Legal Definitions - fideicomiso

A fideicomiso is a specific type of trust under Mexican law, primarily used to allow non-Mexican citizens or entities to acquire and hold property in certain restricted areas of Mexico. These restricted areas typically include land within 100 kilometers (approximately 62 miles) of Mexico's borders or within 50 kilometers (approximately 31 miles) of its coastlines.

In a fideicomiso, a Mexican bank acts as the trustee, legally holding the title to the property. The non-Mexican individual or entity is the beneficiary, meaning they have all the practical rights and responsibilities of direct ownership. This includes the power to use, lease, sell, or even pass on the property through inheritance, even though the bank holds the formal title. This arrangement typically lasts for a period of 50 years and can be renewed for an additional 50 years.

Here are some examples of how a fideicomiso might be used:

• Vacation Home Purchase: Sarah, a U.S. citizen, dreams of owning a beachfront condo in Puerto Vallarta. Mexican law restricts direct foreign ownership in coastal areas. To purchase her dream property, Sarah establishes a fideicomiso with a Mexican bank. The bank becomes the legal owner of the condo, but Sarah is named the beneficiary. This arrangement grants Sarah all the rights to live in the condo, rent it out to tourists, or sell it whenever she chooses, effectively giving her full control and enjoyment of the property.

• Retirement Property Investment: A Canadian couple, the Millers, decide to retire and buy a house in a charming town near the Baja California coast. Since this area falls within the restricted zone for foreign ownership, they utilize a fideicomiso. A Mexican bank holds the legal title to their new home, while the Millers are the beneficiaries. They can live in the house, make renovations, and even include it in their will to pass on to their children, all while the bank manages the formal legal ownership as per the trust agreement.

• Commercial Development: A European investment firm, wanting to build a boutique hotel along the Riviera Maya, identifies a suitable plot of land. Because the land is within the coastal restricted zone, the firm cannot directly own it. They set up a fideicomiso, naming a Mexican bank as the trustee and their investment firm as the beneficiary. This allows the firm to proceed with the hotel's construction and operation, lease out rooms, and eventually sell the entire property, exercising full economic control over the asset despite the bank holding the legal title.