United Advice
Making a Will in Spain.
Drawing up a will in Spain.
If you are a foreigner with property or other assets in Spain, you should make a Spanish will disposing of them. The making of a testament will help avoid time-consuming and legal problems for your heirs. The Spanish testament should clearly state that it disposes only of your assets in Spain. Another will outside of Spain should be drawn up for your assets outside this country and should clearly state that it disposes only of the assets in the country where it is drawn up.
Spanish inheritance taxes are charged after 15025 euros and there is no exemption from these taxes as in some countries. However, if you are an official resident of Spain, and you leave your inheritance to a spouse, you could be eligible for a 95% reduction in the value of your property for inheritance tax purposes. (Avoiding this tax). Spanish law requires that two thirds of an estate must go to the children, as compulsory heirs. However as a foreigner, this law does not apply to you and you will be able to leave your estate to the person of your choice. You will not be exempt from paying the inheritance taxes.
When you have a will in Spain as well as one outside of Spain, the disposal of any assets here will be governed by your own national law and not that of Spain. But you will also have to declare in the Spanish will that your own country’s inheritance law is governed by the principal of free disposition of property by testament. In any event, the situation is complicated and you must have legal advice. The lawyer will also be able to advise you as to the wording of your will in order to best carry out your wishes. If you have immovable property sold, you must leave it to your heirs in equal parts, to be sold and the proceeds divided by them. The will, itself, is made out in two columns, one in Spanish and the other in the language of your choice. It will be checked by the Notary Public and signed in his presence, with three witnesses. This is an open will (testamento abierto), the most common type. The Notary Public keeps the original in his file. He will provide you with an authorised copy and will send you a notification to the registro central de ultima voluntad, which is the central testament registry in Madrid. Each will is given a certification number and wills are kept on file here to make sure that a legal copy can always be found. If you do not have a copy of the will or you do not know if it exists or not, you can contact the central registry to find out. If it does exist, the registry will inform you of the procedure to enable you to get a copy. The existence of a Spanish will makes the inheritance process much more rapid.
You also have the option of making a closed will, (testamento cerrado), a holographic will, hand- written by you, or a verbal will, which requires the presence of five witnesses. These last two types of wills do add time and expense to the whole inheritance process.
The lawyer will also be able to let you know approximately how much inheritance tax will be charged to your estate and possible legal alternatives to getting around paying the maximum tax. One possible legal loophole would be to form a family corporation or trust in which the family’s wealth passes to the company. When a family member dies, the board of directors is reorganised and some company shares are transferred. This procedure is subject to low tax rate.
Another legal step would be to make a gift of your property to your inheritors while you are still alive, while keeping the (usofructo) right to continue using the property as long as you live. However, the Spanish gift tax is the same as the inheritance tax. Another possibility could be to sell the property to your heir, reserving the usofructo. Property transfer tax is approximately 10% of the value set on the property. This option is especially worthwhile if your property exceeds 60100 euros and the inheritor is a non-relative. However, this transaction must be carried out at least 5 years before your demise. Otherwise the state will charge the full amount, on the assumption that the operation was only done to avoid paying the tax. Since each case will be unique, a Spanish lawyer must be consulted every time.
INHERITANCE TAXES.
If you are a UK expatriate, resident in Spain then you should be aware of these points:
Spanish Inheritance tax
Expatriates resident in Spain for tax purposes are liable for Spanish Inheritance tax (IHT) regardless of the country in which the inheritance is situated; those not resident in Spain are liable to IHT in Spain on assets they inherit which are physically located in Spain.
UK inheritance tax.
The worldwide assets of a UK expatriate are also liable to IHT in the UK. Where the deceased is not domiciled in the UK, IHT is assessed on UK sited assets.
The Bottom Line.
Many will say that Spain is now their permanent home and that they will remain here for the rest of their lives, however most will admit that they would probably return to the UK should either partner become ill or one of them died. The fact is that most UK expats in Spain retain their UK domicile so are therefore liable for IHT in the UK and in Spain.
The Tax – UK
The tax in the UK is assessed on the total worldwide wealth of the deceased. Currently the first 234,000 pounds is exempt from tax – this is known as the nil-rate band. A single rate of 40% applies to the excess. An important point is that the surviving spouse is also UK domiciled. A non UK domiciled spouse has an allowance of 55.000pounds.
The Tax – Spain.
Tax is assessed on each individual. The tax payable depends on the relationship to the deceased, pre-existing wealth and if under 21 years of age and the amount inherited. Here in Spain there is no exemption for the spouse. Tax is payable on all transfers and the allowance is just 10,000 pounds.
The home in Spain.
Spanish IHT legislation states that, subject to certain conditions, the value of the family home can be reduced by 95% subject to a maximum of 75,000pounds. However any taxed saved can be clawed back, with interest if the home is sold within 10 years, except on the death of the recipient. Since many surviving spouses return to the UK following the death of their partners, this 95% reduction has little meaning in practise.
I Would also like to add that the % on tax etc may not be exact right now and that this information is not absolute proof and that making a will you should always consult a lawyer. This information is guide line only to give people information on the types of wills available and what they are likely to encounter when making a will.
