some of these include:
- It’s challenging to address the evolving dynamics of local GCC assets within Sharia-compliant estate plans. There has been a visible shift toward increased inclusion and significance in comparison to non-GCC assets
- Another hurdle is to explore the uncharted territories of domestic estate planning solutions like the UAE federal trust regime and common law private foundations
- Managing the web of multiple (non-GCC) jurisdictions remains a challenge, which is influenced by the demographic location of family businesses and different nationalities or tax residencies of family members
- The absence of standardization and harmonization in legal frameworks governing Sharia-compliant estate planning across different GCC countries continues to be a challenge. For affluent families, this lack of uniformity poses significant challenges to encompass all their assets within the GCC
Emerging Trends Shaping the Future of Succession and Estate Planning
In this section, we have discussed the emerging trends that will shape the future of succession and estate planning in the Middle East.
1. Domestic Structuring
Over the years, international structuring has been a viable option. However, the rise of local alternatives like the UAE Foundation, is gaining prominence. New trends reveal that clients largely favor locally-based advisors. These domestic structuring options provide a pragmatic response to rising pressure and costs associated with the adherence to global tax norms.
2. Growing Wealth in the GCC
As the GCC cements its position as one of the wealthiest regions globally, the demand for estate planning services keeps rising. High oil prices and booming economies in the Middle East are the key factors spearheading the affluence of the region. This explains why families are looking for comprehensive solutions for the preservation and succession of their wealth.
3. Increased Awareness of Estate Planning
A significant shift has been noted in the awareness for protecting assets and intergenerational planning among families and high-net-worth individuals in the GCC. This trend reveals that the next generation is likely to take a proactive stance in financial planning. They will recognize the impact of the dispute on their family assets.
4. ESG and Impact Investing
The rise of ESG (Environmental, Social, and Governance) considerations and impact investing is yet another important trend to check out. This trend is particularly visible among younger members of the family. Within family offices, the focus has substantially shifted to long-term sustainability and ESG. This has fuelled a growing interest in digital assets and private banks.
5. Family Offices Becoming Professional
Family offices are undergoing a transformation, and they are becoming increasingly sophisticated while dealing with complexities and managing alternative asset classes. They are bracing up to fulfill more stringent regulatory requirements. The asset management process is becoming increasingly complex, which has fuelled this professionalism. This calls for increased transparency and advanced investment strategies.
6. Technology in Estate Planning
Across the GCC, the role of technology in estate planning is going to be vital in the Middle East. From the virtual execution of DIFC wills to the digitization of registration and operations for UAE foundations and family offices, technology goes a long way in enhancing efficiency. Family offices are readily embracing artificial intelligence, machine learning, and advanced data analytics to streamline their decisions.
7. Affordability of UAE Foundation
Establishing a UAE Foundation involves relatively lower costs. This has gone a long way in democratizing access to asset strutting and protection. The cost of registering a will with the Abu Dhabi Judicial Department at approximately USD 260. This implies that now, a broader segment of the population can secure their assets.
8. Multiple Structures for Estate Planning
Considering the uncertainty in the current business environment, the demand for multiple estate planning structures is on the rise. A recent trend reveals that in the GCC, wealthy families are exploring diversified approaches to reduce the risk associated with owning assets in more than one country.
9. Professional Estate Planning Advisors
A notable trend in succession and estate planning in the Middle East reveals that an increasing number of families are seeking professional advice from established companies for estate planning. These families in the GCC have realized the importance of engaging estate planning advisors for tailoring plans, which align with individual needs to secure the interests of their beneficiaries.
At the IMC Group, we understand the challenges and new trends in succession and estate planning in the Middle East. Our dedicated team of professionals operating both in the Abu Dhabi Global Market and DIFC offers a comprehensive range of services to private and corporate clients. We remain committed to our clients with highly customized succession and estate planning advice.
