Divorce and marital assets in Corporations. ☎️ A problem in family law disputes?
A lot of people find that marriage in Costa Rica is a fantastic idea. And it is! But it’s always better to have a legal consultation, with an expert in Family Law. Our family law firm will not only help you tie the knot securely, we will also assist you with divorce in Costa Rica if the need arises. Costa Rica´s great weather and beautiful beaches make this country a truly wonderful place to live. We have volcanoes, hot springs, and an exuberant natural environment. This article covers the pros and cons of placing marital assets in corporations in Costa Rica. We also cover the importance of having a family law law firm to advise you. What happens in case of divorce? Can the assets be considered divorce assets in Costa Rica?
You decided to invest in your happiness, get married, and found a nice property in Costa Rica:
You planned everything with your fiancé and got prepared for the wedding. The ceremony took place, you got married, and fell in love with this country. It happens! Now you have decided to buy a real estate property. And why not? It’s beautiful!
Since Costa Rica has all climates (except snow), there is a space for every taste. After searching for the property of your dreams, you finally find one. You proceed with the property purchase. The question is, do you place it in your name or constitute a corporation to hold it? Under family law, this action will have varied legal effects that can come to bless or haunt you later.
The standard legal advice by family law firms in Costa Rica:
The standard legal advice in Costa Rica, is to constitute a holding corporation for the real estate property to be held. Should expats buy property in Costa Rica through a corporation? Why not? As legal professionals, we usually suggest, you form the corporation in equal partnership. As a result, you will both own fifty percent of the shares. The incorporation articles should stipulate that you must sign jointly to mortgage, sell, or dispose of the corporation´s assets. Thus, the corporation grants joint powers of attorney to both of you.
It’s been a usual recommendation by family law firms in Costa Rica to constitute standard corporations, which in Spanish are called a “Sociedad Anonima.” Likewise, a family law firm may suggest a Limited Liability Corporation in Costa Rica or “Sociedad de Responsabilidad Limitada.” If you constitute a stock corporation in Costa Rica, you both receive shares; if you form an LLC, you will receive quotas.
Why do family law firms recommend this?
The idea behind doing this is that the asset will be protected from any personal obligations you may have. This is standard legal advice. Corporations in Costa Rica offer a myriad of benefits, from tax purposes to the limited liability they confer. Having a corporation will also cover the property investment from being sold or mortgaged by any of you since a joint signature is required. All of this makes sense.
Another option, is to own the property in both of your names. This is called co-property; each of you will personally own a percentage of the asset. For example, you decide to own property in Costa Rica jointly. Each of you ends up owning 50 percent of the asset. This means that in the Registry, each will own a right to the asset in the allocated percentage. Each right can be mortgaged, sold, or disposed of. A corporation prevents this, for better or for worse!
Positive Aspects of owning marital assets in Costa Rica, in corporations:
This legal service has many positive prospects for clients. Under the corporate umbrella, the stock corporation hides the actual shareholder. This can also give you overseas taxing protections. If an overseas company in Panama owns the company in Costa Rica, the shareholders’ identities are protected. If the holding company in Panama has bearer shares, it’s difficult to determine who the shareholder is. This remains true today despite regulations.
Another positive prospect of creating a corporation in Costa Rica is the “dismemberment of the legal personality.” This means that the shareholders are not personally liable for anything the corporation does, and the corporation is likewise not responsible for any obligations the shareholders may have. If both of you create a corporation and place the marital asset in its name, the asset belongs to the corporation.
The holding company can be a problem in case of divorce, under Costa Rican family law.
There is a problem with all of this. Nobody gets married, thinking of being divorced later on. The question is, if the assets placed in the corporation, are considered to be marital? I am not referring to the shares of the corporate entity. They already belong to you! What I mean is, that what you own are just the shares or quotas of the corporation itself, not the assets. Remember that the corporation owns the asset. And this is where the problems begin.
In a divorce, the net value of the assets are distributed to each spouse. Each one gets fifty percent of the value of the marital assets. The detail here is that if the family home was placed in a corporation, then the asset is not yours! It belongs to the corporation. Keep in mind that marital assets are those that are acquired during the marriage with mutual effort. Assets acquired by a winning lottery ticket, donations, and inheritances, are not marital assets due to a lack of joint effort to obtain them. Technically, a corporation’s assets are not matrimonial since they do not belong to the couple but to the corporation. The marital assets are the shares.
Assets in a corporation are not marital assets per se:
As stated previously, if the marital assets are in the corporation, they technically are not marital assets. They belong to a third party, the legal entity or corporation, not the couple. Thus, the marital assets are the shares or quotas of the corporation. This is where it gets interesting! You should immediately contact me, to represent you. I have the legal solution to all of this.
Avoid the problem through the articles of incorporation:
Even though I have the solution to the problem, there is a way to avoid it altogether. These problems can be avoided during or after the corporation´s constitution. You both should indicate in the corporate legal books, that all the corporation’s current or future assets are marital. Many expensive litigations can be avoided with a solution as simple as this one.
The incorporation of a shareholder agreement is an elegant solution to the problem. When buying a house in Costa Rica, it’s vital to have a family lawyer that will listen to your situation and foresee any future problems. You will thank me later.
If divorce is inevitable, what will happen to the divorce assets in the corporation? Do you lose them?
If you were already married in Costa Rica, the assets are in a corporation, and you want to get a divorce, then I can help. Divorce in Costa Rica can be amicable. If that´s the case, we can do the shareholder´s act and amicably distribute the corporation´s assets between you. This may not be possible for various reasons, and divorce ligation may be the only solution. Remember that corporations are legal entities in the eyes of third parties. If divorce litigation is inevitable, and the divorce assets are in a corporation in Costa Rica, you don´t have to panic. I have the legal solution to this conundrum, and it has to do with disregarding the corporate veil, amongst other things.
When you file the family lawsuit, things have to be properly requested to the Judge in litigation. So be sure to contact me to represent you. If your attorney does not know how to handle this type of situation, you may end up with your property held in the corporate structure, without being able to take it out.
What if I am not married, and we just live together?
If both of you live together as a couple, and are single or divorced, you have legal aptitude to marry. This is what´s called a common law marriage, or a “defacto union.” This type of union has exactly the same effects as any formal marriage: child support if you have children, marital assets, and hereditary rights.
Contact me as your family law lawyer in Costa Rica.
Many people end up in expensive litigations due to erroneous recommendations by family law attorneys in Costa Rica. If you want a marriage in Costa Rica, you should consult me as a marriage lawyer before your wedding.
As a notary public, I can even marry you and give you the best advice possible regarding marital assets. Even though this article offers sound advice, there is no general rule; one must study each case individually. Legal consultation is critical.
Dr. Christopher Pirie Gil.
Family law firm in San José, Costa Rica.