• Author:  Licenciado Juan Carlos Alvarado                                  Bufete Danzilo -  Tegucigalpa, Honduras                                                
              Property Inheritance and Transfer
  

• Having been in correspondence with some U. S. ex-pats regarding this
  topic and in the interests of  clearing  up some misinformation regarding recent changes in the applicable statutes, I wish to make this same information available to all of you.  Generally, this is what the most recent reforms have accomplished :
                                                                                                            First, regarding the validity of wills issued in a foreign country, this topic is spelled out in   Article 1011 of the Honduran Civil Code.  It states:
  
  "Article 1011.- Any will issued in a foreign country, either by a Honduran or any other person, will be valid, so long as it observes all the formalities and conforms to the laws of the country where it was issued, and if the authenticityof the appropriate document is also proven by the normal means."  What this language requires is the notarizing of the appropriate will, and obtaining an affidavit from the probate court that the will corresponds to the laws in force in the particular State, province or country where it was issued.
  
  Second:  A new reform regarding taxes has been passed into law. In summary, Since May 20, 1998, INHERITANCE TAXES HAVE BEEN ABROGATED (Revoked).
  
  Here's the explanation: The prior law that governed inheritance taxes was entitled   "Law of Taxes regarding Inheritances, Bequests and Donations." It was contained in Decree number 67, dated February 15, 1938. Article 2 of this law stated the following table for payment of taxes:
  
  1% Legitimate children
  2% Legitimate parents
  Illegitimate parents who had (legally) acknowledged a child
  Grandchildren and other descendants
  Spouses
  3% Other ascendants
  Legitimate brothers and sisters
  5% Other relatives (who may legally succeed)
  8% Assignments or donations for a purpose
  10% Assignments or donations to unrelated persons, natural or juristic, who have no family ties with the decedent or donor, either by consanguinity or affinity [i.e. related by blood or marriage]
  
  Unfortunately, Article 5 also added that whenever the heirs or recipients of goods located in Honduras were non-domiciled foreigners, they would pay 20% as estate taxes. The same fate accrued to domiciled foreigners who abandoned (left) the country.
  
  Decree 187 dated December 29, 1955, issued a reform of Article 8 of the Law,stating that heirs had to present the petition for transmission of goods within 2 months of the decedent's passing, if a will had been left, or 4 months, in case no will had been left (testate vs. intestate proceedings.)
  
  A new Inheritance Law had a brief existence, between January 1, 1964, and December 30, 1964, but it was subsequently abrogated, and the old law I have quoted above once again took effect.
  
  With the advent of the Family Code (Decree 76-84, dated May 31, 1984, and in force one full year after its passing), the difference between legitimate and illegitimate children (and parents) was abolished, so the new table read like this:
  
  1% Children
  2% Parents
  Grandchildren and other descendants
  Spouses
  3% Other ascendants
  Brothers and sisters
  5% Other relatives (who may legally succeed)
  8% Assignments or donations for a purpose
  10% Assignments or donations to unrelated persons, natural or juristic, who have no family ties with the decedent or donor, either by consanguinity or affinity
  
  Now for the current reform:
  
  Article 29 of the new "Law for the Stimulation to Productivity, Competitiveness and Support for Human Development" contained in Decree 131-98 dated May 20, 1998, in full force since that date, states:
  
  "Article 29.- [We hereby] Abrogate the provisions of "Law of Taxes regarding Inheritances, Bequests and Donations," contained in Decree no. 67, dated February15, 1938, as it relates to the obligation of presenting the petition for the assets of the estate of the decedent and payment of the corresponding tax, on inheritances or bequests, including donations because of death, be it testate or intestate, albeit leaving in full force all provisions relating to donations among the living, of real estate of chattel located in Honduras, as long as the value of the donation exceeds the sum of one hundred thousand Lempiras (L.100,000.00).                                                                                   
  The competent Civil Courts of Letters will issue the corresponding certifications of the declaration of heirs."
  
  What this means is that you no longer have to pay estate taxes, regardless of your condition as child, parent, spouse, Honduran or foreign. You will only pay taxes if, while still living, you donate any real estate or chattel to your children, and the value of the donated goods exceeds L.100,000.00 (about US$8,500.00 at the current exchange ratio).
  
  (My colleagues and I are already discussing the fact that the reform eliminated the Law, but forgot to mention anything about the existing by-laws. Our consensus is that by-laws exist precisely as a consequence to the originating law, so if the latter disappears, or is modified, the by-laws cannot be invoked against you in this instance.)
  
  However, from the above it is quite clear that this new reform will dramatically alter your future plans.

• Establishment of Trust Funds:
  
  Another option that has surfaced in the disposition of wealth is a trust arrangement   This alternative contract now exists as a viable option
  under Honduran law, and parties are steadily increasing its usage. Banks are willing to serve as custodial agents for title deeds, stock certificates or other types of documents involved in the estate.  This topic is big enough in itself, that I will most likely deal with Trusts in a future separate paper,  and consider some of   the questions that the subject evokes.
  
  Hopefully this clears up much of the pre-existing erroneous information in circulation, and I will gladly address any other substantive questions or concerns that may be ovrlooked in this brief treatment. Please remember that since this is a new law, there may be some more explanations  and procedural adjustments in days to come.   Stay tuned.
  
  Juan Carlos Alvarado - Attorney-at-law               <jcalvar@hondutel.hn>

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