In Brief
- A DIFC or ADJD Will gives non-Muslim expats testamentary freedom in the UAE, but it activates only on death and must pass through a probate process that can freeze assets for months.
- A RAK ICC Foundation, governed by the RAK ICC Foundations Regulations 2019 (as amended in July 2025), is a separate legal entity with perpetual existence. Because it owns the assets during the founder’s lifetime, the founder’s death doesn’t trigger a change in legal ownership and doesn’t require probate.
- Under Article 17 of the CT Law, a qualifying family foundation can apply to the FTA for treatment as a fiscally transparent entity, potentially allowing passive investment income to flow to beneficiaries without entity-level corporate tax. For non-Muslim residents of the UAE, the DIFC Wills and Probate Registry and the Abu Dhabi Judicial Department (ADJD) Will registration service represented a significant step forward. For the first time, expats could opt out of default Sharia inheritance rules and direct the distribution of their UAE-based assets according to their own wishes. But a will, however well drafted, has a structural limitation: it only takes effect on death. Until that point, the assets remain in the individual’s name, exposed to personal liability claims, and subject to the probate process once the owner passes away. For individuals with complex asset structures, business interests, or family arrangements that don’t fit neatly into statutory inheritance categories, a RAK ICC Foundation offers an alternative that operates during the founder’s lifetime and continues seamlessly after it.
What happens to UAE assets when a will goes through probate Even a valid, registered DIFC or ADJD Will must go through a probate process before assets can be distributed. Probate is a court-supervised procedure that validates the will, confirms the executor’s authority, and authorises the transfer of assets to the named beneficiaries. During this process, UAE banks and financial institutions are required to freeze the deceased’s individual accounts upon official notification of death. This is a protective measure designed to ensure that all liabilities, including outstanding debts and tax obligations under the CT Law, are cleared before distribution. Probate timelines in the UAE vary, but the process can take anywhere from three to twelve months. During this period, the deceased’s family may face a gap between ongoing financial obligations and the ability to access the estate’s funds. Mortgage payments, school fees, and household expenses don’t pause while a court processes paperwork. If the deceased was the sole shareholder of a company, that company’s bank account may also face restrictions, affecting payroll and supplier payments. Probate is also a court process. Once a will enters the judicial system, the estate’s details become part of a formal record. For high net worth individuals, this loss of privacy around the composition of their estate can be an unwelcome consequence. How a RAK ICC Foundation avoids the probate process entirely A RAK ICC Foundation, established under the RAK ICC Foundations Regulations 2019 (as amended in July 2025), is a separate legal entity with its own juridical personality. It is not a trust and it is not a company in the conventional sense. It has no shareholders or members. Instead, it is governed by a Charter and By-Laws, administered by a Council of at least two members, and may be supervised by a Guardian. The critical difference from a will is this: a Foundation owns the assets during the founder’s lifetime. When property, company shares, or investment portfolios are transferred into a Foundation, legal ownership passes to the Foundation itself. The founder may retain significant influence through the Charter and By-Laws, and may even serve on the Council, but the assets are no longer part of their personal estate. When the founder dies, nothing changes from a legal ownership perspective. The Foundation continues to exist. The Council continues to administer the assets according to the By-Laws. There is no change of ownership to process, no probate court to petition, and no freeze on accounts. The family’s access to income from the Foundation’s assets can continue without interruption, subject to the distribution rules set out in the By-Laws. The By-Laws themselves are private documents. They are not filed with any public court or registry. The details of who receives what, and under what conditions, remain a matter between the Foundation, its Council, and its beneficiaries. The July 2025 amendments: firewall provisions and limitation periods The July 2025 amendments to the RAK ICC Foundations Regulations introduced protections that substantially strengthened the Foundation as an asset protection vehicle. Firewall provisions under Regulations 7(1) and 7(5) The amended regulations confirm that a RAK ICC Foundation is governed exclusively by the laws of Ras Al Khaimah. Under the updated Regulation 7(5), courts within the RAK ICC framework will not recognise or enforce foreign judgments that conflict with the Foundation’s structure or its governing regulations. In practical terms, this means that if a court in another jurisdiction orders the distribution of Foundation assets based on forced heirship rules, community property regimes, or matrimonial property claims that don’t exist under RAK law, that order has no effect within the RAK ICC framework. The Foundation’s By-Laws, not a foreign court’s judgment, determine how assets are distributed. Three-year limitation period under Regulation 68A The 2025 amendments also introduced a fixed limitation period for challenges to the Foundation. Any claim seeking to challenge the validity of the Foundation itself, or the transfer of assets into it, must be brought within three years of the relevant event. Once that period expires, the challenge is time-barred. This provides a degree of legal certainty that wills cannot match. A will can be challenged after the testator’s death on grounds ranging from undue influence to lack of capacity. A Foundation that has been in place for more than three years, with assets properly transferred during that period, has passed beyond the window for such challenges under RAK ICC law. Duress protections The amendments also include provisions addressing situations where a Foundation Council member receives instructions that may have been given under coercion. If the Council has reasonable grounds to believe that an instruction from the founder was given under duress or judicial pressure, the regulations require the Council to disregard that instruction. This protects the Foundation’s assets even in scenarios where the founder themselves is being compelled to act against their own interests. Corporate tax treatment: how Article 17 applies to family foundations Under Article 17 of Federal Decree-Law No. 47 of 2022 (the “CT Law”), a family foundation can apply to the Federal Tax Authority (FTA) to be treated as an “Unincorporated Partnership” for corporate tax purposes. If approved, the Foundation is treated as fiscally transparent: it doesn’t pay corporate tax at the entity level. Instead, income is treated as flowing directly to the beneficiaries. Where the beneficiaries are natural persons and the income consists of passive investment returns such as dividends or rental yields, this income generally falls outside the scope of UAE corporate tax for individuals. The practical result is that the Foundation can maintain a low or zero effective tax rate on passive wealth, provided the FTA’s conditions for fiscal transparency are satisfied and maintained through annual confirmation filings. Tax treatment is not automatic The Article 17 election requires a formal application to the FTA and ongoing compliance. The FTA assesses each application individually. Founders should not assume that fiscal transparency will be granted automatically; professional tax advice is essential before and after establishing the structure. A layered structure: Foundation, holding company, and operating entities In practice, most estate planning structures don’t place assets directly into the Foundation. A more common approach uses a layered model: The Foundation sits at the top of the structure as the ultimate governance and succession planning vehicle. It owns the shares of the entities below it but doesn’t trade or conduct commercial activity. A holding company (typically a RAK ICC or ADGM special purpose vehicle) is owned by the Foundation and holds the specific assets: real estate, investment portfolios, cryptocurrency holdings, or private equity stakes. Operating companies (in RAKEZ, DMCC, mainland Dubai, or other jurisdictions) run the founder’s active business interests. Their shares are held by the holding company. This layered approach serves several purposes. It isolates different asset classes from each other, so a claim against one entity doesn’t reach the others. It allows the Foundation Council to manage the governance of operating businesses through the holding company without direct involvement in day-to-day operations. And it ensures that if the founder dies, the Council continues to exercise voting rights over the holding company’s shares, keeping the business operational and the family’s income stream intact. Where a will still fits within the broader plan A Foundation doesn’t eliminate the need for a will entirely. Not all assets can or should be transferred into a Foundation structure. Personal items, assets in jurisdictions that don’t recognise UAE foundations, and certain bank accounts may remain in the individual’s name. A DIFC or ADJD Will remains the appropriate instrument for directing the distribution of these residual personal assets. The most effective estate plans use both instruments: a Foundation for the bulk of the estate where privacy, continuity, and asset protection are priorities; and a will as a safety net for assets that sit outside the Foundation’s scope. For a detailed assessment of how a RAK ICC Foundation could work alongside your existing will and business structures, contact the Alldren private client team.
This article is for general informational purposes only and does not constitute legal, tax, or financial advice. Readers should seek professional advice tailored to their specific circumstances. The tax treatment described in this article depends on individual circumstances and FTA approval. Information is current as of March 2026 and may be subject to change.
