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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Lawrie Madden

4 June, 2021 5:45 pm

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

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