The death of entrepreneurs and investors holding significant assets often brings to light relevant discussions concerning estate succession and the legal instruments available for the preservation of wealth, especially when assets are located in different countries. The absence of direct descendants or ascendants raises questions regarding the allocation of such assets and the arrangements that may be adopted to avoid succession disputes. This scenario serves as a starting point for a recurring issue in the Brazilian context: if a foreign quotaholder dies while owning assets in Brazil and has no mandatory heirs, no surviving spouse or partner, and has left no will, would such assets be automatically transferred to the State?
Under Brazilian law, the answer is no. As a general rule, succession is governed by the law of the deceased’s last domicile, pursuant to Article 10 of the Introductory Law to the Norms of Brazilian Law (Lei de Introdução às Normas do Direito Brasileiro – LINDB). However, there is a relevant exception: assets located in Brazil are subject to Brazilian legislation, regardless of the nationality or domicile of the deceased.
In practice, this means that real estate, vehicles, bank accounts, and equity interests in Brazilian companies are governed by the Brazilian Civil Code, particularly the provisions concerning the opening of succession, transfer of inheritance, and the order of hereditary succession. Therefore, even if the main probate proceeding is conducted abroad, it will be necessary to conduct a separate proceeding limited to the assets located in Brazil in order to regularize the transfer of assets located within the country.
From a corporate law perspective, it is fully permissible for a foreign individual to hold quotas in limited liability companies or shares in Brazilian corporations. In the event of death, such equity interests form part of the estate and may be transferred to legitimate or testamentary heirs, including, when applicable, the surviving spouse or partner, whose inheritance rights may vary depending on the marital regime and the existence of descendants or ascendants. The quotaholder’s nationality is not a determining factor in the allocation of assets; rather, what matters is the existence of successors and valid dispositions of last will.
The risk of assets being transferred to the Brazilian government materializes only in a specific situation: vacant inheritance (herança vacante). Pursuant to Article 1.844 of the Brazilian Civil Code, if there are no surviving spouse or partner and no heirs entitled to inherit under Brazilian law, the estate may be declared vacant and ultimately allocated to the Municipality (or the Federal District, as applicable), in accordance with the statutory rules.
This demonstrates that it is not the foreign status of the deceased that leads to the loss of assets in favor of the State, but rather the absence of heirs or of adequate succession planning or valid testamentary dispositions. The lack of mandatory heirs, although it broadens freedom of disposition, does not eliminate the risks arising from the failure to adopt succession planning instruments, which may generate legal uncertainty and, ultimately, result in vacant inheritance.
In the Brazilian context, the absence of succession planning in situations involving foreign individuals may be even more complex. The need for parallel proceedings, the simultaneous application of multiple legal systems, and potential jurisdictional disputes increase the complexity and costs of the asset transfer process. Moreover, the inherent delays of judicial probate proceedings in Brazil may compromise corporate management and asset value while ownership remains undefined.
It is also worth mentioning that these situations may trigger relevant tax implications in Brazil. Since assets located in Brazil remain subject to the local legislation, it means that estate tax (ITCMD – Imposto de Transmissão Causa Mortis e Doação) could be charged in Brazil in the event of death of a foreigner owner. Considering that the ITCMD is a state tax, the specifics vary by state, but the tax rates usually range from 2% to 8%. The tax due is commonly calculated based on the asset’s market value at the date of death, which could lead to significant impacts when there are quotas and/or partnerships subject to probate proceedings in Brazil.
It is important to emphasize, however, that not all states are currently able to collect taxes in Brazil in cases involving foreigners or foreign assets due to the lack of specific legislation regulating it, but this scenario might change as soon as such laws are discussed and approved.
A lack of organization may lead to prolonged litigation, high tax costs, and even the transfer of assets to the State in the absence of successors. Succession planning, therefore, is not merely a legal tool for conflict prevention, but also a strategy for asset preservation and business continuity.
In conclusion, a foreign quotaholder holding assets in Brazil does not automatically lose them due to nationality. Such assets form part of the estate and must be transferred to legitimate or testamentary heirs in accordance with Brazilian law. However, only if there are no surviving spouse or partner and no heirs entitled to inherit under Brazilian law (including collateral relatives within the statutory limit), and in the absence of valid testamentary dispositions, may the estate be declared vacant, ultimately resulting in the allocation of assets to the State.
Importantly, such allocation is not automatic; it depends on a formal court-supervised procedure, including the appointment of an estate curator/administrator, publication of notices (edicts), and statutory time limits for heirs, creditors, or other interested parties to come forward before vacancy is declared.
Given the complexity of private international law and the particularities of succession law in Brazil, succession planning proves to be indispensable for asset protection and the maintenance of patrimonial stability.