Know all about the new European Law and the Inheritance taxes.
On this article, we take a look at the very important topic of making a Spanish will, the new European Law and the Inheritance Taxes. Since setting up all our offices in the Alicante province, we have been surprised by the number of people who have come to me to ask whether it is necessary on making a will in Spain concerning their Spanish assets.
Do I need a Spanish Will?
The answer to this is most definitely yes. It is especially important for all property owners to make a will, but others need to consider their position as well.
In the U.K. if you do not make a last will, then the law has special rules (intestate) that will determine the distribution of your assets. These rules could mean that your assets are distributed in a very different way from how you would have liked, and your estate will have to go through the probate procedure.
In Spain, the situation is the same, with an additional factor. Your heirs will have to deal with a foreign language and a different legal system, including the need for each, obtains an NIE, going through all of the legal paperwork, and paying Inheritance Taxes depending on the personal circumstances (fiscal resident, non-resident, the value of the assets, etc…).
All the more reason to leave everything as well organised as possible.
Some people include their Spanish assets in their English will. This is legally possible, but your English will have to be executed in Spain once you went through probate in the UK, so it could be legalized in Spain. The inconvenience of this situation is that it is a long and costly procedure.
What is your best advice?
My advice on the subject is to have either two separate wills, one in the U.K. for your English assets and one in Spain for your Spanish assets or alternatively, you can make an international last will in Spain, that covers worldwide assets.
Drawing up a last will in Spain does not take long and is not expensive, and will definitely save your heirs a lot of time, problems and money. Do not forget about the tax implications of it (inheritance tax planning) which will vary depending of several issues: residency of the deceased and heirs, inheritance value and number of properties to inherit, number of heirs and relationship within the family, place of residence, etc…
What is the procedure- the service that we provide?
We are able to offer you tips and advice on making your last will and testament. We will provide you with a standard will form, that is then adapted to your specific situation. Subsequently we will draw up a rough draft and on your agreement, we will organise an appointment at the Public Notary to sign the final document, which will make it public.
The information is sent to the Central Registry in Madrid, which will vary if you change your will again and make it public. This service is different to the UK, but has obvious benefits for all concerned.
If you would like to change your English will while you are in Spain, and you do not want to travel back to the UK for just this purpose, my recommendation is to draw up an international will which will be valid in Spain and in the UK. The will has to be drawn up in English and Spanish and will mention that it covers worldwide assets.
What will I receive?
You will be given a certified copy (original stays at the Notary Office) and our advice is that you inform your heirs and solicitor in the UK or home country about it and then put it in the bottom drawer. You can relax knowing that everything is taken care of and that you have left your family with everything sorted.
Is a Foreign will valid in Spain?
Yes, but you will have to go through a complicated, time-consuming and expensive process, and it is clearly better and faster to make a Spanish will disposing of your assets in Spain. It is a way to save a long, expensive and unnecessary process for all the heirs.
What are the effects of the New Inheritance European Law?
The new European Regulation No. 650/2012, which is now in force, relates to the contesting and challenging of Spanish Wills granted by British citizens in Spain.
We anticipate that there could be more contested Wills in the near future, due to the fact that the applicable law to the Succession-Inheritance procedure will be the law of the country where the decedent had his habitual residence. Under Article 22 of said regulation, the testator or testatrix can specify in their Will, or at the time of death, his or her national law.
If you decide to leave your assets to your wife, or anyone else (not your children), and you live in Spain, it is of extreme importance that, according to the new regulation, your national law is specified in your Will. Otherwise, if you pass away while living in Spain, the applicable law to the Inheritance will be the Spanish Succession Law, this means that your children, as forced heirs, would inherit at least 2/3 of your estate. This avoids future problems at the time of signing the inheritance deed.
This new Regulation shall apply to people who die on or after August 17, 2015, but if the testator or testatrix stated in his or her Will the applicable law for his or her succession, prior to August 17, 2015, then that choice will be valid if it meets the conditions of the regulation, or of the rules of private international law which was in force at the time the Will was executed.
IMPORTANT UPDATE ON RECENT TAX CHANGES
We are all well aware that Spain, like most of Europe, has serious financial problems and consequently the government is having to introduce new policies to help balance the deficit.
The problem varies across the 17 autonomous regions and so policies and levels of taxation vary according to the laws of local community governments.
The Comunitat Valenciana (government of Valencia region) has been reviewing a number of fiscal policies with the objectives of:
‘The main objectives of the tax measures included in this Decree-Law, first, that in the current economic crisis and budget deficit in our Region, contribute more the haves Secondly, to strengthen legal instruments of the tax administration and control Valencian fight against fiscal fraud in the field of taxes assigned by the State to Valencia. Encouraging, while voluntary compliance by taxpayers with their tax obligations, and simplifying formal tax obligations thereof.’
One of the main taxes to have been revised is the Inheritance Tax – Impuesto Sobre Successions and Donations.
Many people are aware that this is more complicated and potentially more expensive than in the UK. We recommend taking professional advice to guarantee that you have planned in advance how to deal with this tax liability.
This has now become even more important as the tax levels have been revised and allowances amended. Again it is important to point out this tax does vary greatly from region to region and we are primarily highlighting the changes in the Valencian region.
Before the change, which came into effect on August 6, 2013, published Decree-Law 4/2013, of August 2, allowances of up to 99% were possible this has now been reduced to 75%.
However, the actual financial base figure has increased and so the actual final allowances are calculated using a number of complicated factors relating to relationship to deceased, age, residency etc meaning it is vital to seek professional advice to understand your potential exposure to this tax.
Now is a good time to review your financial planning and this naturally goes hand-in-hand with making wills.