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

  1. #11
    tony
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    Default Spanish Inheritance Tax: Advantages of Making a Will in Spain

    our property on the costa blanca is in my wifes name only, in her spanish will it is left to me and then our two sons, it is worth around 80.000 euros do we need to take out an insurance to cover i h t

  2. #12
    Senior Member
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    Default

    Dear Sir,

    I would advise you hire it in any case, yes.

    If the property is worth 80k the national tax allowance will already offset your IHT liability on inheriting it regardless of Valencia's regional laws (regional tax allowances).

    Even so you will still have to hire a lawyer to carry out the deed of acceptance of inheritance; calculate, file and lodge the IHT tax (which will be nil); and finalluy onece the IHT has been lodged, register the property under your name at the land registry as the new owner.

    Which is why I recommend taking on a whole life insurance policy as they are cheap and it will pay for itself in the long run offsetting the associated transfer of estate expenses regardless if your IHT liability (and that of your children is nil). Because one thing is the IHT tax being zero in your case and a different matter is that you still have to hire a lawyer to act on your behalf to transfer the Spanish estate. It's two different things.

    I hope the above clarifies. If not just ask me again.

    Yours faithfully,
    Raymundo LarraĂ*n Nesbitt

  3. #13
    Junior Member
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    Congleto Cheshire/Calpe Spain
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    Default Exemption in Valencia

    Are you saying that a Non resident husband and wife are exempt from IHT in the Valencia region ,My advisor tells me that only residents have this exemption as long as they have been submitting their tax returns for 5 years and if the exemption is taken then they have to stay in Valencia as resident for 10 year .if they leave earlier then the IHT is payable plus taxes. also my understanding is that the tax free sum for a non resident spouse is 15957€ and the tax on the balance of the 80,000€ stated would be 6585€ and approx 5000€ notary and other legal costs is that correct.

  4. #14
    John Perry
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    Default Spanish Inheritance Tax: Advantages of Making a Will in Spain

    Thank you for a very clear and comprehensive article. I am advised that inheritance tax liability lapses after 5 years if the inheritance is unclaimed. Is this true or more chatter? I am resident in Andalucia.

  5. #15
    Senior Member
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    Dear Mr Perry,

    Thank you for your kind words.

    You've heard correctly.

    The nation wide statutory time limit to claim Spanish Inheritance Tax (Impuesto de Sucesiones y Donaciones, ISD for short) is actually 4 years and 6 months to be exact as from the demise of the testator. I simply did not include this information in my article as I did not want readers to mistakenly think we were advocating following this option in any way.

    After said deadline has elapsed, you will no longer be held liable by the Spanish Tax Authorities to pay it. However, you or your appointed legal representative must still lodge it regardless for the transfer of ownership to operate at the Land Registry.

    We cannot advocate following this option, as if you're caught by the Tax man within the timeframe you will have to pay on top legal delay interests and a fine or surcharge for late payment.

    Yours faithfully,
    Raymundo LarraĂ*n Nesbitt

  6. #16
    Jemma Fenton
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    Default Spanish Inheritance Tax: Advantages of Making a Will in Spain

    Please Help! My husband & I have owned a property in Andalucia since 1987. We were so desparate to buy that for mortgage purposes it was put in my fathers name - he was a resident at the time. This has proved to be a costly mistake both for inheritance tax or for transfering into our name. My father is now in his 70,s & it,s still in his name. The property is mortgage free & worth about 400,000€. I,ve been looking for a solution that would make the property safe but as yet no luck. My father has made a Spanish will leaving the property to myself & my husband. My mother is still alive & I have siblings. Your article is the only one that I,ve found that doesn,t spell doom & gloom & a 80,000€ tax bill if my dad dies. Kind Regards Jemma

  7. #17
    Senior Member
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    Dear Madam,

    You are welcome.

    I take for granted you are fiscal resident in AndalucĂ*a region following what you write.

    In that case, as explained in my article, you are entitled to the following regional tax exemption:


    •Reduction of 99.99% in the IHT taxable base on inheriting the family home (deaths occurred as from the 1st January 2003). This requires the beneficiaries being resident in AndalucĂ*a.
    You must have been living in the family home for the last three years (and be in a position to prove it) and your pre-existing wealth must be < €402,678.11

    Additonally, if the estate bequeathed is below €175,000 no IHT is payable.


    •No IHT paid on the estate itself on compliance with certain requirements:

    i) inheritance taxable base < €175,000
    ii) heirs are next-of-kin or surviving spouse
    iii) heirs pre-existing wealth < €402,678.11

    In your case both you and your husband would be inheriting 50% each. Threfore you stand to inherit an estate valued at €200,000 each or maybe even less (if you take cadastral values and nor declared or comparable values; although subject to be reviewed of course by the Tax office).

    You may even qualify to be exempt from paying IHT in AndalucĂ*a as you're next-of-kin inheriting a taxable < €175,000. Your husband on the other hand is unrelated to your father and would be classified for tax purposes in Group IV.

    Regrettably we do not make accurate tax assessments (more so on IHT due to its complexity) on a free basis; you would need to hire us.

    Bottom line things aren't as bad as you thought, providing you are tax resident in the autonomous region of AndalucĂ*a of course.

    Yours faithfully,
    Raymundo LarraĂ*n Nesbitt

  8. #18
    Peleleo Davies
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    Default Spanish Inheritance Tax: Advantages of Making a Will in Spain

    Dear Lawbird,
    I am resident in Uk and already own a third of the property in the Canary Islands. My father died recently (we did have a spanish will thanks to your article) leaving the rest of the house to me. I was told that the law has changed and I would only have to pay a small amount 1% in IHT?
    The house is in the Canary islands and I have been quoted by a lawyer that the IHT amount is 30K on a 200,000 value to inherit. which works out 15%.
    has the law changed? how can I find out? many thanks

  9. #19
    Senior Member
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    Dear Mr Davies

    I'm glad you found my article on the advantages of making a Spanish Will useful.

    I wrote it with that specific purpose on mind as foreigners seemed to be oblivious to the many legal and financial advantages their appointed heirs would have (namely saving them money, time and hassle at a time of bereavement) on following my simple advice.

    Regarding your query, there are very important tax allowances if you are resident in the Canary Islands and have been so at least for the prior 5 years of the death (to the point that no tax is payable).

    However as you are resident in the UK you cannot take advantage of said lenient regional tax allowances specific to the Canary Islands. In your case the general inheritance law woudl be applied (State level) which few tax allowances are already detailed in my article which starts off this very thread.

    I suggest you read our article on the matter which specifically deals with this:

    Spanish Inheritance Tax: How much is it? - 1st February 2000

    I cannot see you paying 1% on a €200,000 taxabale base being domiciled in the UK.

    And to close, we do not provide free tax assessments. You would need to hire us to provide you this legal service.

    Sincerely
    Raymundo LarraĂ*n Nesbitt

  10. #20
    Sny Berwiz
    Guest

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

    My wife and I jointly own a mortgage-free property in Andalucia with a value of around €200,000. We are non-resident. I have 3 children (all over 21) while my wife has none. She intends to leave her share in the property to me however I wish to leave my half of the property in trust to my 3 children in order that that my wife can retain full control of the property after my death (and to aviod any disputes which may arise through co-ownership) but upon her death or if the property is sold my children will receive their share. This is to ensure that if my wife, who is younger than me, were to eventually remarry, my share of the Spanish asset is still preserved for my children in the long term. I can set up such a trust as part of a UK will but don't know if this is possible with a Spanish will. Can you tell me if it is possible with a Spanish will and what the IHT situation would be in such a case.. If it cannot be done with a spanish will, would I be better to transfer the property to a UK limited company (jointly owned by my wife and I) when my shares in the company could be held in trust for my children on my death.

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