There are a growing number of people that own properties in different European Union member countries other than their country of nationality.
This situation is particularly common in Spain, a country with 4,7 million expats. Among them we find a lot of professional expats that have chosen to live in Barcelona or Madrid, not to mention the many retirees that have made Spain their primary place of residence.
If you are an expat living in Spain, while enjoying your new or not so new life in the country, you might also want to start thinking about issues that, though not pleasant to contemplate, must be taken care of. We are referring to matters pertaining to your will and inheritance. No one likes to think about this subject, but like it or not, it needs to be fully understood and resolved sooner rather than later.
There are three main reasons for making a Spanish will:
1. Avoid unpleasant surprises
In August 2015 a new European Union Regulation (Regulation 650/2012) entered into force in Spain and in the rest of continental Europe, excluding the United Kingdom, Ireland and Denmark. Although these three countries are not part of the agreement, Regulation 650/2012 also affects British, Irish and Danish expats who have their habitual residence in any of the European countries that signed it, Spain being among them.
The big change that came with the implementation of the mentioned regulation applies to people who die after of August 16, 2015. The regulation stipulates that in the absence of a will stating otherwise, the law applicable to their inheritance is the law of their habitual residence at the time of death rather than the law of their nationality.
That means that if an expat who lives in Spain passes away in the country without having made a will the Spanish law will be applicable.
As a case in point, imagine a British married couple that lives in Palma de Mallorca most of the year. Husband and wife each want their spouse to be the full beneficiary of their estate but don’t yet have a will. If the husband dies absent a will, the Spanish law rules. This means that, as per Spanish law, the spouse will only get a third of the inheritance — and for “use” only since it will be under a usufruct agreement. All assets and properties will in fact belong to the children. This rule can be highly detrimental to the surviving spouse’s interests, especially when there are descendants from a previous marriage of the deceased or family relations that have weakened over time.
Some Autonomous Communities have peculiarities. For example, in Catalonia the spouse gets the whole inheritance under usufruct.
2. Avoid time–consuming and expensive legal issues
The scenario described above highlights the consequences and complications of not having a will, and the simple way to solve is to have a will written up in Spain that states that you wish to apply the law of your country of nationality when it comes to your Spanish assets.
Although the above is the best option and the one we recommend, your heirs won’t be able to take any action in Spain until the validation of the will has been processed. This may take some time especially if your will or your estate presents some hurdle. Moreover, there is a term of 6 months from the death of a person to settle the Inheritance Tax, after which the Spanish authorities impose Tax penalties for late payment, typically ranging from 5%, 10% and 15% if paid in the next 3, 6 or 12 months respectively from the said deadline. If payment is made after 12 months from the deadline a surcharge of 20% is applied besides the accrued delay interests.
‘Since my father had a Spanish will, I did not have to sworn–translate and legalize tons of documents, there were no surprises regarding the applicable law, no need to get certificates regarding which testament is valid according to the foreign law applicable to the inheritance, no need to pay lawyers to deal with all the unnecessary bureaucracy in all the countries, and no need to wait for a year or two to get the title of the apartment…’
3. Your estate can become eligible to a 95% reduction in inheritance tax
This reduction is different in each Spanish Autonomous Community, but in all cases, it is not available to non-residents outside of the European Union, so bear this in mind when drawing up a will.
In Catalonia, the reduction applies to the first €100,000 when it comes to the children and the spouse, and €50,000 to the rest of family members.
‘We did not pay any taxes for inheriting my dad’s flat, since Roser of AvaLaw advised my father to leave in his will 50% of the flat to my mother and 50% to me, so that we both could take advantage of the personal tax exemption of 175.000 euros that Andalucía had for all of us who were residing over there at that moment.’
Spanish succession tax and inheritance law is far from simple and in all cases it is advisable to seek qualified professional advice in order to make the best arrangements for you and your family.
At AvaLaw we have assisted clients from over 60 different countries. If you are an expat living in Spain and need a lawyer to help you plan your inheritance in Spain don’t hesitate to contact us.