Planning your financial future as a couple

Nowadays, it is increasingly common to see couples who, although they live together and are happy, choose not to formalize their relationship legally. For many of these couples, commitment does not necessarily involve signing a contract or a legal document, either because in their countries of origin the rights and obligations of cohabiting couples are equivalent to those of marriage, or simply because they believe it does not add anything new to their relationship.

However, equality of rights has not yet been achieved in Spain for those who choose to live together rather than legalise their relationship.  In most regions, such as the Comunidad Valenciana, significant legal and fiscal differences persist, which can have important consequences. A clear example of these differences can be found in the inheritance and donations tax, which in some cases can represent an unexpected financial burden.

We illustrate these discrepancies perfectly with a real example. A couple that had been living together for over 25 years, with one partner being widowed and the other divorced at the start of their relationship, had managed to fulfill their dream of purchasing a home in Spain. Both decided to make a will to ensure that, in the event of one of their deaths, the other would inherit 50% of the property in Spain.

However, when the time came for the inheritance, the surviving partner had an unpleasant surprise. He was faced with paying nearly €47,000 in inheritance tax, because the law did not recognize any kinship between them, being neither married nor registered as a de facto couple. If they had formalized their relationship through marriage, the tax would have been less than €65.

This example highlights the importance of considering the legal and fiscal implications of not formalizing a cohabiting relationship, even when everything seems to be in order. Spanish legislation has taken significant steps towards making marriage more accessible. Law 15/2015, of July 2, on Voluntary Jurisdiction introduced major changes, allowing notaries to take on new roles such as performing weddings, processing marriage files, and formalizing acts of separation or divorce. This Law simplifies the process for those wishing to formalize or even end their relationship.

Love, as we know, arrives in unexpected ways, and every couple chooses to live it their own way. However, it is important to consider the future and plan adequately to avoid unpleasant legal or fiscal surprises. Marrying before a notary presents a practical and accessible option for those who wish to regularize their situation without additional complications. It is not just a formality, but a tool that can prevent setbacks in difficult times as you can see in the example.

To continue our story, the surviving member accepted the inheritance and took on the inheritance tax. He became the sole owner of the shared property and bank account in Spain. However, he had no children of his own and chose to leave the property in his will to his partner’s children as although they were not direct descendants they had been raised as such. What he didn’t realise was that he was leaving them with a significant problem when the time came. Again, there would be lack of kinship between him, as benefactor, and the children as inheritors. This meant, again, that the amount of tax to pay would be high.  

For all these reasons, it is essential that, during times of stability, couples examine their family dynamics and financial situation. Getting advice and planning for what inevitably lies ahead is key. You do not want to leave an unnecessary burden for loved one in the difficult times to come.  Love and cohabitation should not be at odds with foresight, and proper legal planning can make the difference between peace of mind and unexpected problems in the future.