I. WILLS AND DISABILITY PLANNING DOCUMENTS
A. Will Formalities and Enforceability of Foreign Wills
In Colombia, a will is a solemn act which must comply with the formal requirements established by civil law in order to be valid and binding. A will, like any other legal act, must fulfill the essential requirements for validity, that is, that the testator has legal capacity to make the will, that his or her consent is not impaired by vices such as error, duress or fraud, and that the act has a lawful purpose and cause. Depending on the type of will involved, the law has established additional specific formalities for validity.
Under Colombian legislation, wills are classified as solemn or privileged. Solemn wills may be open or sealed and privileged wills are classified into oral, military and maritime wills. A solemn will must always be recorded in writing and executed before competent witnesses. At least two of the witnesses must be domiciled at the place where the will is granted, and must be able to read and write.
In an open will, also known as a nuncupative or public will, the testator makes his or her dispositions public before three witnesses and a notary. The witnesses must copy the words of the testator verbatim and, at the end of the proceeding, read and sign the will. In a sealed will, on the other hand, the witnesses and notary are not required to have knowledge of the dispositions contained in it. However, the sealed deed must be presented before a notary and five witnesses, declaring viva voce that the deed contains the will.
Privileged wills, on their part, may omit some of the formalities by reason of specific circumstances expressly determined by law.1 Nevertheless, a privileged will must meet three requirements: i) the viva voce statement of the testator regarding his or her desire to make a will, must be unequivocally declared; ii) the persons whose presence is necessary in the making of the will must be before the testator, and iii) the granting must be continuous, in that it may be only interrupted exceptionally for brief intervals, when required by reason of an accident. The validity of a privileged will is provisional and, therefore, once the exceptional situation is overcome, the requirements of a solemn will must be complied with.2
As to the content of a will, the law provides that it must indicate the full name, place of birth, nationality, domicile and age of the testator, as well as the circumstance of being of sound mind and the names of the testator's spouse and children, together with the information of each of the witnesses and the notary, indicating the place, day, month and year of execution of the will. Errors in content do not nullify the will, provided there is no uncertainty regarding the identity of the testator, notary or witnesses.
The allocations to be made must be determined or determinable, underlining the fact that the will of the testator is limited by the forced allocations established by Colombian law. These allocations are mandatory for the testator, and therefore they will be observed when they have not been made, even if they contradict what is expressly provided in the will. Forced allocations include: i) the support due by law to certain persons; ii) the marital share, that is, the portion of the assets of the deceased which the law assigns to a surviving spouse who lacks the necessary means for a decent subsistence; iii) the legitime succesors portion that is the portion assigned to certain persons known as legatees;3 and iv) the fourth of the estate for accretions to the inheritance of the legitimate heirs.
In accordance with the foregoing, only as of the third order of inheritance, that is, if no descendants or ascendants survive the testator, may he or she dispose freely of the entire estate. Otherwise, the testator may make allocations at discretion only on a percentage equaling 25% of his or her assets.
On the other hand, the validity of wills granted abroad is subject to them been made in compliance with the laws of the State where they were granted, leaving evidence thereof, proof of their authenticity and the legal translation, if necessary.
If the will is granted abroad in compliance with Colombian regulations, the following requirements must be met for its validity: i) that the testator is a Colombian national, or a foreigner domiciled in Colombia, ii) that the will is authorized before a Colombian consul, iii) that the witnesses are Colombians or foreigners domiciled in the city where the will is granted, iv) that the rules of a solemn will are observed.
B. Will Substitutes (Revocable Trusts or Entities)
It is important to point out, first of all, that Colombian law does not contemplate the common law Trust institution, but there is an institution with similar characteristics, known as a Civil Law Trust, or "fiduciae". The establishment of a civil law trust implies the imposition of an encumbrance on all or part of the estate of the Trustor. When this ownership is retained by the Trustor or is transferred to another person, it is done on condition that it will be passed on to a third party upon the occurrence of a specific event. As a will substitute, the use of a Civil Trust is useful to transfer the assets of a future de cujus, through the designation of the spouse and other heirs as beneficiaries of the Trust, once a condition is met, which in this case is the death of the Trustor.
Therefore, a Civil Trust involves three parties: the Trustor, the Trustee and the Beneficiary. The Trustor is the person who delivers the assets by way of a Trust to the Trustee; the Trustee is the person to whom the property is entrusted until the condition is fulfilled, with the charge of restoring it to the Beneficiary; and the Beneficiary is the person in whose favor the restitution is to be made once the condition is fulfilled.
The Trustee holds the full right of ownership and usufruct of the assets for the duration of the Trust, except as otherwise stipulated, bearing in mind that the Trust ownership may be established on the bare title, reserving the proceeds for the Beneficiaries. When the person dies, the ownership of his or her assets passes to the Beneficiaries in the proportion established in the document constituting the Trust Ownership, without the need for a probate hearing.
From the tax point of view, this mechanism may be onerous, given that if the Trust is gratuitous, at the time of occurrence of the condition it generates a taxable capital gain for the Beneficiary, and therefore each case must be studied in detail, in order to determine the appropriateness of using this scheme. On the other hand, even if they do not constitute will substitutes as such, in pursuance of minimizing the tax burden at the time of the succession and as an instrument for administration of the Estate of the deceased during his or her lifetime and after his or her death, certain corporate schemes may be used both in the country or abroad, through corporate forms contemplated in Colombian law, such as Limited partnerships and Simplified Stock Companies.
The establishment of a Limited partnership allows the testator to have control of the company as an administrating or managing partner, and to structure the assignment of the assets with new capitalizations, through which the heirs will gradually increase their rights or shareholdings in the capital of the company.
Likewise, Simplified Stock Companies (Sociedades por Acciones Simplificadas, SAS) have a flexible and dynamic regulatory framework in which the autonomy of the shareholders prevails. This corporate form enables the establishment of types of shares that assign the control of the company to one of the shareholders, through multiple votes or fractioning of vote stipulations for the election of boards of directors or other collegiate bodies of the company. In addition, the SAS offer the possibility of establishing minimum or maximum amounts of corporate capital that may be controlled by a specific shareholder, and special restrictions for the negotiation of the shares issued by the company.
The implementation of foreign companies also allows a testator to manage his wealth in the jurisdiction he considers most favorable for tax and corporate purposes. The transfer of funds abroad to invest in assets is permitted in Colombia, provided the funds allocated for such purposes are channeled through the exchange market and reported to the Central Bank.
C. Powers of Attorney, Directives, and Similar Disability Documents.
Under Colombian civil law, all persons have legal capacity to acquire rights and assume obligations, except for those who the Law deems incapable, namely those who, despite their status as legally capable persons, cannot govern themselves or manage their affairs.4 These persons must act through a representative.
Incapacities have been established in order to protect the interests of certain persons who, for one reason or another, do not have full discernment or lack the necessary experience to be able to express their will, acquire rights and bind themselves in a sufficiently clear manner, and therefore are disqualified to enter legal transactions..
Incapacities may be general or specific. General incapacities refer to all types of legal transactions, while specific incapacities only refer to certain acts and are expressly stipulated by the law. In accordance with the Civil Code, said general incapacities may in turn be absolute or relative. Thus, individuals with absolute mental disability,5 children who have not reached puberty, and deaf-mute individuals who cannot make themselves understood are considered to be absolutely incapable and their acts are subject to absolute nullity. On the other hand, adult minors and squanderers who are under judicial interdiction are considered to be relatively incapable, given that their acts may be admissible under certain circumstances and in certain cases determined by law. This incapacity results in relative nullity.
In favor of protecting the interests of incapable persons, the law has created guardianships, which include tutorships and curatorships. A tutorship is exercised over children who have not reached puberty and is always of a general nature, while a curatorship may be general or special. The latter refers to a specific act or a particular transaction. On the other hand, Law 1306 of 2009, provided that when the value of the productive assets of an individual with absolute mental disability or a minor, exceeds 500 times the legal monthly minimum wage, or is less, but the Judge deems it necessary, the administration of the assets will be turned over to a Trustee.
Likewise, Law 1306 of 2009 created the measure of disability for persons suffering from behavioral deficiencies, prodigality or business immaturity, and who, as a consequence thereof, may place their wealth at serious risk. These individuals may be disqualified to enter certain legal transactions, at the request of their spouse, relatives up to the third degree of consanguinity and even by the individual himself. This may also be imposed as an accessory measure at the request of creditors or ex officio by the judge, in estate liquidation proceedings and in cases of payment through assignment of the assets of individuals.
1. An oral will only occurs in cases of imminent danger to the life of the testator. Likewise, in order to make a military will the testator must be in a war expedition or campaign against the enemy or at a garrison in a territory under siege. A maritime will may only be made on board a Colombian warship at sea.
2. An oral will has no value if the testator dies after thirty days following its execution, or if having died before, the will has not been set out in writing within thirty days following the death. In the case of a military will, if the testator dies before ninety days following the date on which the circumstances of war that enable him to grant a military will have ceased, his or her will is valid, but if the testator survives this period, the will becomes invalid. A maritime will is not valid unless the testator has died before disembarking or during a period of ninety days following disembarkation.
3. The following are legatees:
1) Legitimate, adopted or illegitimate children, personally or represented by their legitimate or illegitimate descendants.
3) Adoptive parents.
4) The blood parents of a child adopted by simple adoption.
4. According to article 1502 of the Civil Code, capacity may refer to enjoyment or action. The former consists of the general legal competence of every individual or legal entity to hold rights and obligations. The capacity to act consists of the ability recognized by law for a person to bind himself or herself, without the intervention or authorization of another person.
5. Persons suffering from a severe or profound learning or behavioral condition or pathology, or mental impairment, are considered to suffer from absolute mental disability.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.