Dodgy Inheritance Tax Advice?

[rufus]

Hello,

I wonder if anyone can advise me on this quandary.

An old chum of mine passed away a couple of years ago. He was UK resident and had a property in Spain.

His lawyer advised his widow not to tell the Spanish Authorities about his death, because she has no intention of selling the house. This seems absolutely insane to me, but perhaps it isn’t. She has a couple of son’s and the intention will be the same on her demise. Surely this has to come out at some stage, and the estate will be liable for the tax due, penalties and compound interest. Am I worrying for her too much??

The house is worth around GBP400K.

Any input gratefully received.

Many thanks in advance.

Rufus.

[chris(madrid)]

Originally Posted by rufus

An old chum of mine passed away a couple of years ago. He was UK resident and had a property in Spain.

His lawyer advised his widow not to tell the Spanish Authorities about his death, because she has no intention of selling the house. This seems absolutely insane to me, but perhaps it isn’t. She has a couple of son’s and the intention will be the same on her demise. Surely this has to come out at some stage,

I think I'd ask for a second opinion AND get the reason, not just the recommendation, from BOTH lawyers. As you say they'll get suspicious when they guy has his 130th birthday!.

HERE Spanish folk tend to add their offsprings names to the house deeds at some stage - so there's NO CHANGE of ownership. My wife and her sister are officially co-owners of their parents home.

THE REASON MAYBE HOWEVER THE NON-RESIDENT STATUS.

[crookesey]

Originally Posted by rufus

Hello,

I wonder if anyone can advise me on this quandary.

An old chum of mine passed away a couple of years ago. He was UK resident and had a property in Spain.

His lawyer advised his widow not to tell the Spanish Authorities about his death, because she has no intention of selling the house. This seems absolutely insane to me, but perhaps it isn’t. She has a couple of son’s and the intention will be the same on her demise. Surely this has to come out at some stage, and the estate will be liable for the tax due, penalties and compound interest. Am I worrying for her too much??

The house is worth around GBP400K.

Any input gratefully received.

Many thanks in advance.

Rufus.

Hi Rufus,

It sounds as though the last thing she needs is more advice from the lawyer who advised her not to declare her husband's death.

I can't pm you until you have made 4 posts, not sure if this applies both ways. A friend recently returned from Spain where he sought advice on a potential IHT nightmare, it was sorted out to his relief. As and when you can send pm's feel free to contact me and I will give you some info.

[Sharon J]

Hi Rufus,

My partner is an IFA in Spain and believes this is dangerous advice, albeit it was common practice here. The IHT liability falls on the beneficiaries and not on the estate so the widow and possibly her children all have a potential tax liability which should have been paid within 6 months of his death. I presume that she disclosed the property to the UK authorities and with free exchange of information between the UK and here it wouldn't take a genius to tie the two up.

[crookesey]

Originally Posted by Sharon J

Hi Rufus,

My partner is an IFA in Spain and believes this is dangerous advice, albeit it was common practice here. The IHT liability falls on the beneficiaries and not on the estate so the widow and possibly her children all have a potential tax liability which should have been paid within 6 months of his death. I presume that she disclosed the property to the UK authorities and with free exchange of information between the UK and here it wouldn't take a genius to tie the two up.

Hi Sharon,

Actually I think that Rufus is a genuine guy attempting to do the best he can for his mates widow. However as probate work is amongst the most lucrative in the legal profession I just can't bring myself to believe that her lawyer turned down the opportunity of a nice little earner.

There is more to this than meets the eye, its no good us guessing what has happened but Rufus needs to make certain that he has been told the truth before he gets further involved.

[Barry Davys]

Dear Rufus,

The only thing that is clear is that you should not play the lawyer's game.

Inheritance Tax in Spain is a tax on the people who receive the money including a spouse. There are some allowances available for the widow. A liability to tax is based upon the recipients residency status.

Inheritance Tax in the UK is a tax on the value of an estate. There is an exemption between spouses. On the second death there is an assessment for tax BUT there are also allowances. The amount of tax is based upon the Worldwide assets. Even if you LIVE in Spain but were born in Britain it is still likely that you WILL have to pay UK Inheritance Tax because the UK has residency status AND domicile status.

Residency status is NOT as simple as 183 days in Spain. There are a number of other "tests" that the Hacienda apply so do not assume the widow is not resident.

Before anyone can confirm or otherwise what the tax liability is, there is a whole lot of information about the situation of the deceased, the widow and the sons needed. It is also not a situation where simply tax is due or not. There may be some mitigating factors which can be brought into play. It may even be the case that the liability is virtually nil.

Barry Davys
Spectrum IFA Group
Web Site Expatfinancialadvicespain Dot com

[crookesey]

Come on rufus, you posted the thread but appear to have abandoned it. This type of problem is interesting but as with myself, other forum members can't say much because you have told us very little.

In most cases I have found advice offered on this forum to be well intentioned. Some could point your mates widow in the right direction but as I said in my previous post on this subject, I don't think that you have been told the full story.

[Trevor Titterton]

I had a friend who died in similar circumstances, he had not included his wife on the house purchase in Spain and therefore she had a lot of tax to pay as she could not claim any allowances on the Spanish property. It is better to get proper advice from a Spanish lawyer as it is a minefield.