Failing to plan is planning to fail. And when it comes to inheritance, this rule applies perfectly well. In this post you are about to learn how to draw up a will in Spain, which are all the benefits of doing it as a foreigner, all the costs associated, and you will also discover some useful tax optimization strategies that will allow you to save money and avoid paying extra in the process.
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.
That is, it is a document in which an individual states what they want to be their last will.
Creating this type of document assures us that your will will be fulfilled when we are no longer here, in addition to helping to avoid confusion for your heirs, and will make the partition of your inheritance easier and cheaper.
We are talking about a contract which effects will become effective after your death. That is why is it so important to plan in advance and consider all the consequences.
Not only will it affect how your wealth is distributed, but also the taxes to be paid. Furthermore, deciding where to make it has its own implications. Why?
The inheritance law is the main regulation that controls wills. This law is different from country to country, and it may change even within states, according to the region.
How important is it to draw up a will?
No matter the country you are living in, drawing up a will is something really advisable. You will be creating a contract that explicitly determines how your wealth will be distributed after your death, instead of letting the existing laws define that for you.
In the end, it’s your assets we are talking about. And you may want them to be in the possession of your heirs in the way you have always desired.
That is something that becomes even more important if we introduce a special situation. We are referring to the situation in which there is the possession of assets worldwide.
As we have said, the inheritance law may vary cross country. So if for example, you have a property in one country and a house in another, things can get complicated.
Understanding the relevant regulation in each case would be key to optimize your future efforts. Then, what should you be considering exactly?
Inheritance law and wills in Europe: Regulation overview
In 2012, the European Union discussed and approved a new regulation regarding wills: the 650/201 Regulation. Except for 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 this regulation about?
Basically, if you are British or Irish residing in any country that signed the agreement, including Spain, the regulation establishes as the law applicable to the succession that of the testator’s habitual residence and not that of his nationality, unless you declare otherwise in a will.
Hence, the applicable inheritance law will correspond to the country in which the death takes place; unless you specify the opposite.
This basically means 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.
Bear in mind that this law will be just applicable to deaths after the 16th of August of 2015.
What we recommend in this case is to grant a will that includes a clause that specifies the applicable law; for example, in the case of the British, the personal law (which allows total freedom to testify).
Do you have any doubts? Ask anything to our lawyers here or keep reading for more information:
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, but you must bear in mind that there is a restrictive provision available in favor of the children (we will delve deeper into this point later in this artcile).
But that will be true as long as you did not draw up a will or that you failed to specify which regulation you wanted to be applied to your case.
So making a will may not be that simple. You should consider all the possible scenarios.
But which implications does the Spanish inheritance law present? There are two relevant issues to consider:
In Spain wills are limited
This 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 is no problem.
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.
Therefore, although in the will it is not mandatory to establish in which part of the assets corresponds to each heir, it is necessary to respect the minimums (which is what is called the legitimate), part of what corresponds to the legitimate heirs by law: descendants, ascendants, and spouse.
Let’s see who the forced heirs are and what part of the will must be left to those who are obviously not affected by the free disposition, but only the legitimate one.
The forced inheritors
In relation to the previous point, the following groups make up the forced heirs:
1.- Children or descendants without concurring with the widowed spouse. Two-thirds of the inheritance corresponds to them: the legitimate one, which must be distributed equally among the children, and the “mejora”, which will be allocated to the children and grandchildren, among whom it can be freely distributed or left to only one of the descendants.
2.- The children or descendants who concur with the widowed spouse. The distribution of the legitimate and the mejora does not vary between the children and descendants, although the widower is entitled to the usufruct of one-third, which falls on the mejora.
3.- Parents or ascendants without a widowed spouse. Children or descendants do not have the nature of forced heirs; therefore, they will succeed the deceased in the absence of the former. In such a case, they are entitled to at least half of the inheritance.
4.- Parents or ascendants with a widowed spouse. One-third of the inheritance will necessarily be given to them, the widower having the usufruct of the half.
5.- Spouse without attending ascendants or descendants. In this case, the usufruct of at least two-thirds of the inheritance must be given to him.
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.
- 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.
- And, 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).
These two dispositions enable us to understand why is it so important to make a will.
Main benefits of drawing up a will in Spain as an expat
If you are an expat with possessions in Spain (like properties, a car, a bank account, etc.), you will hugely benefit from making a will in Spain.
Why? Because it will save you time, money and hassle to your beloved ones: the future heirs.
Not only is it that it will save them money, but also that this process is something INEXPENSIVE and FAST in Spain.
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 property in Spain.
Unless there is any clause in your UK testament that contradicts it, your UK will won’t be canceled by having a Spanish one. This is because the Spanish will just regulate 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.
In addition, the main advantage of making a will is to save time formalizing tedious paperwok when the inheritance is granted to the heirs, since their names and the specific distribution will be already declared within the will.
Thus, without it, it would be necessary to grant a certificate of declaration of heirs for any operation that you want to carry out after death, and prior to being able to adjudicate the deceased’s assets, which means longer waiting times and more money spent.
Draw up a will in your home country and another one for your Spanish assets (in Spain). The latter 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, also having a will in Spain is more beneficial (instead of just having 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 (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 resident 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 situation and how much money you can claim, do not hesitate to send us an email at [email protected].
About the Spanish inheritance tax
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.
But 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 death.
If you don’t want to pay everything upfront, you can also split the payment of the inheritance tax in different installments 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%, becoming higher the longer you take to 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 be extended 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 applied to the value of the goods inherited. 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.
It is also important to consider that when it comes to the inheritance tax, the state or the regional rule can be applied as we have already mentioned to calculate the final amount to be paid, depending on the one that is most favorable for the taxpayer.
The deduction for international double taxation and expenses related to death that is deductible in the tax (for example, last illness expenses, burial, and funeral expenses).
In order to determine which autonomous community is competent to do so, the law establishes competition criteria. Article 32 of Law 22/2009 of December 18 (Autonomous financing system) establishes, among others, that it is considered produced in the territory of an Autonomous Community in the territory where the deceased has his habitual residence on the date of death.
Another type of tax that must be paid is the municipal capital gain or Tax on the Value of Urban Land. It is a tax that is paid to the City Council of the place where the real estate is located. This tax is levied on the change of holder due to the award of inheritance.
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 foreseen.
3. You will save money
You won’t need to wait in order to execute the will. In Spain, you can do it immediately, unlike the UK or Ireland.
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.
Documents you need as an expat to accept a will in the Spanish territory
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). Then, it is also required to have 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 do 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 an 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 easier for you.
Why? Because it uses your own countries inheritance laws.
This implies that you, as a UK citizen, can draw up the complementary Spanish will for the assets you have in the country 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.
How to make a will in Spain
Drawing up a will is simple: you just need to stipulate how you want your assets to be distributed on the notary. In that sense, there are two different steps: preparing the testament and going to the notary to sign it, so it can become effective.
Nevertheless, we could add a third one, which is doing some tax planning beforehand in order to better understand what to include in that contract.
That is why having a lawyer next to you that can help you with both parts is essential.
Finally, the exact process depends on the specific type of will you would like to make.
Which are the different types of wills in Spain?
There are three main types of testaments in Spain:
An open will 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.
The content of this type of will will be drawn up by a notary in accordance with the will expressed by the grantor.
But there are two special situations to make an open will without the presence of a notary:
- Imminent danger of death: When the testator is in danger of death as a result of serious illness, fatal accident, catastrophe, etc. Here the will can be made before 5 witnesses.
- Danger of epidemic: In this case, the intervention of 3 witnesses who are over 16 years old will be enough.
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.
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
This type of will does not need to be presented by the testator before his death.
However, if you have a holographic will in your possession and a relative has passed away, you are probably wondering what to do with it.
And it is important that you know that the will must be notarized within 5 days after the death of the testator. In other words, a notary has to incorporate the document into the notarial protocol and authorize that its content meets the legal requirements.
Failure to present the will before a notary will make you responsible for the damages that this has caused to your heirs.
The real cost of making a will
The exact cost for having your will created will depend on both the type of contract and how extensive it is.
That is why we suggest you send us an email with your current situation, and one of our lawyers will send you a personalized quote. That would include our tax planning services that will let you save money afterwards.
Finally, we would like to reiterate how important is it to draw up a Spanish will if you have assets in the country. The amount of energy, time and money you will be saving your relatives really pays the price.
Our accounting and inheritance lawyer team in Spain will help you draw up your will and optimize your inheritance tax payments. Are you ready to start?