Family as the Core of Succession Planning

In Mexico, most businesses are family run. According to data from CONCANACO SERVYTUR (Confederación de Cámaras Nacionales de Comercio, Servicios y Turismo), in 2023, 85% of businesses in Mexico were family businesses, which generated approximately 75% of Mexico’s GDP and more than 70% of jobs. Therefore, family has a very important role in economic life in Mexico and plays a significant role in estate planning, since the transfer of wealth is generally viewed as a family matter, and decisions about inheritance are often made with the goal of maintaining family unity rather than maximising individual benefit. Open conversations about death, inheritance and estate planning remain culturally sensitive topics, and many families delay formal planning until it is unavoidable.

Freedom of Testation and Alimony Obligations

Although each Mexican state has its own civil code, the general principles are consistent with those of the Federal Civil Code and the Civil Code for Mexico City. Answers in this section are based on the provisions of both civil codes.

Mexican laws generally grant broad testamentary freedom to testators aged 16 and over, but this freedom may be limited by post-mortem alimony obligations to certain family members, including:

• descendants, until they reach 18 years of age, or beyond if they are completing their studies or have a disability that prevents them from working;
• ascendants who lack sufficient means of support;
• spouses or concubines (common law partners) who are unable to work and lack sufficient assets; and
• siblings under 18 years of age or those with disabilities preventing them from working, under certain conditions.

Generational Wealth and Business Continuity

As mentioned above, family businesses are a dominant feature of the Mexican economy. Therefore, their continuity across generations is a primary driver of estate planning. Fideicomisos (ie, Mexican trusts) are flexible and adaptable structures that generally suit most wealth management structures and families, since they provide mechanisms to protect assets from fragmentation.

Charitable and Community Legacies

For many families, incorporating philanthropy into their succession plans is not merely a financial decision but a reflection of deeply held values. Allocating a portion of the family’s wealth to philanthropic endeavours can provide a sense of fulfilment and a purpose that transcends the mere preservation of economic assets across generations. As a result, philanthropic planning has become an increasingly significant component of comprehensive estate strategies. In Mexico, philanthropy has grown as a succession planning consideration among the country’s wealthiest families, particularly through private foundations and civil associations (asociaciones civiles and fundaciones).

Legacy and New Generation Wealth

Mexico’s economic landscape is shaped by the coexistence of long-established multi-generational fortunes and a rapidly expanding cohort of first-generation wealth creators. Legacy wealth is predominantly rooted in industries such as food and beverage, agriculture, mining, real estate, manufacturing and large-scale retail. These families typically control complex portfolios comprising operating businesses, real property holdings and financial investments, all of which demand comprehensive intergenerational succession strategies.

Growth Sectors and New Wealth Creation

In recent years, the technology, financial technology and digital commerce sectors have given rise to a new cohort of high net worth individuals, concentrated primarily in Mexico City and Monterrey. This emerging client profile tends to be younger, with greater international mobility and a higher degree of openness to non-traditional planning instruments, such as offshore trust structures and cross-border corporate arrangements.

Cross-Border Wealth and Multi-Jurisdictional Ties

A considerable proportion of Mexico’s wealthiest families maintain significant connections to the United States, Spain and other jurisdictions, whether through commercial operations, real property ownership or multiple citizenships. This multi-jurisdictional exposure gives rise to particular complexities, as these clients are required to navigate two or more distinct legal and tax frameworks concurrently. Accordingly, estate planning strategies for such families must account for both Mexican and foreign succession and tax obligations.

Prevalence of Real Estate Holdings

Across all wealth levels, real estate continues to represent the single most significant asset class held by Mexican families. Consequently, the structuring of real property transfers – including the deployment of fideicomisos and a thorough assessment of applicable state-level real estate acquisition taxes (ISAI) – constitutes a fundamental component of virtually every estate plan.

Legal Definition of Domicile

Under the Federal Civil Code and the civil codes of Mexico’s 32 states, domicile is defined as the place where an individual has established his or her principal residence, with the intention to remain there. A person may have more than one place of residence but only one legal domicile for civil law purposes. Among other things, the domicile of a person determines the competent courts for proceedings involving their estate and the applicable civil law in succession matters.

Scope of Wills Over Worldwide Assets

Under Mexican laws, wills have worldwide effects, which means that the most recent will granted by an individual overrules any prior ones. However, for particular assets (such as shares and real estate properties) located abroad, it is sometimes advisable to grant local wills specific to such local assets, provided that any such local wills must acknowledge the existence of the “main will” and specify that they only apply to the local assets. Any such “local wills” will have to be homologated in Mexico.

Domicile in Marital and Inheritance Claims

According to the National Family and Civil Procedural Code, jurisdiction for purposes of divorce is asserted based on the latest marital domicile. The Civil Code defines marital domicile as the domicile agreed to by the spouses, in which both spouses have equal authority and standing.

Jurisdiction for purposes of succession proceedings is asserted based on the last domicile of the deceased. In the absence thereof, jurisdiction will be asserted based on the domicile where the real property of the inheritance is located. If there is real property located in several states, the succession proceeding may be brought before the judge of the state in which there are more properties. In the absence of the above, jurisdiction will be asserted based on the place of death of the deceased.

The Civil Code defines the domicile of a person first according to the place where the individual usually resides – the law defines this as a place in which an individual remains for more than six months. In the absence of a usual residence, the place of his or her principal place of business will be considered the domicile. In the absence of both, the Civil Code considers a person’s domicile to be the place where they simply reside, and in the absence thereof, the place where they are located.

Absence of Estate or Inheritance Tax

Pursuant to Mexican civil law, domicile is defined as the place where a person resides with the intent to remain there. It is critical to note that civil domicile is not equivalent to tax residency under Mexican law. Tax residency is determined separately under the Mexican tax legislation, specifically the Mexican Federal Tax Code.

It is important to consider that, in Mexico, income received through inheritances or legacies is generally exempt from income tax when the recipient is an individual who qualifies as a Mexican tax resident. This exemption is established under the Mexican Income Tax Law and reflects the general policy that wealth transfers upon death are not subject to federal inheritance or estate taxation when received by individuals resident in Mexico.

However, it is equally important to consider that the exemptions provided under Mexican law may not apply in the same manner if the recipient is not a Mexican tax resident (and is therefore considered a foreign tax resident). In such cases, Mexican domestic legislation may impose income tax at rates of up to 25%, depending on the type of asset or property being transferred and whether the income is deemed to have a Mexican source. For example, different tax treatments may apply, depending on whether the inherited assets consist of Mexican real estate, shares in Mexican companies or other assets located in Mexico.

Accordingly, when structuring lifetime or succession planning involving Mexican assets, it is important to analyse the tax residency status of the beneficiaries as well as the nature and location of the assets being transferred. These factors may significantly affect whether the transfer qualifies for the applicable exemptions or whether Mexican income tax obligations could arise for the recipient.

Individuals who qualify as Mexican tax residents are subject to taxation on a worldwide income basis. This means that all income earned is subject to Mexican income tax, regardless of its source, whether domestic or foreign.

Individuals who do not meet the requirements to qualify as Mexican tax residents are classified as foreign tax residents and are taxed exclusively on income derived from Mexican sources expressly set forth in the law.

An individual is considered a Mexican tax resident if he or she has established a home or dwelling in Mexico. If that individual also has a home in another country, Mexico will be deemed the country of tax residence only if the individual’s centre of vital interests is located in Mexico. This occurs when any of the following conditions are met:

• more than 50% of the individual’s total income during a calendar year is derived from sources of wealth located in Mexico; or
• the individual’s principal centre of professional or business activities is located in Mexico.

Individuals who do not meet the requirements established under Mexican tax law will be considered foreign tax residents. However, individuals with Mexican nationality are presumed to be tax residents in Mexico, unless proven otherwise by demonstrating their tax residency in another country.

It is important to note that domicile is not an independent basis for determining tax residency in Mexico. While the concept of domicile exists under Mexican civil law, tax residency is determined exclusively under the criteria established in the Federal Tax Code – namely the existence of a dwelling in Mexico and the “centre of vital interests” test.

An individual’s estate (or left-out assets) will be distributed according to the intestate succession rules in the following circumstances:

• when an individual dies without a will;
• if a will is declared null;
• if any assets are left out of the will; or
• when the heir repudiates his/her inheritance or dies before the testator.

Intestate succession in Mexico is governed by the civil code of the corresponding state; see 2.1 Determining Domicile. Although each state has its own civil code, the general principles are consistent with those of the Federal Civil Code. Answers in this section are based on the Federal Civil Code as well as the state civil codes.

The civil codes establish a hierarchical order of heirs. Descendants (children and, by right of representation, grandchildren and further descendants) are the primary heirs, and inherit equally. If there are no descendants, ascendants (parents, then grandparents) inherit. The surviving spouse or recognised concubino/concubina (common law partner) inherits alongside the deceased’s children, receiving a share equal to that of one child, provided that he/she has no assets or if his/her assets are worth less than those he/she would inherit. In the absence of all of the above, collateral relatives (siblings, nephews, nieces) may inherit. If no family members exist, the estate passes to a public institution designated by law (typically the state’s welfare authority or the Beneficencia Pública).

There are no forced heirship rules in Mexico. However, as discussed in 1.1 Social and Cultural Attitudes, Mexican laws limit testamentary freedom through post-mortem alimony obligations to certain family dependents who must be provided for through the estate. Economic dependents left out of a will, or not adequately provided for under it, are still entitled to claim alimony from the deceased’s estate.

Furthermore, Mexican laws embody public policy principles that further restrict testamentary freedom, such as the protection of the family unit, the prohibition of immoral or illegal conditions and the observance of formal validity requirements.

Matrimonial Regimes

Generally speaking, Mexican laws offer two possible matrimonial regimes:

• the community property regime (sociedad conyugal); and
• the separation of property regime (separación de bienes).

The specific agreements of each regime may be agreed upon by the spouses in prenuptial or postnuptial agreements (capitulaciones matrimoniales). In the absence thereof, the provisions of the applicable civil code shall apply. Answers in this section are based on the provisions of the Federal Civil Code, as well as the state civil codes.

Under the community property regime, all assets, rights and property acquired during the marriage become jointly owned by both spouses in equal shares. Each spouse owns 50% of the community estate, and neither spouse may dispose of community property without the consent of the other. At death, the surviving spouse’s 50% share is separated from the estate, and only the deceased’s 50% share is subject to inheritance.

Certain assets and rights (including those belonging to a particular spouse prior to the marriage, or those acquired during the marriage through inheritance or donation) are excluded from the community property and will continue to belong only to one of the spouses.

Under the separation of property regime, each spouse retains full ownership, administration and free disposition of his/her assets, rights and property, regardless of whether they were acquired before or during the marriage. Any assets that are acquired jointly by both spouses are governed by general co-ownership rules. A spouse may transfer or encumber his/her own property without the other’s consent. At death, the entire estate of the deceased spouse is subject to inheritance.

Clawback and Fraudulent Transfers

In Mexico, there are no specific clawback rules for lifetime transfers that may be deemed in derogation of inheritance rights. However, transfers made with the intention of defrauding creditors or depriving economic dependents of their alimony may be challenged.

Recognition and Validity

Prenuptial and postnuptial agreements are fully recognised under Mexican laws through the mechanism of capitulaciones matrimoniales. Capitulaciones matrimoniales apply to spouses married under either the community property regime or the separation of property regime.

According to the Mexican civil codes, capitulaciones matrimoniales regarding the community property regime must be granted before a notary public when the spouses intend to transfer to each other the ownership of assets that require such formality. Any amendments to the capitulaciones matrimoniales must follow the same formalities as the original agreements.

Succession Planning Relevance

The choice of property regime has direct implications for succession planning. Couples with significant pre-marital assets or complex business interests frequently choose separation of property to preserve clarity of ownership and facilitate estate administration. Capitulaciones matrimoniales are therefore an essential first step in any comprehensive estate plan for married individuals. However, many couples prefer to rely on alternative structures such as fideicomisos or family companies, through which they may safeguard their assets in the event of divorce, thereby avoiding the emotional burden that the negotiation and execution of capitulaciones matrimoniales may entail.

Mexican domestic legislation provides an exemption from Mexican income tax for lifetime transfers, such as gifts (donations). Specifically, the Mexican Income Tax Law (MITL) establishes that income received by Mexican tax resident individuals through donations may be exempt from tax, provided that such gifts are made between spouses or between ascendants and descendants, without any limit as to the amount.

Donations received from other individuals may also qualify for an exemption, provided that the total value of the donation does not exceed a certain amount. If the value of the donation exceeds this threshold, the excess amount may become subject to income tax in the hands of the recipient.

Outside of these scenarios, donations are generally treated as taxable income for the donee under Mexican income tax rules. As a result, when structuring family transfers or wealth planning through donations, it is important to carefully evaluate whether the transaction falls within one of the statutory exemptions in order to avoid unintended tax consequences.

For foreign tax residents, Mexican tax law also provides certain exemptions for recipients of donations, provided that such gifts are made between spouses or solely from parents to children, and when the assets involve real property or shares in Mexican companies.

This rule is intended to facilitate family wealth transfers involving Mexican assets without automatically triggering income tax consequences for non-resident recipients. In these cases, the recipient of the donation (the donee) may receive the property or shares without being subject to Mexican income tax, provided that the transfer complies with the applicable legal and tax requirements established under Mexican law.

However, the applicability of this exemption must be carefully analysed in each specific case, particularly when the donee is a foreign tax resident. Factors such as the nature of the asset, the structure of the transfer, the relationship between the parties, and the applicable source-of-income rules under Mexican tax legislation may affect whether the exemption applies or whether withholding or other tax obligations could arise.

Notwithstanding the foregoing, in any case involving lifetime transfers or inheritances, it is important to consider that, although Mexico does not impose a federal estate, inheritance or gift tax, certain local taxes may still be triggered, depending on the nature of the assets being transferred.

In particular, when the transfer involves real estate located in Mexico, a local tax known as the Real Estate Acquisition Tax (Impuesto sobre Adquisición de Inmuebles, or ISAI) generally applies. This tax is imposed by state or municipal authorities and is triggered upon the acquisition of real property by any legal means, including purchase, inheritance, legacy or donation.

The ISAI is typically payable by the acquirer of the property, regardless of whether the acquirer is a Mexican tax resident or a foreign tax resident. The applicable tax rate varies depending on the state in which the property is located, as the tax is governed by local legislation. In practice, the rate generally ranges from approximately 1% to 6% of the value of the property, although the exact rate and calculation method may differ among jurisdictions.

Accordingly, even in situations where no federal income tax applies due to an exemption for inheritances or donations, the local real estate acquisition tax may still arise when Mexican real estate is transferred. For this reason, when structuring estate planning or lifetime transfers involving real property in Mexico, it is important to consider not only the federal tax implications but also the potential local tax liabilities that may be triggered upon the transfer of the asset.

Mexico does not impose a federal estate or inheritance tax. Instead, the tax consequences arise mainly through income tax rules and certain local taxes, depending on the nature of the assets transferred and the tax residency of the beneficiaries.

Mexican tax law generally does not treat death as a taxable realisation event for purposes of income tax. As a result, the deceased person is not deemed to have disposed of their assets at death, and unrealised capital gains are not taxed at that moment. Instead, the assets are transferred to the heirs or beneficiaries without triggering immediate income tax on the unrealised appreciation.

While Mexican law does not operate a formal “step-up in basis” system like those found in some common law jurisdictions, Mexican legislation provides that when Mexican tax resident individuals acquire assets through inheritance or gifts, the acquisition cost of such assets is the same as the cost held by the donor or the deceased prior to the transfer or death. Accordingly, the original tax basis of the asset is carried over to the beneficiary, meaning that the heir inherits the historical cost of the asset rather than receiving a step-up to its fair market value at the time of death.

On the other hand, if the recipient is a foreign tax resident and the transfer is subject to taxation in Mexico, the taxable capital gain may generally be determined based on the asset’s fair market value (often established through an appraisal) rather than the original acquisition cost of the deceased.

Even though there is no federal inheritance tax, local taxes may arise when certain assets are transferred (ie, ISAI).

Mexican laws allow for the creation of many succession planning structures (fideicomisos, family companies, private foundations, etc, and the execution of donation agreements. However, the most convenient lifetime succession planning mechanisms are wills, fideicomisos (which are similar to trusts) and family companies.

Wills

Wills are the backbone of succession planning in Mexico. A will is a personal, revocable and voluntary document through which a legally capable person sets out instructions about how to handle his/her assets, rights and obligations after death. Wills also allow for the appointment of legal guardians and supervisors for underage children.

Fideicomisos

A fideicomiso is a commercial agreement executed among three parties:

• the settlor (the individual contributing assets or rights to the structure);
• the beneficiaries (those designated by the settlor to ultimately receive the benefits derived from such assets and rights); and
• the trustee (a licensed credit institution responsible for the management and safekeeping of the trust estate).

Of the various trust structures available, the fideicomiso de control (control trust) stands out as the most effective instrument for wealth transfer and succession planning. The trust estate may be composed of virtually any asset or right, with the sole exception of those of a strictly personal nature under applicable law.

The primary purpose of a control trust is to safeguard and centralise governance over family wealth by enabling the parties to:

• establish coexistence rules amongst beneficiaries;
• adopt corporate resolutions concerning family-owned businesses;
• oversee the allocation and distribution of economic resources, including dividend payments; and
• exercise preferential rights and manage intergenerational wealth transfers.

Fideicomisos are extremely adaptable structures that can suit different characteristics, needs and desires related to the revocability or irrevocability of the fideicomiso (for purposes of the appointment of beneficiaries) or decision-making mechanisms, among other matters.

Family Companies

The most suitable company type for family businesses is the Sociedad Anónima Promotora de Inversión (SAPI), since it affords more flexibility than is offered by other company types, such as Sociedad Anónima or the Sociedad de Responsabilidad Limitada. Among other things, the shareholders of a SAPI can agree to:

• have different series or classes of shares with differentiated rights (including non-voting or limited voting shares);
• have transfer restrictions and/or mechanisms such as puts, calls, drag-alongs, tag-alongs, piggy back, etc;
• shareholder exclusion and/or separation triggers (including squeeze-outs);
• deadlock mechanisms for the resolution of irreconcilable conflicts that prevent the company from making key decisions;
• specific limits on directors’ and executives’ liability; and
• provisions to limit, increase or deny preferential rights.

Mexican tax law also includes general anti-avoidance provisions, which allow the tax authorities to recharacterise transactions when they lack a valid business purpose and are primarily intended to obtain a tax benefit. These rules were strengthened through reforms introducing the business purpose test into the Federal Tax Code.

Accordingly, estate planning structures – such as transfers through corporate vehicles, trusts or reorganisations – must be supported by substantive legal and economic purposes beyond purely tax-driven objectives.

Certain transfers may also trigger reporting obligations, particularly where they involve large transfers of wealth or cross-border elements. In addition, financial institutions and notaries may have reporting duties under tax and anti-money laundering regulations when formalising transfers of real estate or other assets.

Mexico is a signatory to the OECD Common Reporting Standard (CRS) and has entered into a FATCA Intergovernmental Agreement with the United States. Mexican financial institutions are required to report information on accounts held by foreign tax residents to the Mexican tax authority (SAT), which in turn exchanges this information with foreign tax authorities. This has significant implications for clients who hold assets abroad or who have family members with tax obligations in other jurisdictions.

In Mexico, digital assets are not governed by a single statute. The applicable legal framework depends on the nature of the digital asset and the activity involved.

From a general perspective, digital assets may be treated as intangible movable property under the Federal Civil Code and the corresponding state civil codes, meaning that their ownership, control and disposition are generally subject to the rules applicable to intangible assets. The Federal Law on Copyright (Ley Federal del Derecho de Autor) also applies, depending on the specific features and nature of the asset.

Social media and email accounts are not specifically regulated as a distinct category of assets under Mexican law. Their control and use are generally governed by the contractual terms agreed between the user and the service provider, and by the applicable laws on data protection, intellectual property and consumer protection, particularly the Federal Law on Protection of Personal Data Held by Private Parties, the Federal Law for the Protection of Industrial Property (insofar as the digital asset involves a registered trade mark or trade name) and the Federal Consumer Protection Law. As a result, the user typically holds a contractual right to access and use the service, rather than ownership over the account itself. Under the applicable terms and conditions of several digital platforms, the account (as distinct from its content) cannot be transferred to third parties; at most, some platforms allow a designated third party to exercise limited management powers over a memorialised account. At the local level, certain regulatory initiatives have also emerged; for example, the State of Querétaro has adopted restrictions regarding minors’ access to social media platforms, reflecting a broader trend toward increased regulation of digital platforms.

With respect to cryptocurrencies and other virtual assets, the applicable framework depends on the nature of the actor involved. When operated by regulated financial entities, their use is governed by the Law to Regulate Financial Technology Institutions (Fintech Law) and its secondary provisions (including regulations issued by Banco de México pursuant to its authority to determine which virtual assets regulated entities may operate), under which such entities may only operate with expressly authorised virtual assets and subject to specific operational, compliance and risk management requirements. By contrast, when held or transacted by private individuals or non-regulated entities, there is currently no comprehensive regulatory regime governing the use of virtual assets, which may generally be held or transacted freely.

Digital assets that are not excluded from commerce and do not constitute purely personal (intuitu personae) rights may form part of the deceased’s estate and may be transferred through the ordinary succession process, whether by testamentary or intestate succession under the applicable civil codes.

Mexico City’s Civil Code expressly recognises the possibility of transmitting digital assets or rights through testamentary dispositions. Article 1392 Bis (introduced as part of a broader reform) allows a testator to include various digital assets within a legacy, including email accounts, internet domains, electronic files and access credentials to digital services or financial technology applications. The provision also allows the testator to appoint a special executor (albacea especial) responsible for managing such assets and implementing the instructions contained in the will, without this implying ownership over the underlying rights, unless expressly authorised. This distinction is particularly relevant in relation to intellectual property, as digital content such as photographs, videos or written works may remain protected by copyright and may form part of the estate. Access credentials and other sensitive information may be safeguarded by the notary public, either in the appendix of the notarial instrument containing the will or, in the case of digital notarial acts, in a permanent storage system in accordance with the Notarial Law of Mexico City.

The Code further contemplates that, in the absence of instructions from the testator, the executor or estate administrator may request the deletion of certain digital information in order to safeguard the deceased’s privacy – a concept related to the developing notion of the right to be forgotten in Mexican jurisprudence, though not yet expressly codified as such. In practice, the effectiveness of such requests may be limited by freedom of expression, the public’s right to information, applicable data protection rules, and the contractual policies and terms of service of digital platforms.

Mexico does not have a system of uniform state laws addressing digital asset succession analogous to the US Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA). This reflects the structure of Mexico’s civil law federalist system, under which each state maintains its own civil code and there is no equivalent co-ordinating body to the US Uniform Law Commission. The Mexico City reform accordingly represents a local precedent that has not yet been replicated in other states, and legislative developments in this area remain limited and primarily local in scope.

From an estate planning perspective, it is useful to consider the nature of each digital asset before determining how it should be addressed, since there are some assets that are unlikely to be transmissible, other that have mixed inheritance rights and some other assets that are more clearly inheritable on patrimonial grounds.

In this regard, from a practical estate planning perspective, it is advisable to expressly identify digital assets of potential value and to include specific instructions regarding their administration, access, preservation or deletion. Particular attention should be given to assets whose control depends on private credentials, such as cryptocurrency wallets, where loss of private keys or recovery phrases could prevent heirs from accessing the assets entirely. Where Mexico City law applies, the notarial safeguarding mechanism under Article 1392 Bis offers a practical vehicle for preserving such credentials securely. Practitioners should also carefully distinguish between granting access to digital content (which may be achievable through platform tools and notarial instruments) and transmitting ownership of the underlying rights, which is governed by succession and intellectual property law and subject to the contractual limitations discussed above.

Fideicomisos de control (control trusts) and family companies are the most common and suitable strategies for family business succession planning in Mexico.

SAPIs are the most efficient companies for succession planning since, among other benefits, they allow for the creation of series and classes of shares each with different rights.

Control trusts are commercial agreements that afford the settlors the possibility of specifying voting and decision-making arrangements, distribution policies and transfer restrictions.

Please see 6.1 Common Planning Techniques for more detail.

Mexico is generally considered a favourable jurisdiction for family wealth and succession planning, particularly when compared with many other countries that impose estate, inheritance or gift taxes. From a Mexican federal tax perspective, the transfer of assets upon death can occur without a direct tax burden for the heirs, which makes testamentary transfers an efficient planning mechanism. Similarly, lifetime transfers through donations may also benefit from important exemptions.

These rules significantly influence estate planning strategies in Mexico. Families often structure their planning around inter vivos transfers or testamentary dispositions, knowing that the Mexican tax system generally allows such transfers to occur in a tax-efficient manner when they take place within the immediate family.

Mexican corporate and business entity laws may also play a role in estate planning strategies. Assets are frequently held through Mexican companies or other legal entities, which can facilitate the orderly transfer of ownership interests to heirs or beneficiaries. This can allow families to maintain continuity in the management and control of family businesses while also facilitating succession planning.

However, when planning involves cross-border elements, additional considerations arise. Even though Mexico does not impose inheritance or gift taxes, other jurisdictions may impose such taxes based on the citizenship, domicile or tax residency of the beneficiaries or the deceased.

In summary, Mexico’s legal and tax framework – characterised by the absence of federal estate and inheritance taxes and the availability of exemptions for donations within close family relationships – makes it an attractive jurisdiction for succession and wealth planning. Nevertheless, careful planning remains important, particularly where foreign beneficiaries, cross-border assets or local taxes (such as real estate acquisition taxes) may affect the overall tax outcome of the strategy.

Fideicomisos

Fideicomisos are commercial agreements by means of which a settlor (the person who constitutes the trust and transfers the property) transfers certain rights or assets to a trustee to be administered for the benefit of one or more beneficiaries (persons determined by the settlor to be the ultimate beneficiaries of such assets and rights).

According to Mexican laws, there are two types of trusts: administration and security trusts. Administration trusts are the ones used for succession planning purposes. Fideicomisos can also be revocable or irrevocable.

A distinctive feature of Mexican fideicomisos is that only certain financial institutions (mainly banks) authorised by the Comisión Nacional Bancaria y de Valores (CNBV) can act as trustees. Private individuals and non-financial entities may not serve as trustees.

Non-Profit Structures

In Mexico, philanthropic objectives are typically pursued through asociaciones civiles and fundaciones. If asociaciones civiles and fundaciones comply with certain legal requirements, they can qualify as donatarias autorizadas, which allows them to receive donations that are deductible for income tax purposes.

Increased SAT Scrutiny

The Mexican tax authority (SAT) has intensified its scrutiny of different types of taxpayers (including family companies and fideicomisos), particularly following amendments to the MITL and the introduction of the business purpose rule under Article 5-A of the Federal Tax Code (Código Fiscal de la Federación). Structures that lack genuine economic substance or that are designed primarily to defer or avoid tax obligations are at risk of being recharacterised.

Anti-Money Laundering Laws

Recent amendments to the Anti-Money Laundering Laws have significantly strengthened the Mexican beneficial ownership framework. In this regard, commercial entities (such as SAPIs and other corporate types) are required to:

• identify and maintain information regarding their beneficial owners;
• register certain information of their beneficial owners in an electronic system to be operated by the Ministry of Economy and file notices regarding transfers of ownership or the creation of rights over shares or equity interests; and
• respond to requests made by the competent authorities.

The amended Anti-Money Laundering Law also provides that each state is bound to issue local laws for the identification of beneficial ownership of asociaciones civiles and fundaciones.

Although trusts are more opaque structures that offer an additional layer of confidentiality, certain tax and AML obligations are applicable to them regarding internal recordkeeping of beneficial ownership and potential disclosure thereof when requested by tax authorities.

As mentioned in 9.1 Choice of Planning Vehicle, only CNBV-authorised financial institutions can act as trustees in Mexico; neither individuals nor private trust companies are allowed to act as trustees. In practice, this means that a fideicomiso must always involve a bank or authorised financial intermediary as trustee.

Authorised trustees are held to a professional and fiduciary standard of care under applicable Mexican laws and regulations. They are subject to internal control requirements, KYC procedures, conflict-of-interest rules and reporting obligations.

Transparency Principle

Mexican trusts (fideicomisos) are generally treated as tax-transparent vehicles for Mexican income tax purposes. As a result, the trust itself is not typically subject to income tax; instead, income generated by the trust assets is attributed to and taxed in the hands of the relevant settlor or beneficiaries, depending on the structure of the trust and the nature of the income.

Under Mexican law, trusts must be administered by a licensed Mexican financial institution. In practice, this means that the trustee of a Mexican fideicomiso is almost invariably a Mexican bank, as financial regulation does not permit other types of entities to act as trustees.

Business Activity Trusts

Where a fideicomiso carries out business activities such as owning and operating real estate or participating in joint ventures, it is treated as a distinct taxable entity (similar to a partnership) for certain purposes, and the beneficiaries are taxed on their proportional share of income.

Domestic Estate Planning Structures

Mexican fideicomisos commonly used for estate planning purposes generally qualify as administration trusts (fideicomisos de administración) and are treated as tax transparent under Mexican tax rules.

While the trust itself is not taxed, the trustee may assume certain withholding and reporting obligations depending on the nature of the underlying assets. For example:

• where the trust holds shares in Mexican companies, the trustee may be required to withhold the additional 10% income tax applicable to dividend distributions made to individuals; and
• where the trust holds Mexican real estate that generates rental income, the trustee is generally required to make advance income tax payments and comply with the relevant VAT obligations associated with the leasing activity.

Non-Resident Settlors or Beneficiaries

Where the settlor or beneficiaries are non-Mexican residents, the trustee will generally be required to withhold the applicable Mexican tax on Mexican-source income distributed through the trust.

Foreign Trusts and Mexican Tax Exposure

If a foreign trust is effectively administered from Mexico, it may be necessary to consider whether such circumstances could give rise to Mexican tax residency for the vehicle, potentially resulting in the trust being taxed in Mexico under the rules applicable to legal entities.

In addition, Mexican tax residents who participate in foreign trusts as settlors, trustees or beneficiaries may be subject to reporting and tax obligations in Mexico, depending on the level of control retained and the nature of the income generated.

Same-Sex Spouses

Through a line of binding decisions issued by the Supreme Court of Justice of the Nation (Suprema Corte de Justicia de la Nación), statutory provisions that limited marriage to opposite-sex couples have been struck down as unconstitutional. A same-sex marriage validly solemnised in any state of Mexico is entitled to full legal recognition nationwide. As a consequence, same-sex spouses hold identical succession rights to those afforded to heterosexual spouses, encompassing both the entitlement to inherit under the rules of intestate succession and the right to seek post-mortem maintenance from the deceased’s estate. As Mexico does not impose any federal estate or inheritance tax, no distinction in tax treatment arises on the basis of the sex or gender of the surviving spouse.

Non-Marital Partners (Concubinage)

Under Mexican law, concubinage (concubinato) constitutes a legally recognised institution from which succession and maintenance rights analogous to those arising from marriage are derived. Pursuant to the Civil Code, a concubino or concubina who satisfies the applicable legal requirements – ordinarily, continuous cohabitation with the deceased in a conjugal-like arrangement for a minimum period (generally two years, or a shorter period where a child has been born of the union) – is entitled to inherit under the rules of intestate succession on terms equivalent to those of a surviving spouse. The concubine is likewise among the persons who may claim post-mortem alimony from the estate, provided that he or she lacks the capacity to work and does not possess sufficient assets of his or her own.

Children Born Out of Wedlock

Mexican law draws no distinction between children born within marriage and those born outside of it for the purposes of inheritance. Provided that the parent-child relationship (filiation) has been duly established (whether by voluntary acknowledgment, judicial determination or civil registration), all children are vested with equal succession rights under both testate and intestate succession.

Adopted Children

For all legal purposes, including succession, adopted children are placed on an equal footing with the biological children of the adoptive parents. Under the applicable Mexican civil codes, adoption gives rise to a full parent-child relationship (adopción plena), conferring upon the adopted child the same inheritance rights as any biological descendant. Where full adoption has been granted, the legal bond with the biological family is extinguished, and the adopted child ceases to hold any succession rights in relation to his or her biological parents.

Surrogate Children

The legal treatment of surrogacy differs from one Mexican state to another. Certain states have adopted specific legislation that authorises and regulates surrogacy arrangements, whereas others either lack express regulation or prohibit the practice altogether. In those jurisdictions where surrogacy is lawfully recognised and the intended parents are duly recorded as the legal parents in the birth certificate, the child is vested with the same succession rights as any other biological or legally recognised child. In states where surrogacy remains unregulated, the establishment of legal parentage – and, by extension, the child’s succession rights – may necessitate judicial proceedings to determine filiation.

Posthumously Conceived Children

There is no comprehensive federal framework in Mexico governing the succession rights of children conceived through assisted reproduction techniques following the death of one of the biological parents. This remains an area of limited and developing regulation. Under the general principles of Mexican civil law, inheritance rights crystallise at the moment of the testator’s death, and only persons who are alive or at least conceived at that time are eligible to inherit. Certain state civil codes recognise the rights of children born within 300 days of the father’s death (pursuant to the legal presumption of paternity), yet the particular circumstances of children conceived through the posthumous use of preserved genetic material remain largely unaddressed across most jurisdictions.

Where filiation can nonetheless be established (for instance, on the basis of prior written consent given by the deceased to posthumous reproduction),– the child would, in principle, be entitled to the same succession rights as any other descendant, although this is likely to require judicial determination on a case-by-case basis.

Estate Tax Treatment

From a tax perspective, Mexican law does not contain specific provisions addressing non-traditional family structures. Instead, the tax treatment of inheritances, gifts and other wealth transfers is determined under the general rules of the Mexican Income Tax Law, which typically refer to transfers between spouses, ascendants and descendants.

Mexico does not impose an inheritance or estate tax. As a general rule, transfers received by inheritance or legacy are exempt from income tax. Gifts may also benefit from exemptions where they occur between spouses or between ascendants and descendants in the direct line.

Because Mexican tax rules must be interpreted strictly and cannot generally be extended by analogy, the application of these exemptions to non-traditional family relationships will typically depend on the recognition of the relevant family relationship under the applicable civil law.

For example, gifts between spouses are exempt from income tax under the Mexican Income Tax Law. Following the constitutional recognition of same-sex marriage and equality of family rights, this exemption is generally understood to apply equally to same-sex spouses. Similarly, exemptions applicable to transfers between ascendants and descendants may extend to adopted children or other legally recognised parent-child relationships.

In practice, the tax consequences in these situations will largely depend on how the relevant family relationship is recognised under the applicable state civil law. As Mexico is a federal system with state-level family law regulation, the civil law classification of the relationship may therefore be determinative for tax purposes.

In cross-border situations, additional tax considerations may arise, particularly where foreign residents, foreign trusts or assets located in multiple jurisdictions are involved. In such cases, it is necessary to analyse both the Mexican tax treatment of the transfer and the potential tax implications in the relevant foreign jurisdictions.

Conflicts Between State Jurisdictions

In Mexico, family and succession law falls within the competence of each of the 32 states, which gives rise to certain divergences among local civil and family codes. Although the general principles are consistent with those of the Federal Civil Code, differences in the specific regulation of matters such as concubinage, adoption, filiation through assisted reproduction techniques, and same-sex marriage may produce internal conflicts.

For example, although the Supreme Court of Justice of the Nation (Suprema Corte de Justicia de la Nación) has declared unconstitutional those state laws that restrict marriage to heterosexual couples, not all states have amended their civil codes to reflect this criterion. Consequently, conflicts may arise when a same-sex couple that is validly married in one state (such as Mexico City) seeks recognition of their succession rights in another state whose local legislation has not been updated. In such cases, the Supreme Court’s binding precedent and the constitutional principle of non-discrimination require the authorities of all states to recognise such marriages and the rights derived therefrom, including succession rights.

Conflicts With Foreign Jurisdictions

As a significant portion of Mexican high net worth families maintain ties with the United States, Spain or other countries, conflicts arise when family relationships are recognised differently in the jurisdictions involved. For instance, the figure of concubinage (common law partnership), which under Mexican law gives rise to succession and maintenance rights comparable to those of marriage, may not be recognised in foreign jurisdictions that do not grant legal effects to de facto unions, or vice versa.

Similarly, Mexico is not a party to the Hague Convention on the Law Applicable to Succession to the Estates of Deceased Persons, and therefore the recognition of Mexican succession rulings abroad – and vice versa – is determined on a case-by-case basis, in accordance with the private international law rules of each jurisdiction.

Mechanisms for Resolving Such Conflicts

Internal conflicts between states are primarily resolved through the rules of jurisdiction based on the domicile of the deceased and through the application of the binding precedent of the Supreme Court of Justice of the Nation, which ensures uniformity in the interpretation of fundamental rights such as equality and non-discrimination.

At the international level, Mexico has entered into bilateral and multilateral treaties on judicial co-operation and maintains private international law provisions in its civil codes and in the National Code of Civil and Family Procedures, which set forth rules for the recognition and enforcement of foreign judgments. It is also advisable for families with interests in multiple jurisdictions to execute separate wills in each country where they hold significant assets, and to ensure that their succession planning takes into account the differences in the tax and legal treatment of family relationships in each relevant jurisdiction.

Cross-Border Succession and Tax Considerations

Cross-border succession planning involving Mexican residents or Mexican assets requires careful co-ordination between the relevant jurisdictions. Although Mexico does not impose estate or inheritance taxes, Mexican tax and reporting rules may still affect the structuring of cross-border wealth transfers.

Mexican Residents With Foreign Assets

For Mexican tax residents, foreign assets generally form part of the individual’s worldwide estate from a civil law perspective. Accordingly, succession planning must consider how the transfer of such assets will be recognised and administered in the jurisdiction where the assets are located. In practice, this often requires analysing whether a Mexican will can be recognised abroad or whether local estate procedures (such as probate proceedings) or additional testamentary instruments should be implemented.

From a tax perspective, inheritances and legacies received by Mexican residents are generally exempt from Mexican income tax. However, any income subsequently generated by the inherited assets will be taxable in Mexico in the hands of the heir. Where heirs reside in other jurisdictions, co-ordinated planning is typically required to address potential tax exposure in both countries.

It should also be noted that inheritances received by Mexican residents through certain entities or investment vehicles may not qualify for the same tax treatment as a direct inheritance. In particular, Mexican tax legislation does not generally recognise the tax transparency of many foreign vehicles. Instead, where such entities are not controlled by a Mexican resident, the Mexican Income Tax Law may treat them as opaque, which can result in income being taxed under rules applicable to foreign entities rather than under the inheritance exemption.

Certain Mexican tax rules may also affect cross-border estate structures, including the rules applicable to trusts (fideicomisos), controlled foreign entities and tax-transparent vehicles, which may trigger anti-deferral regimes or reporting obligations in Mexico.

Non-Residents With Mexican Assets

Where a non-resident holds assets located in Mexico (particularly Mexican real estate or shares of Mexican companies), local tax implications may arise upon the transfer or subsequent disposal of such assets. For example, transfers of Mexican real estate may be subject to local real estate acquisition tax (ISAI), and any subsequent sale may trigger Mexican capital gains tax.

In addition, income generated by Mexican-source assets (such as rental income or dividends) will generally be subject to Mexican withholding tax at the applicable rates.

Absence of Estate Tax Treaties

Mexico has not entered into bilateral estate or inheritance tax treaties with other jurisdictions. The Mexico–United States Income Tax Treaty, for example, covers income taxes but does not address estate or inheritance taxation. As a result, there is no treaty mechanism specifically designed to eliminate double taxation where foreign jurisdictions impose estate or inheritance taxes.

Information Exchange and Transparency

Mexico participates in the OECD’s Common Reporting Standard (CRS) and exchanges financial information with numerous jurisdictions. Mexican financial institutions therefore report accounts held by foreign tax residents to the Mexican tax authorities (SAT), which may share such information with the relevant foreign tax authorities. This transparency framework is an important consideration in cross-border estate planning involving Mexican financial assets.