Posted on: 20th December 2024

What Expats Need to Know About Spanish Inheritance Laws

Understanding Spanish inheritance laws is crucial if you're an expat living in Spain or someone who owns property here.

It might not be the most exciting topic, but planning ahead can save your loved ones a lot of hassle and ensure your wishes are followed.

Let's break it down and make it easy to understand.

Who do Spanish Inheritance Laws Apply to?

By default, Spanish inheritance laws apply to anyone who is a habitual resident in Spain at the time of their death.

However, there's good news for expats: under EU Regulation 650/2012, you can choose the law of your nationality to govern your inheritance. This means that if you're British, French, or of another nationality, you can opt for the laws of your home country instead of following Spain's rules.

To make this choice official, you'll need to state it clearly in your will. Spanish laws will automatically apply without this, which might not align with how you'd like your estate to be divided.

Understanding Spain's Forced Heirship Rules

One of the biggest differences between Spanish inheritance laws and those of other countries is the concept of "forced heirship." This means that a large portion of your estate must go to specific heirs, whether you like it or not.

Here's how it works:

• Children and Descendants: Two-thirds of your estate is reserved for your children. One-third is split equally, while the other can be distributed more flexibly. You can leave it all to one child, share it unequally, or use it however you wish.

• Spouse: If you have children, your spouse is entitled to a life interest (known as "usufruct") in one-third of the estate. This means they can use and benefit from it during their lifetime, but they don't own it outright.

These rules can surprise you if you're used to more freedom in distributing your estate. That's why choosing the law of your nationality might be a better fit for your situation.

Do You Need a Spanish Will?

The short answer is yes. Having a Spanish will is highly recommended if you have assets in Spain. It makes the inheritance process much smoother for your loved ones and ensures your wishes are respected.

Without a Spanish will, your estate may be subject to lengthy legal processes and could default to Spain's inheritance laws. A local will simplifies everything and reduces potential complications.

What About Inheritance Tax?

Spain's inheritance tax, or "Impuesto de Sucesiones y Donaciones," can vary widely depending on several factors:

• Your Relationship to the Deceased: Close relatives like spouses and children typically benefit from higher tax-free allowances and lower rates. For example, children under 21 can receive up to €47,859 tax-free, while spouses and older children have an allowance of €15,957.

• The Value of the Inheritance: Spain uses a progressive tax system, with rates ranging from 7.65% to 34%, depending on how much is inherited.

• Regional Differences: Spain's autonomous regions can adjust inheritance tax rates and allowances. Close relatives may enjoy substantial reductions or even full exemptions in some areas. For instance, Andalusia and Madrid are known for offering generous tax breaks.

Understanding these factors can help you plan ahead and minimise tax liabilities for your heirs.

Deadlines and Penalties

Timing is important when it comes to inheritance tax in Spain. Beneficiaries have six months from the date of death to pay the tax. If this isn't possible, you can request a six-month extension, but this must be done within the first five months.

Failing to pay on time could result in penalties and interest, so acting quickly and seeking professional advice is a good idea.

What if You're a Non-Resident?

Non-residents who inherit assets in Spain are also subject to Spanish inheritance tax. However, the tax rates and allowances might differ depending on your country of residence and whether a double taxation treaty exists.

For example, the UK and Spain have a treaty that can help prevent beneficiaries from being taxed twice on the same inheritance.

It's worth noting that non-residents are often taxed at national rates, which can be less favourable than regional ones. This is another reason to seek expert advice.

Why You Need Professional Help

Spanish inheritance laws can be complicated, especially when you factor in cross-border issues. Consulting with a legal or financial professional is essential. They can help you:

• Decide whether to choose Spanish or home-country laws.

• Draft a will that aligns with your wishes.

• Navigate the inheritance tax system and take advantage of regional benefits.

• Avoid common pitfalls and ensure a smooth process for your heirs.

Don't Leave Things to Chance

Planning for the future isn't always easy, but it's one of the most thoughtful things you can do for your loved ones.

Understanding Spanish inheritance laws and taking the right steps—like drafting a will and seeking professional advice—can ensure your wishes are respected and minimise stress for your family.

If you're an expat in Spain, don't leave these things to chance. Take action today to protect your legacy and provide peace of mind for tomorrow.