Your Legacy in Costa Rica: A Guide to Wills, Trusts, & Usufructs

Planning your legacy in Costa Rica is a crucial step for anyone with assets or family ties in the country. While Costa Rica’s no-inheritance-tax policy might sound straightforward, it hides a serious legal hurdle: a mandatory, often lengthy court process known as proceso sucesorio (probate).

Without proper succession planning, your assets can be frozen, your family may face costly legal battles, and your wishes could be delayed—or ignored. Fortunately, Costa Rica offers legal tools that allow you to bypass probate entirely. This guide explains the strategies—wills, trusts, usufructs, corporate structures, and more—that can help ensure your assets transfer swiftly, privately, and exactly as you intend.

The Big Hurdle: Costa Rica’s Probate Process (Proceso Sucesorio)

When someone passes away in Costa Rica, their assets are immediately frozen. They cannot be sold, transferred, or accessed until the succession process is completed.

Two forms of succession exist:

• Sucesión Testamentaria (Testate): A valid Costa Rican will directs distribution, but probate is still required.
• Sucesión Abintestato (Intestate): If no will exists, assets are distributed under the Civil Code’s strict order of heirs—often misaligned with the deceased’s wishes.

Even a simple, uncontested probate can take months. A contested case may drag on for years, draining money and family goodwill.
That’s why modern estate planning in Costa Rica focuses on structuring assets to avoid probate altogether.

Your Toolkit: Core Strategies to Bypass Probate

1. The Ultimate Strategy: The Trust (Fideicomiso)

The Costa Rican trust is the most powerful and flexible estate planning instrument available.

How it works: You (the grantor) transfer assets—such as real estate, bank accounts, or investments—to a trustee, who manages them for beneficiaries according to your instructions.

Key Advantages:

• Avoids probate: Trust-held assets bypass the succession process.
• Confidentiality: Unlike wills, trusts are private contracts.
• Asset protection: Trust assets form a separate patrimony, shielding them from creditors.
• Flexibility: You can dictate conditions, such as age-based or milestone-based distributions.

The Patrimonial (Family) Trust is most common: revocable during your lifetime, irrevocable upon death.

2. The Foundational Tool: The Will (Testamento)

Even if you use a trust, a Costa Rican will remains indispensable. It:

• Names an executor (albacea) to oversee your estate.
• Appoints guardians for minor children.
• Distributes “residual” assets not placed in a trust.

Costa Rica allows broad freedom of testation—you decide who inherits—limited only by the obligation to provide support for dependents.

3. A Powerful Hybrid: The Usufruct (Usufructo)

The usufruct separates ownership from use:

• Naked Owner (Nudo Propietario): Holds legal title.
• Usufructuary (Usufructuario): Retains the right to live in, use, or collect income from the property.

When the usufruct ends (usually at death), full ownership automatically reverts to the naked owner—with no probate required.

Example: Robert owns a home in Costa Rica and has two children. He remarries and wants his new wife, Maria, to live there for life but still pass ownership to his kids. He grants his children naked ownership and Maria a lifetime usufruct. Upon Robert’s death, Maria continues living in the home. When she later passes, the usufruct ends, and the children inherit full ownership automatically.

Additional Strategies for Seamless Asset Transfer

• Corporate Structures (Sociedades): Holding real estate in a Costa Rican corporation allows heirs to inherit shares rather than the property itself. Shareholder agreements can ensure smooth business or property transfers.
• Lifetime Gifts (Donaciones en Vida): Transfer assets during life, often gifting naked ownership while retaining a usufruct.
• Direct Beneficiary Designations: Many bank, pension, and investment accounts allow beneficiaries to be named directly.
• Life Insurance (Seguro de Vida): Proceeds flow directly to named beneficiaries, providing immediate liquidity and avoiding probate.
• Payable-on-Death (P.O.D.) Accounts: Ensure funds pass privately and automatically to heirs.

A Critical Complement: Planning for Incapacity

Estate planning isn’t just about death—it’s also about incapacity. A Power of Attorney (Poder Generalísimo) allows a trusted person to manage finances if you’re alive but unable to act. Without one, your family must endure another long court process to appoint a guardian.

Understanding Costa Rica’s Tax Landscape

• No inheritance or gift tax: Heirs aren’t taxed just for receiving assets.
• Transfer tax: Real estate transfers still incur registration fees and taxes based on fiscal value.
• Capital gains tax: Inheritance itself isn’t taxed, but heirs pay 15% capital gains tax if they later sell at a profit.

Your Action Plan

For most expats and residents, the ideal plan combines a Patrimonial Trust for major assets with a Will for residual items and appointments. To begin:

1. Inventory your assets: Real estate, accounts, shares, vehicles.
2. Define your goals: Decide who inherits, when, and under what conditions.
3. Engage expert legal counsel: A Costa Rican attorney ensures documents are valid and compliant.
4. Title assets properly: Make sure properties, shares, and accounts are correctly transferred to trusts or corporations.
5. Review regularly: Update your plan after life events like marriage, divorce, or the birth of children.

Final Word

Succession planning in Costa Rica is about more than avoiding taxes—it’s about protecting your loved ones from drawn-out probate, preserving privacy, and ensuring your wishes are honored.

By combining the right tools—trusts, wills, usufructs, corporate structures, and life insurance—you can build a plan that transfers your legacy smoothly and securely. With proactive planning today, your heirs will receive a gift of clarity and peace of mind tomorrow.

For personalized assistance, legal guidance is essential. Costa Rica Expertise does not endorse or refer specific attorneys or firms. For guidance, consult your trusted legal advisor. If you don’t have one, ask friends or colleagues in Costa Rica for recommendations you can trust. You may also check your home country’s embassy or consulate website, which often provides a list of reputable attorneys in Costa Rica and notaries authorized to practice here.