If you are an expat with assets or properties in Spain… then it would be 100% advisable to draw up a will. Why? Because you will be saving time, money and hassle to your heirs. If you would like to learn the main advantages of the Spanish will vs the ones in other countries, how to save money by making a will in Spain and which is the exact amount of taxes you will need to pay, don’t stop reading!
WHAT IS A WILL?
A will is a legal document that regulates to whom and by which amount your assets and properties are going to be distributed after your death. The implications and regulations of this procedure go under the inheritance law, and that law changes from country to country. Nevertheless, regions of the European Union do enjoy shared provisions.
IS IT IMPORTANT TO DRAW UP A WILL?
No matter the country you are living in, making a will is something really advisable. Having a contract that explicitly determines how you would like your desires to be executed is clearly positive.
In the end, is your assets that we are talking about, and you may want them to be in the possession of your heirs in the way you have always desired. If not, you are letting the law decide for you.
That is something that becomes even more important if we introduce the possession of assets worldwide. As we have said, the inheritance law may vary cross country, and understanding the relevant regulation in each case would be key to optimize your future efforts. Then, what should you be considering?
INHERITANCE LAW AND WILLS IN EUROPE: REGULATION OVERVIEW
On 2012, the European Union discussed and approved a new regulation regarding wills: the Regulation 650/201. Excepting in the United Kingdom, Ireland and Denmark (we will talk about these countries afterwards), this new regulation started to be applicable in 2015.
Even though these 3 regions do not figure on the agreement, having the possession of any given asset in Spain will affect British, Irish and Danish nationals.
And what is the regulation about?
It mainly states the fact that the applicable inheritance law will correspond to the country in which the death takes place; unless you specify the opposite.
This implies that, if you made a will in your country but did not specify that you would like your home country law to be applied, dying in Spain will mean the application of the Spanish inheritance law.
This issue just corresponds to deaths after the 16th of August of 2015.
What does it mean to have the Spanish inheritance law applied?
SPANISH INHERITANCE LAW: THE BASICS
As we have just mentioned, if you are an expat who dies in Spain, the Spanish Inheritance law will be applied to you; provided that you did not draw up a will or that you failed to specify which regulation you wanted to be applied to your case.
In that sense, you should take into consideration two relevant issues:
IN SPAIN WILLS ARE LIMITED
It is something habitual for expats that, while making their testament, they leave everything to his or her spouse. Taking as an example the English Inheritance law, that implies no problem whatsoever. 100% of your possessions will be granted to the inheritor you explicitly defined. There is free disposal of assets, as in many other countries.
But in Spain the situation is the complete opposite: wills are limited.
What does this mean?
Even if you died leaving a valid will or not, there is a fixed percentage of your possessions that must be conceded to your relatives.
That is, two-thirds of the total assets must be for your children, spouse or parents; and the other part to those who you define.
WILL STRUCTURE IF THE DECEDENT DIED INTESTATE
In the case that you died with no valid will (intestate), the law of successions will define (for you) to whom your assets and properties will go.
To whom? First of all, to your children. If the deceased did not have descendants, it will go to his or her ascendants (parents or grandparents). Then, to the spouse, brothers or sisters, cousins; or, finally, the Government (we jump from one level of connection to the other provided that the deceased did not have relatives on the forme level).
The two beforementioned situations start to make us understand why is it so important to draft a will. So, which are the other relevant reasons?
MAIN BENEFITS OF DRAWING UP A WILL IN SPAIN AS AN EXPAT
If you are an expat with possessions in Spain (properties, a car, a bank account, etc.), you will hugely benefit from making a will in Spain. Why? Because it will save time, money and hassle to your beloved ones: the future heirs. Not only is it that it will save them money, but also that the drawing up a will in Spain is something INEXPENSIVE and FAST.
Let’s analyze the main benefits that the Spanish succession law provides to you:
1. THE SPANISH WILL IS EXCLUSIVE FOR SPANISH ASSETS
Let’s say, for example, that you are a UK citizen in possession of a property in Spain.
Unless there is any clause in your UK testament that contradicts it, your UK will won’t be annulled or cancelled by having a Spanish one. This is because the Spanish will is exclusive just for the assets you have in Spain.
At the same time, a will on the UK, Denmark or Ireland is completely valid to bequeath goods in Spain. This explains why having a well-structured will saves so much hassle: you can include all contingencies over it.
Draw up a will in your home country and another one for your Spanish assets. That will be the complementary one. As the Spanish testament will not revoke the clauses of the will in any other country, you will enjoy immense benefits from this practice.
Which ones? The ones that come up next.
2. YOU WILL SAVE TAXES
No matter if you are a resident or a non-resident in Spain, the last Europea law stated that the status before the inheritance law will be the same for both. Then, having a Spanish will done will be beneficial (instead of just your home country one). And that is explained by the corresponding tax to be paid: the inheritance tax.
Whenever you inherit some assets in Spain, this is the tax that must be paid.
The exact percentage is dependant on the region or community (Comunidad Autonoma) you are based in. Some regions have reduced it to nearly its elimination (like Madrid). On the other hand, other autonomous regions have different types of percentages and allowances (apart from the ones the Government sets).
Therefore, depending on the Spanish position of the assets, you will pay a higher or lower amount in terms of inheritance. Nevertheless, and as we have mentioned before, there won’t be a difference in terms of your residency status.
This implies that, if you paid more than you should corresponding to what the new European law suggests, you can claim your money back. If you would like to know the exact procedure for this issue and how much money you can claim, do not hesitate to send us an email at firstname.lastname@example.org.
ABOUT THE INHERITANCE TAX IN SPAIN
How is the inheritance tax applied for a bequeathed asset?
First of all, the payment period. You, as an inheritor, will have 6 months after the death to pay the inheritance tax to the corresponding tax authority.
Nevertheless, what happens if you would like to have more time to realize the payment? You can ask for an extension of 6 additional months during the first 5 months after the decease.
If you don’t want to pay everything up front, you can also split the payment in different instalments over a 5 year period.
Failing to pay on time will imply different penalty fees after the mentioned 6 months. The fee will be a percentage that can range from 5 to 20%, become higher the later you finally pay.
And what does the payment imply? Let’s say, for example, that you should receive a certain amount of money as part of the inheritance, money that is on the bank. That bank account will be frozen until the corresponding payment of the IHT is realized. And this can also extend to the other types of assets: you will be the official holder only after you have paid the corresponding tax amount.
This helps us break the misconception that many expats have about financing the inheritance tax. They think that they can sell the to-be-inherited property or its rents in order to pay the IHT, but that is not possible. Why? Because you won’t be the proprietary until you have realized the full outlay.
HOW MUCH SHOULD YOU PAY FOR THE INHERITANCE TAX IN SPAIN?
The inheritance tax corresponds to a percentage of the value of the goods to be transmitted. Nevertheless, it is not a fixed payment, and it will depend on many factors.
One of them, as it is obvious, is the total value of the inheritance.
As we have already mentioned, we are talking about a tax that changes depending on the autonomous community where the legal procedure takes place. Therefore, that is another factor that will make it change, like the allowances that each region has.
Finally, other factors like the place of residence and the total number of heirs will also affect the final percentage.
Properly tax planning this issue is crucial, as you can really save money if all contingencies are contemplated.
3. YOU WILL SAVE MONEY
Unlike the UK or Ireland, places in which you need to wait for a while in order to execute the will, in Spain you can do it immediately.
Why is this so beneficial?
Let’s go back again to the case in which the individual had a property in Spain, but she is from the UK. She only has the UK testament.
After the decease, you want to pay and accept the assets that were in Spain, so you need a document called GRANT PROBATE. That usually takes more than 6 months to receive.
What happens? As we have said, the Spanish tax authority will start charging penalties to you after the first 6 months. As you don’t have your grant probate yet, you will end up paying the fee.
In that situation, if the UK individual had a complementary will in Spain just for the Spanish assets, that problem would have never existed. You would be saving time and money.
Why does the process of executing the will in a different country take that much time?
DOCUMENTS YOU WILL NEED AS AN EXPAT IN ORDER TO ACCEPT A WILL IN SPAIN
There are four main documents you will need in order to accept the testament for the Spanish assets as an expat. The fact that makes the process so slow is that, provided that you don’t have a Spanish will, you will need to translate all the documents into Spanish (via a sworn translator), having them approved by the notary and having affixed on them the apostille of the Hague.
And that takes time.
Which are those required documents?
- Origin country will
- Grant probate
- Certificate of legal compliance (Certificado de Ley), which explains the legal process in your home country
- NIE number, the basic identification number needed for any legal procedure in Spain
But those are the specific documents you will need to provide just because you do not have a Spanish will. What happens if you do? Then you will need to have the general documentation in place.
GENERAL DOCUMENTS TO ACCEPT A WILL IN SPAIN
In order to be in a position to pay the inheritance tax and then becoming finally the owner of the bequeathed assets, as heir you will need:
- A copy from the notary of the testator’s last will
- The original death certificate from the civil registry
- A document from the Last Wills Registry identifying there is a testament pointing to you plus who was the notary who signed it (certificate of last will)
- If the testator had any, the life insurance certificate
By providing all these documents you will be given the Deed of Declaration of Acceptance of Inheritance (‘Escritura de Aceptación de Herencia’). That is the document you will need in order to pay the IHT.
As you have seen, having a will in Spain will not only saves you time (avoiding legal procedures), but also money. Why? Because you will avoid the need to pay for the translation of the documents and the notary service.
4. NO NEED TO MODIFY YOUR HOME COUNTRY WILL
The Spanish successions law does not only make it possible for you to have the will you have in your country intact (not revoking it). It makes things even more easy for you.
Why? Because it uses the rules from the inheritance law of your own country.
This implies that you, as a UK citizen, can draw up the complementary Spanish will for the assets you have in Spain using the same procedure and criteria as the one you used for your general testament. You do not need to follow the Spanish successions law rules.
WHICH ARE THE TYPES OF WILLS IN SPAIN?
Now you know the main benefits of making a will in the Spanish territory. So, luckily, we have convinced you about starting as soon as possible.
But there is a final aspect you should bear in mind: how to actually draft a will in Spain?
TYPES AND PROCEDURES OF SPANISH WILLS
There are three main types of testaments in Spain:
OPEN WILL. It is the most usual testament in Spain. It is granted before a notary and 3 witnesses. All of them must sign, and the testator will receive a copy of the will. Another copy will go to the General Registry of Wills in Madrid. The original will be kept by the notary.
CLOSED WILL. The main difference with the open will is that in a closed one, the content of the testament is known just by the testator (and the lawyer and notary). The will is kept in an envelope, which is sealed and then sent to the General Registry.
HOLOGRAPHIC WILL. In this case, the most infrequent of the three options, the testator writes himself the will. It should be signed by him on every page too. We must specify here that the handwriting of the document must be that of the decedent, and this should be declared by witnesses
ARE YOU READY TO MAKE YOUR SPANISH WILL?
We would like to reiterate how important is it to draw up a will in Spain if you have assets in the country. The amount of energy, time and money you will be saving your relatives really pays the price.
But, as you may have seen, there are a lot of different contingencies to consider; especially if we focus on taxes. In terms of the inheritance law, going into a close examination of your concrete situation, in order to determine how should you plan ahead will be crucial.
And we can help you with that.
Our accounting and immigration team will help you draw up your will and optimize your inheritance tax payments. Are you ready to start?