|Making a will

Why should I make a Spanish Will?

Making a Spanish Will is not compulsory – but it is highly recommended!

All Wills made in Spain are registered centrally at the Registry of Wills, which makes it very easy to locate them, and to carry out the deceased’s wishes in the event of death. Because Wills are registered in Spain, it is not necessary to apply for Probate as in other countries.

With a Spanish Will in place, everything can be sorted in just a few weeks.

It is important to remember that a deceased’s estate is treated differently in Spain, and to be prepared for the unfamiliar. For example, it is quite common in the UK to set up a Trust, but this is totally unknown in Spain. At MAM SOLICITORS, we understand the processes involved, and can help you get it right first time.

The difference between having a Will and not having a Will can be enormous. When we die, we want our assets to go to our loved ones. Without a Will, that may not happen. Furthermore, in the absence of a Will, the Inheritance Tax burden left behind may be far greater than it needs to be. Please let us help you to minimise it.

 

 

|Inheritance tax (IHT)

In Spain, IHT or “Death Duties” apply whenever a deceased leaves an estate to be passed to his/her beneficiaries. It is a very unpopular tax, and in many regions of Spain, different governments have passed laws to minimise the amount of tax that their resident citizens must pay.

It is vital to understand that the tax treatment differs if the Deceased and/or his/her Beneficiaries are Resident or Non Resident in Spain, for tax purposes.

If the Deceased and Beneficiaries are Tax Resident in Spain, they can take advantage of several Allowances that can help reduce the tax burden on death. Unfortunately, the same does not apply to those who are not Tax Resident. It is important to emphasise that Residents must declare all of their assets for IHT purposes, wherever those are located in the world, whereas Non Residents are required to pay Spanish IHT solely on their Spanish assets. Remainder assets are then subject to the IHT regulations that apply in their own country.

In general terms, IHT is calculated on a sliding scale. It starts at 7.65%, and escalates up to 34%. The actual rate that applies is based on the value of the estate. Other percentages are then applied, subject to whom the estate is bequeathed and if the deceased and beneficiaries are residents or not.
This is because Spanish IHT law differentiates between close relatives and certain acquaintances, and anyone else. In the case of non-residents as you are: If a beneficiary is a surviving spouse or child of the deceased, for example, he or she can apply for an allowance of around 16,000 euros before IHT is calculated. However, this allowance does not apply to friends or even to a deceased’s partner if they were not married.

Also, in Spain, any beneficiary of a deceased who is not directly related faces an additional penalty because the tax payable is doubled!

EXAMPLES:

Mr & Mrs Happy are Non Resident in Spain. Their main asset is a villa worth 150,000 euros.
Sadly, Mr Happy dies. Thankfully, he had made a Will, appointing his wife as sole beneficiary, and their three children as Substitutes. His taxable estate amounts to half the value of the jointly-owned villa – or 75,000 euros.

Two potential scenarios could apply:

1. Mrs Happy can elect to take her deceased husband’s full estate. She will be granted a 16,000 euro allowance, leaving an IHT bill payable of about 6,000 euros.

2. Alternatively, Mrs Happy may decide to pass her late husband’s estate directly to her children, utilising the substitution clause. In this case, each child will pay around 696 euros. The final IHT bill in total will be approx. 2,088 euros. In order to do this, she must renounce her rights in entirety, allowing the next in the list to supersede her. Mrs Happy cannot take part of her husband’s estate and leave the rest to her children – she must renounce it all (but do not forget she is still the owner of her own half share).

Mr Smile is single, and decides to leave his Spanish apartment to a good friend of his. It is worth 75,000 euros. When he dies, the friend will have to pay IHT of some 16,836 euros.

As you can see, the amounts payable in different circumstances can vary very significantly. It is therefore absolutely essential for clients to discuss their hopes and expectations with us, and for us to draft a Will accordingly.

MAM SOLICITORS welcomes new and existing clients. We look forward to hearing from you and to helping you benefit from our many years of experience. Wills and Inheritance Rules are extremely complex, and under no circumstances should anyone attempt to “go it alone”.