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Thread: Spanish Inheritance Tax: Advantages of Making a Will in Spain

  1. #61

    Default

    Hello,

    You can certainly transfer the property in your sole name by a dissolution of the joint ownership, that a solicitor can do in our behalf via a Power of Attorney. However, if you also want to get your children´s names on the deeds, it will have to appear as a sale of shares from your husband to the three of you and the process will be regarded as an ordinary sale. You will have to set a price and show proof of payment to avoid paying high Capital Gains and plusvalia Taxes. I recommend you to process the dissolution that I have mentioned on the beginning and then make a will so your children inherit your property in the future. The IHT it will attract will be based on their family relationship, and they may not be as high as they would be in a sale case.

    Please feel free to contact me by clicking on my profile if you wish to discuss your situation further.

    Regards,
    Patricia Martin
    Immigration Consultant at Lawbird | Contact Me
    Check My Profile

  2. #62
    Junior Member
    Join Date
    Sep 2012
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    1

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    My parents together with my 2 sisters and myself jointly bought a property near Vera-Andalucía, on the deeds the ownership is split 26+26+16+16+16%, my parent’s having the majority.

    None of us are resident in Spain only using the property as a holiday home. We are discussing Spanish wills and how to avoid IHT. Am I right in understanding that there is no free transfer of assets between a spouse when a partner dies? And if the intention is to bequeath to children is it best to do this from the outset? If the property is worth say 300K (having depreciated!) and that is the only asset in Spain what is the likely tax to pay on the first parental death applying scenario 1 & 2.

    And finally what is best for siblings with 16% ownership who are married with children, how should their wills be structured?

  3. #63
    Administrator
    Join Date
    Oct 2008
    Posts
    186

    Default

    Hello Philip

    Welcome to the belegal forums.

    In answer to your questions, please note that Spanish law makes no provisions for IHT exemptions when it comes to non-residents. These exemptions do exist, but only if you were legally residing in one of the regions which make provisions in respect of IHT.

    Having said this, your case is the typical scenario in which inheritance tax can be almost negligible if the will is structured properly.

    For our calculations, we will be using the figures that appear on the article:



    The article is 12 years old, but everything mentioned there is still in force.

    The calculations are the following:

    Code:
    Value of Assets		300,000.00 € (including 'ajuar')			
    				
    	
    Scenario 1: Spouse and Children Inherit on First Transfer. Children on Second					
    	
    				
    First Transfer
    					
    Percentage to be transfered	26%	78,000.00 €			
    					
    Heir	Share	Allowance	Taxable Amount	Tax Percentage	Total Tax
    
    Spouse     19,500.00 €	15,956.87 €	3,543.13 €	7.95%	271.05 €
    Children 1 19,500.00 €	15,956.87 €	3,543.13 €	7.95%	271.05 €
    Children 2 19,500.00 €	15,956.87 €	3,543.13 €	7.95%	271.05 €
    Children 3 19,500.00 €	15,956.87 €	3,543.13 €	7.95%	271.05 €
    	
    				
    Second Transfer
    					
    Percentage to be transfered	32.50%	97,500.00 €			
    					
    Heir	Share	Allowance	Taxable Amount	Tax Percentage	Total Tax
    
    Children 1	32,500.00 €	15,956.87 €	16,543.13 €	9.35%	1,343.00 €
    Children 2	32,500.00 €	15,956.87 €	16,543.13 €	9.35%	1,343.00 €
    Children 3	32,500.00 €	15,956.87 €	16,543.13 €	9.35%	1,343.00 €
    					
    Total					5,113.20 €
    				
    	
    Scenario 2: Spouse Inherits on First Transfer. Children on Second					
    		
    			
    First Transfer
    					
    Percentage to be transfered	26%	78,000.00 €			
    					
    Heir	Share	Allowance	Taxable Amount	Tax Percentage	Total Tax
    
    Spouse      78,000.00 €	15,956.87 €	62,043.13 €	13.60%	6,536.49 €
    	
    				
    Second Transfer
    					
    Percentage to be transfered	52%	156,000.00 €			
    					
    Heir	Share	Allowance	Taxable Amount	Tax Percentage	Total Tax
    					
    Children 1	52,000.00 €	15,956.87 €	36,043.13 €	11.05%	3,303.63 €
    Children 2	52,000.00 €	15,956.87 €	36,043.13 €	11.05%	3,303.63 €
    Children 3	52,000.00 €	15,956.87 €	36,043.13 €	11.05%	3,303.63 €
    					
    Total					16,447.38 €
    Scenario 1 is clearly more favourable. On the first transfer, heirs would pay less than €300 each.

    Note

    • If the childrent are under 21, further allowances are applicable.
    • The above calculations don't consider the declared pre-existing wealth of the heirs, which, in case of Group I and 2 descendants, could attract an extra 0% to 20% depending on how wealthy each heir is.


    Taking a look at the above calculations, it is clear that structuring correctly a will is the best way of mitigating IHT over exisiting assets.

    I'd like to take the opportunity to recommend staying away from services such as the ones described here:



    Regards

  4. #64
    liz hagerty
    Guest

    Default Spanish Inheritance Tax: Advantages of Making a Will in Spain

    Oct 2012. Does this all hold true? It is very reassuring. But I think our Spanish will leaves half of deceased's estate (house value) to non resident spouse and remaining half divided between three non resident children over 18. No mortgage. House cost 400,000 now worth 250,000. Andalucia.

    What would inheriting spouse pay? Should we change will?

  5. #65
    Administrator
    Join Date
    Oct 2008
    Posts
    186

    Default

    Hello Liz

    Sorry for the late reply.

    In your case, for a property worth €400,000, your tax liability would be:

    Code:
    Percentage to be transfered	50%	200,000.00 €			
    					
    Heir    	Share    	Allowance	Taxable Amount  Tax Percentage	  Total Tax
    Spouse          100,000.00 €	15,956.87 €	84,043.13 €	16.15%	7,758.22 €
    Children 1	33,000.00 €	15,956.87 €	17,043.13 €	9.35%	122.21 €
    Children 2	33,000.00 €	15,956.87 €	17,043.13 €	9.35%	122.21 €
    Children 3	33,000.00 €	15,956.87 €	17,043.13 €	9.35%	122.21 €
    					8,124.85 €
    If you chose to change the will and divide in equal shares the bequeathed assets (50% of €400.000) then the resulting tax would be:

    Code:
    Percentage to be transfered	50.00%	200,000.00 €			
    					
    Heir	        Share	        Allowance	 Taxable Amount   Tax Percentage	  Total Tax
    Spouse          50,000.00 €	15,956.87 €	34,043.13 €	11.05%	1,582.77 €
    Children 1	50,000.00 €	15,956.87 €	34,043.13 €	11.05%	1,582.77 €
    Children 2	50,000.00 €	15,956.87 €	34,043.13 €	11.05%	1,582.77 €
    Children 3	50,000.00 €	15,956.87 €	34,043.13 €	11.05%	1,582.77 €
    					
    Total					4,748.31 €
    It's roughly €3,300 more, but note that when the other spouse passes away, heirs will attract a larger IHT percentage. The rule of thumb is to divide as much as possible, avoiding alocating large sums to a single heir.

    Regards

  6. #66
    Tony Pride
    Guest

    Default Spanish Inheritance Tax: Advantages of Making a Will in Spain

    Thank you for your informative article.
    My wife and I jointly own an apartment in Andalucia (valor catastral 317,000 euros). We have made Spanish wills but are not Spanish residents, our main home being in the UK.
    We want our two children (both over 21) ultimately to inherit.
    We expect there to be a Spanish IHT issue.
    Both our wills currently leave the deceased's half share split equally three ways between the surviving spouse and the two children.
    Is this the most tax efficient way? or should we simply both leave our share equally between the two children?
    Will there be a UK IHT tax issue on the childrens inheritance in addition?

  7. #67
    Barry G
    Guest

    Default Spanish Inheritance Tax: Advantages of Making a Will in Spain

    Hi, My Father is a non resident spanish home owner and he wishes to start making arrangements in his will to leave his spanish property to his wife (not my mother) and eventually to me.

    I have a sibling that is not to inherit this property and my father wants to make everything as clear and easy for everyone as he can.

    What is the best way to safeguard the property for his wife, and then myself?

    And what inheritance tax burden are we likely to be liable for. The property is 3-400k Euros. The property is located in Andalucia.

  8. #68
    Peter j k
    Guest

    Default Spanish Inheritance Tax: Advantages of Making a Will in Spain

    We bought an apartment in javea alicante in 2004. We are non residents living in the UK. We have two sons over 21 years of age! The apartment is worth approximately 300,000 euros. Could you tell me what inheritance tax would we have to pay if either my wife or myself died. Also if we both die what tax would our two sons have to pay? Also as my wife and myself are retired and considering moving to Spain would that alter the inheritance tax situation. Thank you

  9. #69
    Unregistered
    Guest

    Arrow property in Spain

    Dear BeLegal,

    I have spent some time reading your very clear and comprehensive article on inheritance of Spanish property, thank you for making it easier to understand.

    I need your help and guidance. My parents and I own a villa to the value of 100keuro in the Valencia region( all3 names are on the deeds). We are Irish but I live, work and pay my taxes in Netherlands. They have no other property in Ireland or any other country only the one in Spain. They are non residence, spending ~80 days a year there. I have a mortgage ~50% of the value on the property. As they are getting older I want to look at the best course of action meaning, can they transfer the property over to me, if so what taxes would I be liable for? Should I buy them out as a cheaper option?, should I do nothing? We all have Spanish wills drawn up. Mine is left to my wife. My parents left to each other. Additionaly I have other brothers and sisters in Ireland who would not contest the house.

    Please advise!

    Best regards.

    Dutch Irish.

  10. #70

    Default

    Hello Dutch Irish,

    Our recommendation is that you wait until it´s time to inherit and not take any action now.

    The IHT in the Communitat Valenciana is exempt up to the 100K € if the beneficiaries are first grade relatives ( children, spouses, parents ). As you indicate the property is not valued in more than 100k €, you would be, in principle, exempt of IHT.

    If the beneficiaries are under 21 years the exemption is raised to assets valued up to 156.000 €.

    Please feel free to contact us by email should you wish to discuss the particular case further.

    Regards,
    Patricia Martin
    Immigration Consultant at Lawbird | Contact Me
    Check My Profile

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