How does Spanish law on inheritance work
Spanish inheritance laws differ in some aspects to Inheritance laws in other countries. Who inherits and where and when liability for paying Inheritance tax lies are the key points to understand.
As a general rule if you own or hold assets in Spain it is advisable to have both a Spanish Will covering the Spanish Asset along with an Will in your main country of Residency specifying what happens to all your worldwide assets, and that the two wills co-validate each other.
Writing a Will with an adviser who has no knowledge of your worldwide situation who can ensure the two wills can exist beside each other can cause issues for your beneficiaries. You should appoint a Spanish Lawyer to ensure your requirements on your Spanish assets are met after death.
If no Will is made in Spain the process upon death will be more difficult, complex and costly for those who inherit your assets in Spain.
When is Inheritance tax payable in Spain
Payment of Inheritance tax in Spain needs to take place within 6 months of death, after this you can apply for a further extension but late payment fines are incurred.
Eventually if the tax and fines is not paid there is a risk the asset will be taken over by the state and sold.
What levels of Spanish Inheritance tax are payable
Levels of tax payments vary depending on, who is inheriting and their relationship to the deceased, the value of the asset, and the region of Spain the asset sits in. It is most likely that if you purchase or hold a fixed or moveable asset in Spain that some level of IHT tax will be applicable.
We can provide for you an assessment of IHT tax liability and future expectations so you can decide and instruct the appropriate solutions for you and your heirs. For an assessment of your future IHT liabilities contact us today.
Can my beneficiaries sell the asset in Spain to pay for Inheritance tax liabilities
Unlike the UK and other countries there is no spousal exemption on IHT taxes upon first death. This means that IHT tax becomes immediately payable on the value of the share of the deceased partner.
Unlike other countries where the beneficiary is liable for the payment of taxes and can sell an asset to make the payment, the reverse is true in Spain and taxes must be paid before the asset can be transferred to the beneficiary for sale. Bank accounts of the deceased situated in Spain will be frozen at death so do not work on the basis that ready cash can or will be used by your beneficiaries to cover tax liabilities.
To ensure sufficient monies are available to pay death duties an up to date understanding and continual re-assessment of Inheritance Tax implications are required at all times and that consideration is then given as to how any tax liability would be paid in the event of death.
Can a Spanish Mortgage or a Life Insurance policy in Spain help me mitigate future Inheritance tax
A Spanish Mortgage can help reduce the tax liability and general life cover policies held in Spain can be set up which will not be frozen at death to allow payments to be made.
Life cover policies can be used to make IHT tax payments.
For free advice on all aspects of IHT, the making of Will and solutions for paying Inheritance Tax contact us today.