Inheritance Tax

[jakey]

Hi,

I've heard Spanish Inheritance Tax is awful.

Does anybody know a way round it?

Someone mentioned to me that you can set up a company, but have no idea what to do...............yours worried.

[Stravinsky]

Originally Posted by jakey

Hi,

I've heard Spanish Inheritance Tax is awful.

Does anybody know a way round it?

Someone mentioned to me that you can set up a company, but have no idea what to do...............yours worried.

Not legally that I know of
And yes, it is awful when you leave an inheritence to a non resident. You can leave it to your spouse if you have things set up properly and get, I think, a 95% deduction. To have your house in joint names is an advantage.

You need to ensure you have a Spanish will also .... thats very important.

Inheritence tax goes up to 34% depending on the inheritence. Its a bit complex so you need to take advice really because it very much depends who's inheriting and where they are

[jakey]

Thanks, Jakey

[ColinCarter]

This is a confusing subject. I called the British consulate this morning to ask what was required and was told to contact a Spanish lawyer with UK knowledge and sent a list. Other questions were steadfastly answered by "I wouldn't know".

I spoke to a Spanish notary who tells me my estate (entirely in Spain) would be dealt with in accordance with British law (I was born in Britain).

However, my son (British nationality, born in Germany, resident in Spain) took separate advice and was told his estate (entirely in Spain) would be dealt with in accordance with German law. I hear this is an EU agreement.

I suspect that probate would be delayed while things are sorted out. Maybe a will will help.

I do not have a lot of faith in Spanish lawyers and I don't want to waste time and money so I thought I would draw up a simple will (either from a handbook or an on-line service), get a traduccion jurada and deposit it with a friend.

QUESTIONS

1. Is my plan for an economical solution feasible?
2. Is inheritance tax payable according to country of birth?
3. Can anyone confirm my son's situation?
4. What steps will my wife have to take if I die?

Any comments, especially from people who spouse has died in Spain, would be much appreciated.
Colin

[Stravinsky]

I can assure you that if you die as a resident in Spain your estate here will be dealt with here under Spanish law. A neighbours husband dies last year and she has been through it all. When I moved here the person who had previously looked after our place died, and his wife also went through it.

An interesting point was that in the first of these instances, our neighbour was told by her solicitor that there was no longer an inheritence tax to be paid under local Valencian law.

If you have your house in joint names here and you die then inheritence tax can be reduced to almost zero (conditions apply). If you were the surviving partner and died leaving your estate to your son in Spain, the IHT would still be dealt with under Spanish tax. Also, you cannot sell the property to raise the IHT. You have to pay the taxes within (I think) 6 months to gain release of the property. Bank accounts in Spain are also frozen.

It is most important that a Spanish will is drawn up. Trouble is, if you draw your own up you won't know if its a problem, but your surviving relatives will.

[ColinCarter]

Originally Posted by Stravinsky

I can assure you that if you die as a resident in Spain your estate here will be dealt with here under Spanish law. A neighbours husband dies last year and she has been through it all. When I moved here the person who had previously looked after our place died, and his wife also went through it.

Thanks Stravinsky,
Can you tell me if these people had to go to a Spanish notary for the probate process? Did the notary issue some sort of escritura that could be shown to the Property Register / tax authority?
Colin

[Bevdeforges]

What Stravinsky said. I can add, just as a general observation, that the answer to question # 2 is definitely no.

Generally, a person's estate is subject to the laws of the country in which he resides at the time of his death. (OK, all the issues of "tax residence" can complicate things, but the general principle still holds.)

Real property (i.e. real estate - land and buildings) holdings, however, are usually subject to the transfer and inheritance laws of the country in which the property is located.

If most of your estate is in Spain, it's probably best to have a simple Spanish will prepared (and registered). If you do-it-yourself and it isn't in conformity with Spanish law, they'll wind up splitting your estate as though you died intestate and who knows what that will do!
Cheers,
Bev

[ColinCarter]

Originally Posted by Bevdeforges

Generally, a person's estate is subject to the laws of the country in which he resides at the time of his death. (OK, all the issues of "tax residence" can complicate things, but the general principle still holds.)

Hey, thanks. So, in my case (Brit resident in Spain with only Spanish assets), my estate on death would be processed under Spanish law and there is no need for an English will (unless I can't understand Spanish). Are you pretty sure of this or should I check?

. . . it's probably best to have a simple Spanish will prepared (and registered).

Sounds good. In fact I would be quite happy with the standard Spanish rules for division of estates and have no will.

But, if I did make a will and exercised the limited voluntary rights under the Spanish rules, with whom ought it to be registered?

When I get all the info together and verified I will post a summary here for others.

Colin

[Big Pete]

Originally Posted by jakey

Hi,

I've heard Spanish Inheritance Tax is awful.

Does anybody know a way round it?

Someone mentioned to me that you can set up a company, but have no idea what to do...............yours worried.

Do what i intend to do , well fingers crossed i dont snuff it to early of course ..

I intend to spend spend spend so there is hardly anything left

This is planned by spending loads during the next 10 years and then when it gets to the point where i need more as i get older .. I am going to do the sell the property but retain the rent it route
So when i am finally dead there will be no inheritance issue ..

Now you could argue thats greedy , but ask yourself the following !!

Its my money and i doubt i could take it with me as it will get burnt .

The kids well its not for me to give them loads so they can use it , they should make there own .

So what is the point in saving it ?

Spend spend spend i say

[Bevdeforges]

Originally Posted by ColinCarter

When I get all the info together and verified I will post a summary here for others.

That would be great! Or, you could take Big Pete's advice and just make sure you spend it all before you go. (Seriously, that was the suggestion of a finance prof in an estate planning class I took.)
Cheers,
Bev