Spain Explained

Inheritance tax and stepchildren – protecting your family

Many people live in families with stepchildren. They have perhaps grown up with a stepparent who they have come to look on as they would a natural mother or father. So what happens when a stepparent dies? There are aspects of Spanish inheritance tax related to stepchildren that you need to be aware of.

When someone dies, the heirs can apply for reductions in inheritance tax depending on their relationship to the deceased. The extent and details of this depend upon the Autonomous Community that the family lives in or where the assets are located. Although there are national requirements when it comes to inheritance law, there are currently also regional adjustments. Where you live matters, but most important is which category of relative you belong to.

Different categories

How much inheritance or donation tax you have to pay exactly depends upon your relationship to the property owner. This applies whether the property is being transferred due to bereavement or as part of the donation process.

The categories include:

Group 1 – children (including adopted children) below the age of 21

Group 2 – children (including adopted children) of 21 or above, partners, grandparents

Group 3 – other relations considered to be on the 2nd or 3rd level including brothers, sisters, uncles, aunts and cousins  

Group 4 – anyone else

The level of inheritance tax set will depend on which category your inheritors belong to.  

As we all know, families come in many shapes and sizes. Family life is often quite a tangled web of different relationships, particularly with marriage break ups and second partnerships. It is not unusual to have stepchildren in the equation. And this is where there can be a surprise when it comes to inheritance and donation tax.

Although adopted children are considered to be in groups 1 and 2 – this does not apply to stepchildren who currently fall into group 3. No matter, whether the child has grown up as part of your family unit or not, within Spanish law they are not recognised as being your child, as such. The only exception to this is if the child has been legally adopted. Other than this, stepchildren are classed within Group 3 and will therefore have a significantly greater amount of inheritance or donation tax to pay.

Case study

Mrs. M already had a two-year-old daughter when she met her new husband-to-be – Mr. M. They then went on to have a son together. Their partnership continued and they brought up both children as one family. Mr. M considered the daughter to be as much his as the son he had had later with his wife.

Forty years on and Mr. M died leaving the two children as inheritors. When they progressed through the inheritance process it was to discover that the inheritance tax to pay on the 100,000€ Spanish home was different for the siblings.  Mr. M’s son did not have any inheritance tax to pay, whereas his stepdaughter had a bill for 6,650€.

The benefits of inheritance planning

There are many other complications in our interesting family make-ups that can equally benefit from the professional eye of an inheritance planner. If you are not sure how Spanish inheritance law will impact upon your inheritors or you are considering taking advantage of the current arrangements available in certain regions, then our legal department will be happy to advise you.

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6 comments

Lawrie Madden

4 June, 2021 5:45 pm

Hi
We are non resident taxpayers but own a hone in spain
We have four children between us – 2 children each but none between us
Your example did not cater for this and I was interested
Thanks

Oscar Paoli

7 June, 2021 1:05 pm

Hi Lawrie,
In this case, only blood children would be included in group 1, the other two non common children (stepchildren) would be considered group 3. This means that your two children could apply allowances according group 1 to you (which are higher) but only as group 3 to your partner, and vice versa.
Please do not hesitate to contact us should you have any further queries.
With kind regards,
Ábaco Advisers

RITA ASPINALL

6 October, 2021 3:07 pm

My husband and I had two adult children each when we met. We do not have children together. We are non resident in Tenerife but own an apartment jointly between the two of us. My husband does not want to leave anything to one of his two children but a small sum to that child’s 2 children for the future. My husband’s half share of all his worldly goods will go to one of his children apart from a small amount of money for the children of the one child who does not inherit. This situation is the same in his UK will, so will he be allowed to do this in Spain. My two children will inherit as normal.

Oscar Paoli

11 October, 2021 11:20 am

Hi Rita,

We would recommend that in the UK will you leave the amount for their grandchildren as a legacy, the amount you want, that way the will in Spain and subsequent inheritance is more direct. As you are free to testify, you can simply say that you leave all of your assets located in Spain to your son (the one you want him to inherit). The other would be left out of the inheritance, and the small amount of money that you want to bequeath to the grandchildren, that you do it under a UK will.
In other words, we recommend that you have a will in Spain for everything in Spain and another in the UK for everything related there.
If you were a resident of Spain, we would understand that it would be more difficult for you because you would have the money in Spain, but being non-residents, we understand that most of the savings you will have there, by leaving the legacy in the UK, it will surely be more convenient for you.

With kind regards,

Ábaco Advisers

Craig G.

12 October, 2021 7:37 am

My wife and her brother were named as inheritors by their blood mother, who lived in Spain. She lived there with her partner, they were not married. The Mother passed away in 2019 and her partner passed away in September 2021.

His will also stated that “in the event of Mothers death, my wife and her brother would still inherit the property and assets. We have checked and the deeds are still in his name. We believe someone else is living in the property (his cleaner). If he has “gifted” this property to his “cleaner”, what rights do we have to challenge ?

Thank-you.

Oscar Paoli

14 October, 2021 7:50 am

Hi Craig,

If you have checked in the Land Registry and it still appears in your father’s name, it is because he had not donated the house to anyone. If someone else i living in the property that is not any right that they have.

Those who have inheritance rights are the heirs.

If nothing has been done, you will need to first arrange with the inheritance process. If you wish assistance in this matter, please forward any information you have regarding the Title Deed and Will in Spain so we can give you information regarding the process and a free cost estimate of the inheritance process.

You may contact us at info@abacoadvisers.com or by phone at 0034 966 703 750

With kind regards,

Ábaco Advisers