Understanding the Challenge
Managing estates across borders presents unique challenges, particularly between the UK and Spain. With over 293,000 British citizens residing in Spain and countless others owning holiday homes, the intersection of these two legal systems has become increasingly important. The fundamental differences in how these countries approach inheritance law can create significant complications if not properly addressed.
At Del Canto Chambers, we regularly assist clients navigating these complex waters. The most common issue? Spain simply doesn’t recognise trusts – a cornerstone of many British estate plans.
The Fundamental Differences
Before diving into practical steps, it’s essential to understand the key differences between the UK and Spanish inheritance systems:
UK Inheritance System:
- Based on common law principles
- Recognises trusts as valid legal entities
- Offers considerable testamentary freedom
- Uses executors to administer estates
- Inheritance tax applies to the estate
Spanish Inheritance System:
- Based on civil law principles
- Does not recognise trusts as legal entities
- Has forced heirship rules (“legítima”)
- Heirs directly inherit assets and liabilities
- Inheritance tax applies to each beneficiary
These differences create a fundamental incompatibility that requires careful planning and expert guidance to navigate successfully.
Practical Steps: Preventive Measures
1. Draft One Will That Covers Both UK and Spanish Assets
To ensure simplicity and avoid potential conflicts, we recommend preparing a single will that effectively covers both your UK and Spanish assets. Exceptionally for some estates, drafting one will for each jurisdiction can be advantageous. Based on your estate and personal circumstances, you will need to decide where your only will should be drafted.
Key considerations:
- Work with a lawyer experienced in both UK and Spanish law
- Ensure the will complies with the EU Succession Regulation (Brussels IV)
- Make the will legally valid in the country where it will be executed
- Clearly identify all beneficiaries and specify which assets are located in each country
- Be mindful of Spanish forced heirship rules, particularly if you are a Spanish resident
- Clearly specify which country’s laws you want to govern your will if different from where you’re executing your will.
- If you draft your will in Spain, have it executed before a Spanish notary (“Notario”)
2. Avoid Trust Structures for Spanish Assets
Since Spain doesn’t recognise trusts, including Spanish assets in a trust structure creates significant complications. Instead:
- Name direct beneficiaries for Spanish assets
- Consider alternative structures like Spanish-compliant holding companies
- If trusts are crucial to your estate plan, seek specialist advice from a dual-qualified lawyer
3. Register Your Spanish Will
Unlike in the UK, Spanish wills must be registered to be valid:
- Ensure your will is registered with the Spanish General Registry of Last Wills (Registro General de Actos de Última Voluntad
- Keep a notarised copy in a safe place
- Inform your executors and beneficiaries of its existence and location
Steps When a Death Occurs
When someone with assets in both the UK and Spain passes away, these steps should be followed:
1. Document Gathering
Collect the following essential documents:
- Original death certificate
- Copies of all wills (UK and Spanish)
- Property deeds for Spanish assets
- Bank account details
- NIE numbers (Spanish tax identification for foreigners)
- Marriage certificates, if applicable
- Birth certificates of beneficiaries, if needed
2. Will Search in Both Countries
- In the UK: Check the National Will Register
- In Spain: Request a certificate from the Spanish General Registry of Last Wills (this can only be done 15 days after the death)
3. Probate and “Declaración de Herederos”
- For UK assets: Apply for Grant of Probate
- For Spanish assets with a Spanish will: Provide the death certificate and will to a Spanish notary
- For Spanish assets without a Spanish will: Obtain a “Declaración de Herederos” (Declaration of Heirs)
4. Managing Trust Complications
If Spanish assets are included in a UK trust, you’ll need to:
- Prepare a Deed of Appointment naming specific beneficiaries for the Spanish assets
- Obtain a Certificate of English Law explaining the trust’s validity and beneficiary rights
- Have these documents translated, notarised, and apostilled
- Present them to Spanish authorities alongside the Grant of Probate
Navigating the Spanish Probate Process
The Spanish probate process differs significantly from the UK equivalent:
1. Tax Obligations First
In Spain, inheritance tax must be paid before assets can be transferred:
- File and pay inheritance tax within six months of death (extensions possible)
- Regional tax rates and allowances vary significantly across Spain
- Non-residents typically pay national rates without regional benefits
- Prepare for the “Plusvalía” municipal tax on property transfers
2. The Acceptance of Inheritance
Spanish heirs must formally accept their inheritance through a deed of acceptance (“Escritura de Aceptación de Herencia”):
- This must be signed before a Spanish notary
- All heirs typically need to be present or represented
- The deed must list all Spanish assets in detail
- Original documents must be presented
3. Registration of Property
Once the acceptance deed is completed:
- Register property transfers at the Spanish Land Registry
- Update utility contracts and local tax registries
- Notify banks and other financial institutions
Tax Considerations
The tax implications of cross-border inheritance require careful planning:
UK-Spain Double Taxation
While no specific inheritance tax treaty exists between the UK and Spain:
- Both countries have unilateral relief provisions to prevent double taxation
- Specialist tax advice is essential to navigate these provisions
- Different asset types may receive different treatment
Spanish Inheritance Tax Variations
Spanish inheritance tax varies dramatically by region:
- Some regions offer substantial reductions for close family members
- Non-residents can now access regional benefits in many cases
- Tax rates range from effectively 0% to over 80% depending on region, relationship, and pre-existing wealth
Common Pitfalls to Avoid
When handling cross-border estates, watch out for these frequent mistakes:
1. Assuming UK Probate Is Sufficient
Spanish authorities will not recognise UK probate alone. You’ll need:
- A Spanish will or Declaration of Heirs
- Documents properly translated and legalised
- Formal acceptance of inheritance by heirs
2. Overlooking Forced Heirship Rules
If you become a Spanish resident, Spanish forced heirship rules may apply regardless of your nationality. These rules reserve portions of your estate for specific heirs.
3. Trust Structures Without Alternatives
Creating trust structures for Spanish assets without alternative arrangements can lead to significant complications and tax inefficiencies.
4. Missing Tax Filing Deadlines
Spanish inheritance tax must be paid within six months of death, with significant penalties for late filing. Plan accordingly.
Conclusion: A Coordinated Approach Is Essential
Managing wills and trusts between the UK and Spain requires a coordinated approach with expert guidance. At Del Canto Chambers, we specialise in navigating these complex cross-border situations.
The key takeaways for anyone with assets in both countries:
- Create separate, jurisdiction-specific wills
- Avoid trust structures for Spanish assets
- Seek dual-qualified legal advice early
- Plan for tax implications in both countries
- Keep documentation organised and accessible
- Review your estate plan regularly, especially after major life changes
By taking these practical steps, you can ensure your estate is handled according to your wishes while minimising complications and tax burdens for your beneficiaries.
For personalised advice on your specific situation, contact our team of experts who specialise in cross-border legal matters between the UK and Spain.
