Estate planning
Estate planning revolves around certain core principles. The starting point is a valid will, and the strategy may include the use of gifts and/or trusts. When moving abroad, however, estate planning becomes more complicated and there are rather more factors to consider. This is particularly true in the case of expats in Spain.
Spanish inheritance tax rules, just as in most countries (including the UK), affect:
- Who will receive your legacy
- How much tax is payable on your estate
- When your legacy will be passed down
Please note that, whilst resident in Spain, you may still be liable to inheritance tax in your home country (depending on your circumstances). If you are unsure where and how much tax will be due, speak to a specialist independent adviser.
With prudent planning, you can ensure your legacy will be distributed according to your wishes – and in the most tax-efficient manner possible. Feel free to book a call with us to discuss your personal situation.
At this point it is worth highlighting that being unaware of your obligations is not a legitimate reason for incorrectly declaring your taxes. Failure to declare accurately can result in severe financial penalties or even prosecution in some cases, so be sure your affairs are handled correctly.
Details to consider
1. Who will receive your legacy
In the EU, many countries apply a concept known as “forced heirship” in their succession laws. This is also the case in Spain. This essentially mean that your legacy may be automatically divided between your spouse and children, irrespective of the provisions in your will. Ensuring your legacy is distributed as you wish can therefore become complicated.
Foreign nationals living in Spain may be able to invoke a European succession regulation known as ‘Brussels IV’. This may or may not be appropriate for your situation, and advice should be sought.
2. How much tax is payable on your estate
Under UK succession law, for example, inheritance tax must be paid by the estate before your legacy is transferred to your heirs. In Spain, however, your heirs are responsible for the tax arising on the assets you leave them.
In Spain, the amount of tax payable depends on your relationship with your heir. The tax amount payable can vary enormously (up to a maximum of 82% tax!) so this should be considered when estate planning for expats.
3. When your legacy will be passed down
You may wish to retain some control over when your heirs receive the legacy you leave to them. This could be to ensure your children/grandchildren only gain access to funds after they reach a certain age, or to ensure that any assets you leave are used for a specific purpose (such as education costs).
By seeking tailor-made, professional advice you can rest assured that your legacy will be distributed as efficiently as possible and in accordance with your wishes – whilst also minimising the tax your heirs will have to pay.
For a no-obligation assessment on your personal situation, feel free to book in a no-obligation chat with us at the time that suits you.
4. The impact of inheritance tax in your home country
Moving abroad does not absolve you of tax ties to your home country. For example, UK expats that have been resident in Spain for many years can still be deemed as British-domiciled by the UK tax authorities. In such cases, they will be liable for UK inheritance tax on their estate.
If you are unsure of your tax domicile, independent advice can help.
For a more detailed look at the Spanish tax system, you can read our free guide by clicking the button below. This guide focuses primarily on the use case for UK expats in Spain, however much of its content also applies to expats in general. In addition to the wider context of the Spanish tax system, you will learn how the Spanish inheritance tax system works and how much your estate can expect to pay.
