INTRODUCTION

• A will (testamento) is a legal declaration of how a person wishes their possessions to be distributed after death.
• To inherit is to receive a property, money, or title from a parent, ancestor or another person by legal succession.

An inheritance is a mirror of a will. Linked to both is taxation of an inheritance.

Readers of this article will probably be a couple either married or unmarried, resident or non-resident in Spain. They may also be a single person resident or non-resident. They will probably be British (Scottish, Northern Ireland, Wales and England) at birth, with a property and some assets in Spain. So this article considers the testator law of both the UK and Spain and how it would affect readers, together with Spanish inheritance tax and some legitimate methods of tax avoidance.

MAKING A WILL

Which country?

A person with British nationality at birth will find that Spanish authorities permit an estate to be bequeathed to whoever they choose, so long as this is allowed by their own national law. However a Spanish estate is subject to Spanish inheritance tax. Anyone with assets in Spain should make a Spanish will disposing of their Spanish assets in order to avoid time-consuming and expensive legal problems for heirs. A separate will should be made for disposing of assets located in the UK. Make sure a UK will states clearly it disposes only of assets in that country and make sure a Spanish will disposes only of assets in Spain.

Spanish inheritance law applies theoretically to British citizens with a property in Spain. Both Spain and the UK have laws which state that the disposal of property will be governed by the law of the country in which the property is located. However, a Spanish Certificate of Law ensures that when a foreign property owner dies, the disposal of any assets in Spain will be governed by their own national law, not Spanish law. Confusing and contradictory!

In practice the Spanish authorities do not ask if a testator is an official resident or not. They accept as valid a Spanish will disposing of Spanish property according to the law of another country. The only requirement by Spanish authorities is payment to Spain of inheritance tax on property or assets located in Spain.

UK laws

UK law (England, Wales and Northern Ireland) permits free disposal of an estate. Scottish law requires that some portion of the estate be left to surviving children. In other words an estate in whole or part can be left to anyone including the dogs’ home. Compare this to the restrictive law of Spain which is known as the law of compulsory heirs (herederos forzosos).

Spanish laws

Spanish inheritance laws restrict the testator’s freedom to leave their property to anyone. Spanish law requires a testator to divide the estate into three equal parts. One-third must be left to the children in equal parts. Another third must also be left to the children, but the testator may decide how to divide it with the surviving spouse having a life interest in this part. A life interest is a controlling interest as the child who inherits it cannot dispose of it freely until their surviving parent dies. The final third of the estate can be willed to anyone.

This is not quite as brutal for the surviving spouse as it may seem initially, as he or she keeps all assets acquired before the marriage, half of the assets acquired during marriage, and all inheritances which have come directly to the spouse. In effect this means that half of the assets do not really form part of the deceased person’s estate. Half the property continues to belong to the surviving spouse.

So what is a possible outcome of all this? Take a married Spanish couple with two children. One of the parents dies and they own a property which if sold is worth 150,000€.

The spouse retains 75,000€ acquired during marriage. The value of the estate is the other half which is obviously 75,000€.

Each child is allocated half of one-third of 75,000€. in this case 12.500€ each.

Let us say the eldest son retains one-third, in this case 25,000€ with a controlling interest, called an usofructo, held by the spouse.

Probably the final third of 25,000€ is left to the spouse. The spouse’s total holding is now effectively 100,000€ with a controlling interest in a further 25,000€. in total 83 per cent.

Spanish inheritance laws are inflexible. They aim to preserve the family unit by ensuring a property is handed down from generation to generation. In this example the property now has three owners and all three have to agree before it can be sold. An extremely unlikely scenario! More likely would be one child buying out the other child’s share upon the death of the other parent.

Contesting a Spanish will

The law of both the UK and Spain states that the inheritance laws of the country will apply where the property or asset is situated. But Spain chooses not to apply this provided inheritance tax is paid to them. So what happens when a British citizen leaves a Spanish property to a dogs’ home, which is perfectly possible under English law, but children contest the will, stating they are entitled to two-thirds of the asset under Spanish law? After all, the Spanish authorities are choosing not to apply their own laws. Answer – the children would win the case. It is better to eliminate grounds for contesting a will if a controversial one is to be written.

Dying intestate

If a UK resident or non-resident dies intestate, the estate in Spain will be distributed according to Spanish laws. If a British resident or non-resident dies with only an all embracing will for all assets this will still be applied, but there will be some considerable delay and cost before it can be finalised. Specialist legal assistance is necessary in both countries. This is a strong argument for making a Spanish will.

How to make a will for Spanish assets

Making a Spanish will for Spanish assets according to the inheritance laws of the UK is quite straightforward provided the abagodo and notary understand they are not rubber-stamping Spanish succession laws. A husband and wife who own half the property as stated in an escritura are required to make separate wills as they own their property share separately. A will is made out by an abagodo, authorised by theriotario and signed in their presence by witnesses. It is called a testamento abierto.The notary keeps the original with the testor receiving an authorised copy. Notification is made to a central registry in Madrid, called the Registro Central de Ultima Voluntad. Wills are filed there under a reference number and name of the notary.

Author: Harry King