usufructo

I own a property on the Costa Blanca. Can I form a Usufructo with my children whereby they own the property but I can live in it thus saving them inheritance tax. If so what costs are involved to set it up
John Hadley

Dear Sir,

You already own the property. To transfer them ownership, whilst alive, it would have to be by either gifting them your property or else selling it to them.

Selling it attracts less tax (7% Transfer tax) than if you gift it to them as it will attract the Spanish Inheritancae Tax scale (which is the same as Gift tax).

So from a tax mitigation point of view you are better off selling the property to them rather than gifting it to them.

Hello John,

I have made a post below yours which may be of interest to you.

I purchased in Spain and was advised by my Agent as how to combat Spanish Inheritance Tax. They informed me that if I own my property in a UK Limited Company and not my own name, I can leave the shares of the Company which I own instead of the property to my Heirs & Beneficiaries, so NO IHT in Spain would be payable.

I followed their advice and have now produced a UK Will, which instructs to leave my shares of the Company to members of my family. This means that when I pass away no Spanish Inheritance tax will have to be paid by them, as they will inherit a UK Limited Company that owns the property, and not the property its self. Therefore Spanish Inheritance Tax is irrelevant and completely removed. Any Nationality can own or inherit a UK Limited Company and take advantages of the free taxation in the UK appose to the ghastly Taxes in Spain.

The comments above by Lawbird Lawyer are true if you sell then the 7% Transfer Tax takes place in Spain, and if you gift to an individual then there is Tax too, but if you gift to a UK Limited Company in Spain then there is no Tax to pay in Spain so this is the most cost effective way to structure your property in Spain. If you sell the property to your children then they may not need to pay IHT in Spain when you die as they already own it, but this is not very good for you because if they have a divorce or go into financial issues then they may loose the property you have worked hard to pay off. Ownership in a UK Limited Company saves IHT in Spain and keeps you fully in control. Should any of them die before you and the property be in their names then you will have to pay IHT in Spain yourself to get the property back from them, and if they do live longer then you then their Beneficiaries will have to pay IHT in Spain as well.

My Corporate Property Ownership Consultant who is located in Spain and the UK can assist anyone who wishes to purchase or own in a UK Limited Company, appose to his or her own names.

If anyone else has suggestions of how to save IHT in Spain then I would love to hear them but my research so far shows this is the only true way around it. I am happy to pass on my Consultants details to anyone who would like to contact them.