Making a will in Spain (II). In the previous post about wills and inheritance in Spain, we discussed how the difference between the United Kingdom and the European Union context was present even before Brexit. EU legislation is quite clear on the succession regimes that should be applied: they are based on residency unless the deceased has stated otherwise in a will. Even then, it is preferable to seek legal assistance to ensure conflicts in the future.
In fact, another relevant issue which is more applicable to Spain and less to the rest of the continent is forced heirship. What is this rule affecting inheritance and wills? How can it impact the family transfer of real estate for British expats in Spain?
The Spanish forced heirship rule and other rules impacting on inheritance for British expats
Again, as we stated in the previous publication, many British expats believe that inheritance rules are mostly the same across countries. This is far from the truth. Unlike in British law, Spain lacks testamentary freedom. Without a will, however, Spanish rules will be applied and this means that all assets must be inherited by the children. That is, they cannot be left out from accessing the deceased’s properties. Therefore, those British citizens who disagree with this rule should opt in for British rules regarding succession; rather than do nothing and be imposed Spanish forced heirship rules!
Another issue is the Inheritance Tax. Certain so-called “legal experts” advising British expats will actually overlook that the Inheritance Tax is not included in the UK and Spain Double Tax Treaty. As a result, the Spanish tax must be checked in combination with the UK’s IHT (Inheritance Tax Rules). What is the difference between them? Chiefly, the Spanish inheritance tax is an acquisition duty: the inheritor must pay the tax before he or she can access the inheritance. As a result, when conducting an asset review within Spanish law, it is important to consider the inheritor’s financial position, rather than the deceased’s asset structure. If the former is not able to cover the tax, he or she will not be able to access the inheritance.
Another important fact to consider is that British citizens who choose to transfer assets through British regulations, and are considered residents or are actual owners of properties in Spain, will be taxed in the UK on their Spanish assets according to rules on worldwide assets. Equally, inheritors (regardless of their connection to Spain) will have to pay tax on the Spanish real estate they inherit. This inheritance must be communicated to the Spanish tax agency within six months after the death of the family member. It is important to remember that expats will need tax reference numbers (NIE).
Finally, more differences include the lack of certain inheritance exemptions within Spain:
- There is no tax-free exemption for donations to certain charities.
- There are no automatic exemptions for spouses, except through certain rules implemented by particular Spanish regional governments. Your advisor should be aware of geographical legal differences across Spain.
- Certain structures, such as corporate ownership of real estate, have their own special tax regulations which should be known by the advisor.
- Plus, any asset owner who seeks to avoid these issues by making a lifetime gift should take into account that these donations are also taxed in Spain.
Considering these complexities, any British or other European expat who chooses to draft a Spanish will should first consult with experienced professionals. At Del Canto Chambers we are not only familiarised with the differences across the continent, but our team is also aware of the diverse regulations across Spain that can also impact inheritance. Rather than hiring a British team that might not know these in detail, or a Spanish team that might lack knowledge of the UK context, it is best to contact us so we can assist you in arranging your affairs with confidence in both countries.
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