INHERITANCE TAX IN SPAIN

So you’ve got your Spanish Will. But what are the consequences of your actions. Did anyone explain Inheritance Tax in Spain to you? Probably not.

Sadly enough, it is a fact, that everybody must depart from this world at one time or another. Their assets, however, will remain. Those goods and assets that belonged to the deceased person at the time of his/her death form their inheritance.

For many it is only during a time of grief that the question of Inheritance Tax raises it’s head. And for some it is a great shock.

Fiscal Residents of the Communidad Valencia receive tax relief on Inheritance Tax. Unfortuntately, what constitutes a Fiscal Resident is often not appreciated and whilst many people have lived here for years and believe that they are a resident, they are not.

This leads to difficulties with Inheritance Tax.

A further problem is often the construction of the Will itself. Many couples are in a second relationship with children from a first and proper and adequate planning has often not been given as to how to deal with this. This again can have a significant bearing on Inheritance Tax, particularly for unmarried couples.

To consider each individual situation, you need to look at the value of the assets in Spain, the relationship between the deceased and the beneficiary and the net worth of the beneficiary. All these factors are taken into account to calculate Inheritance Tax.

For those who are not fiscally resident in Spain they should look carefully at their situation, and where appropriate ensure that they have sufficient funds set aside to pay Inheritance Tax in the event of their death.

A further important factor is that for many they ultimately leave their assets to their children who are usually not resident in Spain. They will have Inheritance Tax to pay because they will not benefit from the tax relief available to fiscal residents.

There is also the misconception that there is no inheritance tax because it is below the threshold. This view is based on the allowances in the UK which have absolutely no standing in Spain.

In certain circumstances there are no allowances for a beneficiary in others there is an allowance of just under 16000€ which, lets be honest is not much. So when faced with this situation there is the question of who inherits and to what extent their liability is to inheritance tax.

Whilst fiscal residents in the Valencia Region and their spouse/children who are also fiscally resident in the region do benefit from 95% tax relief, sadly is it not available for anyone who does not fall into that criteria such as a partner or non resident.

This is particularly relevant to those couples who are unmarried. Will or no Will there is no tax relief and the tax payable is at a much higher rate. Don’t forget that you can leave your assets to children from a previous relationship whilst protecting your partner.

Getting the right advice and working out what is best for you and your loved ones could save thousands. It doesn’t matter how many times we write on this topic there are still those that don’t listen and it is usually to their loved ones cost.

It is usual that children inherit on the death of the second parent, they having left their assets to each other in the first instance.

One problem for the Expat in Spain, is that there is an illusion that upon death the estate passes automatically to the Spouse.

This just isn’t right. Failure to make a Will causes unbelievable difficulties for the family left behind.

Getting the right advice and working out what is best for you and your loved ones could save thousands. It doesn’t matter how many times we write on this topic there are still those that don’t listen and it is usually to their loved ones cost.

Whether we like it or not the Spanish system is in place to keep assets within the bloodline. As a UK national, English law applies to your Spanish Will and you do have the democratic right to leave your assets to whoever you wish, but make sure you get it right.

If anyone just takes instructions from you without discussing your circumstances and/or inheritance tax and your beneficiaries exposure to it – BEWARE. You could be making a costly mistake.

Cross border laws and tax implications are complex and everyone is entitled to know their own position before making an informed choice.

For more information contact Costa Blanca Lawyers http://www.costablancalawyers.com/