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The Spanish Lawyer Online

Antonio Flores’ Blog

Thoughts about laws and regulations which affect foreigners in Spain

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Posts Tagged ‘Inheritance Spain’

Why you need a Lasting Power of Attorney in Spain

May 9th, 2017

shutterstock_89635177Lasting Powers of Attorney (LPA), well known and extensively used in common law jurisdictions, are legal documents which allow a person who is at least 21 years of age (‘donor’), to voluntarily appoint one or more persons (‘donee’) to make decisions and act on his behalf as his proxy decision maker if he should lose mental capacity one day.

In Spain, very few know that there are two almost identical legal documents that grant the same powers to a trusted person should the time of incapacitation arrive.

These documents are known as the “Poder Preventivo”, or Preventive Power of Attorney (PPA), and the “Autotutela”, or “Appointment of Tutor”, both of which are granted before a Notary Public.

The Preventive Power of Attorney is one where a person can deal with the financial affairs of the grantor, with immediate effect after a certain date or once a medical doctor declares a person incapacitated. For its part, the Appointment of Tutor deals with health and care decisions, daily routine or where the affected person should live (but will require judicial approval where the sale of assets is concerned).

It is recommendable to grant at the same time both the Preventive Power of Attorney and the Appointment of Tutor to avoid the lengthy (and costlier) process of applying for a judicial decision -appointment of tutor- following a clinically diagnosed incapacitation or intellectual disability because of disease or accident, a process that furthermore will require a separate procedure to sell real estate or other assets.

It is worth noting that both appointments can be revoked by the grantor whilst capable, and that Notary Publics in Spain have an obligation to communicate any such documents to the Spanish Civil Registry.

Family Law, Inheritance , ,

Imminent Enactment of New EU Succession Laws

May 11th, 2015

With effect from the 17th of August 2015, a new EU law will automatically apply –replacing local laws- to the succession of persons who die on or after the same date in countries parties to the agreement. While the main concepts of this new law may seem simple, the name given to it is truly mind-boggling:

Regulation  (EU) No 650/2012 on jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of Succession.

But let’s not get carried away by all the legalese and go straight to the most relevant points of the law; and by doing so perhaps we can kill the expat rumour mill before it causes havoc.

The main change introduced relates to the applicable law to succession: As of August 17th, citizens are able to choose whether the law applicable to their succession will be that of their habitual residence or that of their nationality, on the understanding the former law will apply by default if there is no choice. This has important implications in Spain where, owing to century-old laws, children have an automatic entitlement to two thirds of the estate.

This choice shall be made expressly in a declaration in the form of a disposition of property (will or codicil), or shall be demonstrated by the terms of such a disposition.

People who already have a will need to check if it contains a term or terms that indicates that the national law, sometimes described as personal law, will apply. Most wills I have come across do state this when noting that the testator’s wishes are in accordance to his or her national law, which in my opinion suffices.

Where there is no provision to the effect in a will and the testator wishes to avoid the application of Spanish succession laws, we recommend drafting a new will.

Finally, we still recommend property owners to have a Spanish will as well as one in the country(ies) where they own assets, at least until we can experience how easy -or not- will it be enforce wills in other EU states. This applies in particular to the United Kingdom and Ireland since neither country is bound or subject to the application of this Regulation.

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93% of Tax Returns Exempt from Payment: Has Inheritance Tax Almost Disappeared in Andalucía?

February 19th, 2015

Until recently, Spanish lawyers cautioned their clients that the level of Inheritance Tax (`IHT´) in Spain, for non-resident heirs, could mean the difference between being able to inherit or not. The worry is still there but, ever since the European Court of Justice (ECJ 3/9/2014) ruled that Spain’s IHT tax rules were discriminatory – different rates for residents and non-residents-, the latter are able to enjoy the same allowances residents can apply on their tax returns.

So now, for instance, an EU-resident who inherits in Andalucía an estate worth less than €175.000 from parents, children or spouse is totally exempt from paying IHT. This is no small matter for this allowance has made possible that in 2014, according to the statistical information provided by Junta de Andalucia, 93% of all IHT tax declarations filed anywhere in Andalucía were without associated payment (nil tax returns).

If we take for instance the average family with a property and two children, on the basis that in Andalucia the average price per square meter of property -as recorded in December 2014- was of €1,500, with an average size according to the Ministry of Housing of just over 105 m2 (and 187 m2 for town houses and villas), it is easy to understand why only 7% of IHT tax declarations filed by residents of Andalucía included a sum of due tax.

This is great news, for more than one reason. Firstly, a logical one: it reduces the IHT tax bill on the estate of holiday property owners, automatically, as from the 28/11/2014 (date of effective implementation of the ECJ ruling). Secondly, it takes the fear of God away from thousands of owners who’ve been incessantly bombarded -over the last years- with unreal horror stories that depict the Spanish taxman slicing into the estate of a deceased Briton, only to offer an illegal tax-dodging scheme to avoid it (mostly foreign based companies and equity release loans).

Of course, IHT will still be an issue for the wealthier whose inheritors could be hit with as much as 34% (on estates above 800k Euros). For owners not included in the above 93% contingent, we suggest some degree of planning to minimize -legally that is- exposure to IHT.

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