Month: January 2023

Costa Rican Last Will And Testament

When living in paradise it can be difficult to think about the less savory topics such as your last will and testament. Costa Rica will honor your US/Canadian last will and testament only after it has gone through the probate process in your home country and can take up to 2 years to go through the courts and probate of Costa Rica. The last thing you want to do is put your loved ones through a difficult and expensive probate process.

If you have assets in Costa Rica such as a property, bank account, car, and so on, you will need to have a will created according to Costa Rican laws to ease and expedite the probate process.

The process to create a Costa Rican last will and testament is fairly simple and reasonably priced. You will need a Costa Rican notary public or an attorney who is also a notary. With the notary you will draft a will declaring all your Costa Rican assets and specifying who the beneficiary/beneficiaries will be. After this draft is created the notary will create a public deed including all of this information and require it to be signed by at least 3 witnesses. This public deed is called a “testimonio” and your notary will supply you and the National Records building “Archive Nacional” with a certified copy.  You can revoke or modify your will at any time and since it is publicly recorded you can always request another copy from the National Records building. It is important that you also make sure to send a copy to your beneficiaries and the executor of your will.

Keep in mind that regardless if you have a will or not, there will be a probate process. Yes a last will and testament will expedite the process through the courts but you should still guarantee that your beneficiaries will have the funds necessary to go through the process. There will be notary fees, National Registry fees, and the real estate transfer taxes. If you own a bank account here in Costa Rica, you can appoint beneficiaries that will receive access to your accounts without a probate process. This way your beneficiaries can pay for the necessary costs to carry out your final wishes.

Another great option is creating a trust. A trust is a formal agreement between you and this entity, that states the trust owns the assets. Assets will be transferred to the beneficiaries you have designated at the time of creating the trust if you pass away. Before you purchase any assets, the trust must be created so that you can transfer the assets directly to the trust that is administered by a bank or escrow company. Of course you can transfer assets to a trust later but this will be an additional cost so it is easier to have the trust created prior to purchase.

Creating a last will & testament is the responsible and right thing to do for your loved ones. Each case is different and it is best to talk to your trusted attorney on what the best option is for you. If you have any questions or need recommendations I am more than happy to assist.

Buyer’s Closing Costs In Costa Rica

A common question buyers have when purchasing property in Costa Rica is “what are the closing costs”. This is actually a very easy question to answer as the laws of Costa Rica dictate what the bulk of the closing costs are.

When purchasing a property the closing costs will be a percentage of either A) the agreed upon sale price or B) the legal registered value of the property in the Public Registry system, whichever number is higher. The government always wants their cut to be the higher percentage. The total closing costs should be no higher than 5% and can be as low as 3.85%.

Here is a detailed breakdown of the fees:

1)    Attorney/Notary Fees: This is the fee that you will be charged by the attorney/notary that represents you in the transaction. The fee ranges from 1-1.5% of the A) the agreed upon sale price or B) the legal registered value of the property in the Public Registry system, whichever one is higher. This fee is for the attorney to do all the due diligence on the property to make sure you are purchasing a free and clear title with no liens, encumbrance, or annotations. The notary will also ensure that once the sale is completed, the new deed will be registered properly under your name or corporation. (Not all Costa Rican attorneys are notaries, to become a notary a person has to be a licensed attorney first)

2)    Real Estate Transfer Tax : This tax is paid directly to the Costa Rica Government and is 1.5% of the registered value or the agreed upon sale price, whichever one is higher.

3)    National Registry & Documentary Stamps: This fee will be .85% of the registered value or the agreed upon sale price, whichever one is higher.

Here is a further breakdown: National Registry Stamps (0.5%) Agrarian Fees: (0.15%) Fiscal Stamps, National Archive Fee, Costa Rica Bar Association Fees (Less than $20) Municipal Fee: (0.2%)

4)    Escrow Fees: The escrow is the registered company that will hold the funds and disburse at closing. This is usually split 50/50 between buyer and seller. The fee the escrow agency charges depends on the amount of funds they are responsible for safe keeping. Average cost for both buyer and seller is about $550.00.

5)   Wire Fees:  Depending on the escrow company that is used for holding the funds, wire fees will be about $75.00 to disburse the funds after closing. Your bank may also charge you a fee for sending the funds to the escrow company. Check with your local bank.

6)   Inspection Fees: When purchasing a finished property like a condo or a home, it is highly recommended to have a home inspection. This will run anywhere from $300 to $700 depending on the size of the property. This will be paid out at closing by the escrow agency, so no need to send fund for this ahead of time

7)    Utility Transfer: If you choose to have your attorney transfer the utilities under your name or corporation it will be an additional cost, approximately $150.

8)    Utility Deposit: You will also have to give a deposit to the utility companies, the deposit amount will be based on past usage, approximately $250.

9) Affidavit For Money Laundry: For closing, you will have to sign an affidavit for money laundering, depending on the law firm you use, the fee will be approximately $275.

10) Special Power Of Attorney: If you are not able to be present for the closing, you will have to have a Special Power of Attorney, the cost ranges from $200-$400.

11) Corporation: If you choose to put the property under a corporation, instead of your personal name it will run you about $700-$1200, depending on the law firm or type of corporation you set up. Something else to keep in mind is each year you must pay a corporate tax, register your shareholders and file a tax return. To learn more, check out this blog  https://blog.costarican-american-connection.com/annual-taxes-and-filing-requirements-in-costa-rica/

12) Survey: When purchasing a house or a lot it is very important to get a licensed topographer to survey the property and make sure all the lot lines are correct. A comprehensive survey with markers all on points of the property will cost around $750. If you need to survey a large property, like a farm, the survey will be more expensive.

13) MISC FEES: A few additional fees that can be added into a closing are paying your new property taxes and HOA fees in advance.

VAT (13%): All services used in the closing of a property will include a 13% Value Added Tax. For each of the amounts listed above that are being provided as a service will have this additional tax added on. 

The higher the value of the property the higher the closing costs will be. Just use 5% of the purchase price as a safe assumption as to what you will spend on your new home in paradise when you are looking at your budget. A small price to pay! If you have any questions, please reach out and I will be happy to assist. I can also help you run the numbers on a property you may be interested in!