Inheritance in Spain
A lot of confusion has been created in the area of inheritance law in Spain by the question mark over whether Spanish law should be applied to determine the beneficiaries of the Spanish assets of a deceased foreign national.
The question is important because other legal jurisdictions such as English common-law tend to give the testator virtually complete autonomy regarding disposal of their assets. Spanish law on the other hand is much more restrictive.
The answer to which law applies depends on whether a will is drawn-up to deal with the Spanish assets.
For a comprehensive list of the services available via Spainwide in the area of wills and inheritance in Spain, please click on the following link: Wills and Inheritance in Spain.
Inheritance Law Spain
So how does Spanish inheritance law function?
If a will is not made to deal with the Spanish assets held by a foreign national i.e. the person dies intestate, then the Spanish inheritance rules of intestacy apply.
This will force the assets to be divided equally between the surviving relatives as follows:
- Descendants i.e. divided equally between surviving children, grandchildren, etc. If none living...
- Ascendants i.e. if no descendants then as between parents, grandparents etc. If none living
- The spouse. If no longer living...
- Brothers, sisters, nieces and nephews
A very precise process must be followed in order to claim an inheritance where there is no testamentary document.
Firstly a "Declaration of the beneficiaries" is required which involves, depending on the beneficiary, presentation of a number of documents such as birth, death and marriage certificates, either to an official notary or to a judge
It is important to note that in Spain inheritance tax is applied to the beneficiary's estate and not that of the testator
For assistance with claiming an inheritance in the case of intestacy, please go to Intestacy in Spain.
If a Spanish will is left but the person has Spanish nationality, the inheritance rules are still restrictive and the estate (often a property) is divided into three parts as follows:
One third is divided equally between the children;
One third is also retained for any children but may be divided according to the testators wishes and is subject to a life interest to the benefit of the surviving spouse;
The final third of the estate is disposed of as the testator desires i.e. may be left to anyone.
It should be remembered that often the testator has only one half of the estate and therefore the above rules would apply to one-half only.
A surviving spouse will often own half of the estate and therefore anything inherited under the Spanish rules will be in addition to this. As regards real property, no decision can be taken to sell unless all owners are in agreement.
In any case there are specific steps that need to be taken in order to claim as a beneficiary under a will in Spain.
The division of the inheritance is typically voluntary but if there is no agreement it may become a judicial matter.
In any case, upon agreement between the beneficiaries, it is recommended practice to sign a notarised document to evidence agreement on the division and so avoid later problems.
Should you need help with an inheritance under Spanish or foreign law, please go to Inheritance in Spain.
Why make a Spanish will?
There are a number of reasons for making a Spanish will to deal with your Spanish assets.
- Firstly, it permits you to dispose of your assets as you desire as opposed to them being dealt with under Spanish succession laws.
- Secondly, it avoids the need to have a will from another country verified, officially translated, have the apostille stamp attached etc. Essentially an expensive and time consuming exercise.
- Thirdly, the time taken to arrange probate of a foreign will can cause problems with the Spanish inheritance tax time-limits making interest payments on late taxes unavoidable.
How to make a Standard Will in Spain
in a nutshell, to make a will in Spain, requires the following:
1. Draw-up a list of assets,
2. Make clear how those assets are to be distributed among the beneficiaries, and
3. Have the document officially notarised and recorded on the official registry.
The notary keeps the original will and gives a copy to the testator. At this point the notary informs the Ministry of Justice (Registro General de Actos de Ultima Voluntad) of the existence of a will, the date and the name of the person making the will. No other information is passed to the Ministry.
At Spainwide we offer a service in conjunction with local official notaries to draw-up a standard will that ensures that your instructions with regard to your Spanish assets are carried-out. For more information about this service please go to Standard Wills in Spain
Making a Complex Will in Spain
Should it be necessary to draw-up a more complex will, for example where there are children from a previous marriage or the assets themselves are more complex, it is advisable to get legal advice to ensure that your wishes regarding your assets can be carried-out.
Getting expert advice from qualified professionals in the relevant country is to be recommended given the differences between UK or Irish and Spanish law and to avoid problems ariding from challenges being made to the will in the future.
Spainwides network of independent Spanish, UK and Irish based lawyers are highly qualified in the area of wills and testaments and can ensure that complex wills are drawn-up correctly and in acordance with the laws of those countries.
Spainwide will ordinate between the lawyers and the official notary in Spain to ensure that no confusion ensues in the resulting will document.
For more information on this service please go to: Complex Wills in Spain
Due to the federal nature of the Spanish state, the law of succession tax exists at two levels - the general framework is laid down at the central government level (see law 29/1987) while the specific rates of tax and the exemptions available are determined at a regional government level. As a result, inheritance tax in Andalucia, for example, is not necessarily the same as that of Cataluña. It is best therefore to consider the issue of inheritance taxes in terms of State Laws and Regional Laws
The general rules regarding succession tax are laid out in law 29/1987.
Succession Tax is generally payable upon being bequeathed goods by another. The tax is payable within six months of the death of the testator and failure to pay the tax results in fines and interest.
The succession taxes are payable on the net value of the goods acquired by each individual beneficiary i.e. the real value less charges and deductible expenses. Deductible charges and expenses would include any legitimate debts owed by the benefactor at the time of his death. This may not include any debts owed to any of the beneficiaries.
However, debts payable to the state such as taxes etc. are considered to be deductible charges, as are the bills associated with the final illness suffered by the testator including burial expenses as well as legal bills arising from the division of the estate.
When the net amount of the inheritance is known, further reductions are made, according to regional law, to determine the taxable amount.
While each regional government may determine it's own unique succession tax regime there is a general tendency towards eliminating this tax.
Similar measures are being adopted by many of the regional governments such as:
- The family home gets a special exemption and is usually exempt from any tax up to 95% of its value, with a given ceiling in each region.
- Family businesses are also usually given an exemption from tax of 95% of the value - again to a set ceiling and normally where the business is continued for a specified time.
- A discount of 99% is applied to the net tax payable by the immediate family.
- There is an exemption, up to a specified limit, for income from life insurance payable on the death of the testator.
Please note that the above is a general list to give a general idea as to how the tax is applied but in every case, a determination must be made based on the applicable regional law.
Also, virtually all of the regional governments insist that the beneficiaries be resident in that part of Spain for five years in order to avoid seeking lower taxes by moving around.
The law as it stands is that should a person not be resident in any of the regions of Spain then the State levels of tax are payable. These do not tend to offer such generous discounts as the regional regulations do.
Spainwide offers a full service to calculate as well as handle the filing of the tax payable upon an inheritance. For more information please go to: Inheritance Taxes.
Paying less Inheritance Tax
So what methods, if any, exist to lower the amount of succession tax that must be paid.
Split Up the Belongings Properly
This should be done via a dissolution of the "Sociedad de Gananciales"the form of marriage that assumes that all earning during the existence of the marriage should be split.
In particular, it is better to place the family home entirely in the name of the deceased partner as this will cause exemption from tax up to 95% of the value of the property and not just the half that was formerly the portion that belonged to the deceased spouse.
Relinquish the right to lifetime Use
If the surviving spouse inherits a lifetime interest or use in a proportion of the estate of the deceased, as is normally the case under Spanish law the surviving spouse must pay the tax at the relevant rate on the value of the right. However, upon the death of the surviving spouse, the tax will be paid again by the children upon receipt of their interests.
The solution to avoid this situation is for the surviving spouse to renounce their right to a life interest in the property and this then passes on automatically to the children. This renunciation of the life interest must occur within 4 years and six months of the death.