Inheritance laws in Spain are quite different from those in the UK and it is essential to have a notarised and registered will to cover your assets in Spain and solely in Spain – if you wish to avoid Spanish inheritance tax being applied to worldwide assets.
If you are a non-resident in Spain your estate will be subject to state inheritance. Furthermore, ‘gifts’ are also subject to the same rate of tax so trying to ‘gift’ your property to your beneficiaries in advance does not save money.
For residents, some central and northerly regions have abolished inheritance tax while other regions have effectively annulled it by a system of exemptions. You are only entitled to local exemptions if you are registered (empadronado) in the region where the property is situated. Local exemptions also only apply if the property has been owned for 3-5 years and if the beneficiaries don’t sell for 5-10 years.
There’s a big catch – most regions require the beneficiaries to be residents in the same area in order to be exempt. So, one way or another, your beneficiaries are probably going to pay inheritance tax.
For a non-resident leaving non-resident beneficiaries around 100,000e each, their tax burden would be approximately 10%.
For a resident leaving resident beneficiaries, who lived in the same region, around 100,000e each; there would be no inheritance tax due to exemptions.
Spanish inheritance law does not allow Spaniards to leave their estate to whomever they please – as with British law – and it varies from region to region. In general, presuming there is a surviving spouse, two-thirds of a half (1/3) of any Spanish estate goes to the children. Only one third of the estate can go to whom ever the deceased nominated as a beneficiary outside of the immediate family, so where there is a surviving spouse this is effectively one third of a half i.e. 1/6.
The surviving spouse is entitled to half of the assets gained during the marriage, all assets that were his/hers before the marriage and any gifts or inheritances that came directly to the spouse. For most people the major asset is their property, purchased while married, so half the property will no longer belong to the deceased’s spouse.
In the UK assets between married couples will generally just go to the spouse and any amounts that the spouse wishes to pass on to the children are discretionary at that time. As this is not the case in Spain you will need to be a non-resident, with your main residence in the UK, if you wish to have British law apply – even then you may have to fight your case.
In Spain if say the husband dies and the wife is on the property deeds as joint owner, then half belongs to her. One third of the husband’s half is split evenly between the children, one third is then split at the deceased’s discretion between his children or grandchildren but the spouse maintains a life interest in this third i.e. the property cannot be sold from under her and the children who inherit cannot sell until the surviving parent dies. Finally one third can be willed to whom ever, however again the widow cannot be made homeless – she holds a usufructo (usufruct) on the other shares. All the new owners of the property must agree in order for the property to be sold.
If a non-resident dies intestate in Spain, the Spanish inheritance laws will apply.
The fascinating complexity is that English inheritance law says that the laws of the country in which property is located are to apply, while Spanish law says that English inheritance law can be upheld over property in Spain, although Spanish inheritance tax will still apply. In reality most foreigners have free disposition in Spain and can have their Spanish will written to override normal Spanish inheritance laws.
Red Tape consultants can:
- Advise on inheritance tax in your region
- Help you to register your will at the notary
- Sort out life insurance claims
- Set up a family trust to reduce inheritance tax
- Advise on equity release
- Advise on selling property to relatives but you keeping an usufructo so you can continue to live there until your death
- Advise on Spanish inheritance law for same sex couples
Let Red Tape tie up a solution today
Contact: Jose Ensenat on 661 341 568 or at jose@redtape.es