par Gabriella Trussler | Oct 8, 2018 | Inheritance
Due to the increasing amount of foreign retirees choosing it as their retirement destination, international inheritances and the issues they present have become much more common in Spain.
By international inheritances we mean any inheritance with an international dynamic (e.g. the deceased is a foreign national, a foreign law applies to the inheritance, etc.). Here are just a few of the complications that can arise.
- Locating last will and testament.
When the deceased is a foreign national, the likelihood that the last will and testament was made abroad is obviously higher. Although within Spain we have an extremely effective system for the registry of wills, this is not often the case in other countries. In the event that the last will and testament has been made in Spain, any notary is able to request information from the Spanish Registry of Wills to ascertain where and when the last will was made and obtain a copy. However, if the last will was made abroad this will need to be obtained, and this can become very difficult if there is no national registry of wills.
- Legalisation and translation of foreign documents.
Whenever there is an international dynamic to inheritance, some form of foreign documentation has to be submitted
(e.g. death, birth and marriage certificates, certificate of foreign law, etc.). All foreign documentation will have to legalised/apostilled, depending on its origin, unless it is an exception as regulated by an international convention. Furthermore, unless the notary dealing with the inheritance has sufficient knowledge of the language of the document, or it is a multilingual document, sworn translation will be needed.
- Determining the law which applies to the inheritance.
Clauses within Spanish wills electing the law that will apply to the inheritance have become more commonplace, but when such a clause does not exist a determination will need to be made of the applicable law, according to Spanish and EU law, based on the residence of the deceased. This could create limitations for the inheritance if the applicable law establishes forced heirship, as such heirs will have to inherit a certain legal minimum by law.
- Certification of foreign Inheritance Law.
In the event that a foreign law does apply to the inheritance, unless the notary is sufficiently aware of the domestic inheritance legislation, a certification of said law will need to be obtained from the appropriate authority of the foreign country. Once again, legalisation/apostille and sworn translation may be needed depending on the circumstances.
- Locating inheritors abroad.
Another obvious complication of an international inheritance, is the existence of inheritors who are resident outside of Spain. This only creates a difficulty when they are unable to be contacted due to lack of information, in which case they will need to be located through the appropriate authorities for the inheritance to proceed.
- POA for inheritors.
In the case of inheritors who are resident abroad, a power of attorney is often granted for a third party to deal with matters relating to the Spanish inheritance on their behalf. However, some people may not be aware that the only form of power of attorney acceptable in Spain is a notarised one. This means that the inheritor either has to grant the power of attorney before a Spanish notary, or they will need to grant it before a notary public in their country of origin, which will then need to be legalised/apostilled and translated, depending on the Spanish notary’s knowledge of the language.
- NIE for all inheritors.
All inheritors, foreign or otherwise, must have a Spanish id number, which means that all foreign inheritors must obtain an NIE (Foreigner Identification Number). This is for tax purposes and the avoidance of money laundering, as the NIE becomes the inheritor’s tax number without which they will be unable to inherit, submit Inheritance Tax return or have any real-estate registered to their name.
- Locating assets and liabilities of the estate.
In the event of a Spanish inheritance of a foreign national there are often assets abroad. This can become complicated if the inheritors are unaware of the existence of such assets. As regards locating debts and liabilities of the deceased, this is always difficult in and out of Spain, as there are no centralised records in these cases.
- Co-ownership of property among inheritors.
What many, who are unaware of the Spanish inheritance system, do not appreciate is that Spanish wills very rarely assign an executor, as it is not a common role in Spain due to the necessary execution by notary public. This means that in such cases there are no means by which part or the whole estate is liquidated before each inheritor acquires their share. Therefore, in the case of real-estate, it can lead to a situation where a property is co-owned by several inheritors, the obvious implication of which is that the property will not be able to be subsequently sold without the agreement of all parties.
- Inheritance Tax jurisdiction.
The residence of the deceased and the inheritors will determine whether jurisdiction over Inheritance Tax lies with the appropriate regional tax authority or the central tax authority.
These and other complications are why it is very important in these cases to seek appropriate legal advice from professionals who specialize in such international cases. The inheritance process in Spain is not as straight-forward as in other jurisdictions, and without the correct guidance can be unnecessarily complicated and delayed.
Gabriella Mary Trussler Rowland
Lawyer
4408 Ilustre Colegio de Abogados de Almería
par Gabriella Trussler | Avr 4, 2018 | Inheritance, Tax
As you will already be aware if you read our post on “Inheritance Tax reform in Andalucia”, a much needed revamp of Inheritance Tax legislation took place in Andalucia in 2017.
As you may also have heard, thanks to a political agreement between PSOE and Ciudadanos, further improvement on this legislation came into effect on the 1st January 2018 and April 2019, by which a tax allowance of 1,000,000 € was introduced for some direct family members, as well as a fied 1% tax rate in all cases.
Who does this apply to?
This news, as often happens, has given way to some confusion that this in fact refers to a general tax allowance, which is not the case. The 1,000,000 € exemption per beneficiary (in Spain each beneficiary is taxed rather than the estate – for more information check out our post “Inheritance Tax reform in Andalucia”) will only apply to family members that come under Group I and II in accordance with Andalucia’s Inheritance Tax legislation. The groups under this legislation are as follows, and are based on the beneficiary’s relation to the deceased:
| Group I |
Blood or adoptive descendants under 21. |
| Group II |
Blood or adoptive descendants 21+, spouses and blood or adoptive ascendants. |
| Group III |
Collateral relations of 2nd and 3rd degree (siblings, nephews, nieces, etc.), and other ascendants and descendants (stepparents, stepchildren, etc.). |
| Group IV |
Other collateral relations (cousins) and strangers. |
This means that the 1,000,000 € tax exemption does not apply to siblings, nephews, nieces, cousins, strangers, etc. These have their own, much lower allowances.
Finally, a further condition to being entitled to this exemption is that the beneficiary’s existing assets are no more than 1,000,000 €.
In addition, a reduced tax rate of 1% applies to these types of beneficiaries, as far as any amount that surpasses this allowance.
Changes to Gift Tax
The 1,000,000 € tax allowance will also apply to the direct family members described above, only in the event that a living gift is made for the purpose of the beneficiary purchasing his/her first home, or for a business startup or expansion. Obviously certain conditions are put on this exemption that will ensure the gift is being made for that purpose.
Once again, the 1% tax rate applies in the case of a living gift to these beneficiaries from Group I and II
In conclusion, despite having some limitations, this is a welcome change that effectively does away with Inheritance Tax in Andalucia for direct family members, except in the case of the “super rich”. It is important when dealing with an inheritance in Spain that you seek the appropriate legal counsel, who is aware of these and other benefits, and who knows how to apply them in both the resident and non-resident field.
Gabriella Mary Trussler Rowland
Lawyer
4408 Ilustre Colegio de Abogados de Almería
par Gabriella Trussler | Déc 15, 2016 | Inheritance
You may or may not know that a European regulation has been approved to regulate questions of jurisdiction, applicable law and enforcement of all successions where the deceased has passed away on or after the 17th August 2015 (Regulation No. 650/2012 of the European Parliament and of the Council of 4 July 2012).
This regulation can cause difficulties for those foreigners who have not made certain provisions regarding their last Will and Testament, especially for those habitually resident in Spain.
We must pay particular attention to the provisions of Articles 21 and 22 of the regulation. On the one hand, Article 21 establishes that “Unless otherwise provided for in this Regulation, the law applicable to the succession as a whole shall be the law of the State in which the deceased had his habitual residence at the time of death.” But on the other hand, Article 22 points out that “A person may choose as the law to govern his succession as a whole the law of the State whose nationality he possesses at the time of making the choice or at the time of death.”
But what is the difference between these two options? And how can this be resolved?
For those of you who don’t know, Spanish inheritance law provides a certain amount of protection for legal heirs which, to those who originate from other jurisdictions, seems completely foreign. Certain inheritors are deemed, under Spanish law, to be what are called “compulsory heirs”, entitling them to a legal minimum share of the deceased’s estate.
The new European regulation sets the place of habitual residence of the deceased as the sole criteria for determining jurisdiction, as well as the applicable law. This being the case, it means that any foreigner that is deemed to be resident in Spain who does not make the necessary provisions in their Spanish Will to ensure the application of their national law on their death, as opposed to that of their habitual residence which is automatic, will be limited regarding the distribution of his/her estate. Even if you are not legally registered as a resident here, the Spanish authorities may consider you to be resident here based on other external factors.
To help you understand this better, here is a practical example of what the application of Spanish law to your inheritance entails.
Let us imagine that you are married with 2 children and the total value of your estate amounts to 150,000 €. Spanish law would require, upon death, that your estate be divided in the following way:
- « Legítima »: 1/3 of estate (50,000€) must be left to all your “compulsory heirs” in equal parts (25,000€ each).
- « Mejora »: 1/3 of estate (50,000€) must be left to “compulsory heirs” but may be distributed in any way the testator sees fit (you can leave it all to one child, to two of them or to all three of them, but to no-one else).
- « Libre disposición » or « Tercio libre »: 1/3 of estate (50,000€) can be disposed of however, and to whomever, the testator wishes (legal heir or not).
There are autonomous regions with their own civil law in this matter, and they are Aragon, the Balearics, Catalonia, Galicia, Navarre and the Basque Country.
What does this all mean? It means that if you have made a Spanish Will, but not included the proper provisions to ensure the application of your national law on your death, any provisions for the distribution of your estate that overstep these limitations under Spanish law will be ignored. This could mean a great amount of inconvenience for your heirs in trying to have your Will recognised on your death.
It is for this reason that it has become strongly advisable for any foreigners with assets in Spain to make a Spanish Will for their property in Spain, or update it if necessary. Make sure to seek appropriate legal advice to make sure it complies with the new requirements of Regulation No. 650/2012 and to avoid the automatic application of Spanish law on death, which can result in your wishes not being abided by because of the legal restrictions Spanish inheritance law places on the freedom of the testator to dispose of his estate at his own discretion.
Gabriella Mary Trussler Rowland
Lawyer
4408 Ilustre Colegio de Abogados de Almería
par Gabriella Trussler | Nov 5, 2016 | Inheritance, Tax
Finally, a much needed change to Inheritance Tax in Andalucia has arrived and will be coming into effect on the 1st January 2017. With Andalucia being one of the poorest regions of Spain it was becoming increasingly difficult to justify it being the region with the highest level of Inheritance Tax, forcing many inheritors to renounce their inheritance because of the unaffordable tax bill that came with it. Consequently, a restructuring of the tax had long been a matter of debate and negotiation, on a regional as well as a national scale.
Higher threshold
The main change brought about by the new Inheritance Tax reform is the increase of the general threshold from 175,000 € to 250,000 € for each individual beneficiary. This means that as long as the value of the part of the entire estate being inherited is under this amount, no Inheritance Tax will be owed by said heir.
In addition, to inheritances of between 250,000 € and 350,000 € a 200,000 € reduction is applied (e.g. if an inheritor’s share is valued in 270,000 € tax will only be due on 70,000 €). The effect of this change is to correct the leap that currently exists where, the moment the inheritance is even a euro over the threshold, Inheritance Tax is owed on the entire amount. This circumstance quite clearly placed inheritors at a comparative disadvantage, and was one of the main criticisms made of Inheritance Tax regulation in Andalucia.
Main residence
Another important change is the introduction of increased
allowances for the inheritance of the deceased’s main residence by spouses, ascendants or descendants, or collateral relations over 65 years-old. Specifically, a 100 % allowance is applied when the value of the property is under 123,000 €, which reduces 1 % each time as the property value band increases, with the minimum allowance being 95 % when the property is valued at anywhere over 242,000 €.
Furthermore, as of the 1st January the beneficiary will now only be required to maintain ownership of the property for 3 years, as opposed to 10 years as it stands at the moment.
How is the tax rate calculated?
The above allowance, together with any other allowance the heir may be entitled to, is applied to the amount above the general threshold to determine the taxable amount.
Once we have the taxable amount the Inheritance Tax scale is applied, as well as a coefficient that depends on the relation to the deceased and the inheritor’s existing assets, to determine the tax rate that applies. All of these aspects remain unaltered by the tax reform.
Will this apply to UK residents post Brexit?
The regional allowances for Andalucia in the event that both the deceased and the beneficiary are EU residents. When this is not the case, only state allowances may be applied, which are far fewer.
Therefore, depending on the result of the negotiations between the UK and the EU, these regional allowances will continue to be applied to UK residents post Brexit, or not.
It is important that all of these circumstances and potential costs are taken into account when preparing your will, so as to organise your will and manage your wealth in a way that will be most beneficial to yourself and your inheritors. All of which makes seeking professional assistance in these matters essential, to avoid any unexpected and costly surprises when it’s too late.
Gabriella Mary Trussler Rowland
Lawyer
4408 Ilustre Colegio de Abogados de Almería
Commentaires récents