It might be uncomfortable to do, but it is important that you make plans that will help those you leave behind. There are many differences in the way inheritance works in Spain in comparison to elsewhere. Taking action now can ensure that your wishes are fulfilled and your assets are protected for those you care about.
This guide to Spanish inheritance provides some general advice. Every case is unique, however, and you should consult an expert about your own, individual circumstances.
In this overview we outline some of the most important facts surrounding:
- The Spanish succession laws
- Making a will in Spain
- Inheritance tax
- Donating property
The Spanish succession laws
In the UK, Ireland the succession law means that when you make a will you can leave your inheritance to whoever you wish, in some other countries there are limitations. For example, Spanish succession law is different. Children as well as spouses are the ‘legal beneficiaries’ in Spain with the result that you only have one-third of your property left to bequeath as you wish.
From the 17th August 2015 residents living in Spain who are nationals of another European country must state clearly on a Spanish will if they wish their own country's inheritance law to apply. If you have no will at all then Spanish law also applies. So if making a will in Spain has been something you have been avoiding for a while, now is the time to think again.
Making a will in Spain
It is beneficial to make a will in Spain for other reasons too. It helps simplify the process when beneficiaries come to inherit as documentation to be assembled is less complex and the procedure is swifter.
It also provides you with opportunity to discuss with an expert, what the implications will be when it comes to Spanish inheritance tax. There are ways in which you can adjust your wishes to ensure that Spanish inheritance tax is kept to a minimum. For example, sharing your property out between several people can mean that there is less inheritance tax to pay as they will each have their own threshold rather than just having one.
A husband and wife must each make separate wills. The will is prepared as a bilingual document – with text in Spanish and another selected language. The will is then taken to the Notary’s office where it is signed and certified. The Notary keeps the original and you will be forwarded a copy for your records. The will is then recorded in the central will registry in Madrid (Registro Central de Ultimas Voluntades).
This central registration means that your latest will is easily located. However, it does mean that if you do wish to change it a new will has to be written.
Before a property can be registered in the inheritor’s name, a inheritance tax declaration has to be presented and the corresponding inheritance tax must be paid, if any.
Until recently there had been differences in inheritance tax law in relation to residents and non-residents. However, following pressure from the European Commission and based on a European Court's decision, a modified law was passed on the 28th November 2014. This meant that for all bereavements and donations after January 1st 2015 the taxation of Spanish inheritance must not discriminate against non-residents in Spain, but living in EU countries.
Your are allowed six months to make the inheritance tax declaration. After this time an additional levy of 5% every three months is applied, up to a maximum of 20%. A very good reason for making sure that you are as prepared as you can be.
The amount of inheritance tax to pay varies according to where the property is located in Spain and the inheritor’s relationship to the deceased.
In Spain there are two laws that govern inheritance tax:
- national law (Ley estatal)
- local law governed by the autonomous regions of Spain
Regions can have different rules to each other. For example, there can be differences in the threshold above which you must start paying inheritance tax in Spain.
Your relationship to the deceased can make a substantial difference in how much an inheritor must pay. There are four groups of inheritors:
- Children and grandchildren under the age of 21
- Children and grandchildren over the age of 21, parents, grandparents and spouse
- Brothers, sisters, uncles, aunts, cousins, parents-in-law, daughter/ son-in-law
- Anyone else
Inheritors have to voluntarily declare the value of their inheritance. It is wise to take advice on this as extra tax will be charged if the tax authorities do not agree with the declaration value.
There is no automatic transfer, even where it is a spouse who has died, the formal procedure has to be followed. You should be aware that omitting to inform the authorities of the death of a co-owner of a property means that when the property is handed on again, a retrospective transfer will need to be made.
Some people prefer to donate their property rather than bequeathe it when they die. If you do decide to do this you still need to go through the process of signing a new title deed. This process is called the ‘Donación de bienes’ and is a gift from the donor to the donee.
You will still have to make a Donation tax declaration but, similarly to inheritance tax, the tax is reduced when you are close relatives (parents/ children) depending on the allowances that apply in that particular community e.g. Comunidad Valenciana.
That you make a will in Spain that clearly outlines what your inheritance wishes are and whether you want the succession law of your residency or your nationality to apply. Use expert advice, to consider carefully what the implications will be tax-wise for your inheritors and inform them of this. Having a reputable solicitor who you can communicate with in your own language is an important part of the process.
Managing your inheritance may not be at the top of your list of things you’d like to do, but it will make all the difference to the ones you care about that you leave behind.
Should you prefer to tie up things in lifetime, we would recommend you to proceed with a donation of your Spanish property to your children.