Spanish inheritance is a recurring worry for both residents and non-residents holding property in Spain. It is a different system and inheritance tax – only the concern of the rich in the UK – can be steep. We are often asked ‘How much inheritance tax do non-residents have to pay?’ It’s a difficult one to answer. Every case is different and that’s where case studies come in handy.
So, to answer the question, here is an example of what inheritance tax in Spain meant for one couple.
The case study
Mr and Mrs A had a property in Montesinos. They were both non-residents and took advantage of the extra time provided by retirement to enjoy the Spanish sun. Unfortunately Mr. A died following a sudden heart attack. He did not leave a will, either in Spain or the UK.
His wife found herself grieving for her husband and also worrying about the absence of a will. Not so much a problem she felt in the UK but what about not having a will in Spain? Having contacted our offices, we were able to reassure Mrs. A that although this made it more complicated and more costly, we would be able to help her.
The first step was to collect some basic information about Mr A including when and where he died, information about the property itself and the inheritors. This meant that we could give Mrs A a cost estimate for Spanish inheritance tax and legal expenses. Something that we knew was worrying her.
The total value of the property was 118,000€. This meant that the value of Spanish property passed from Mr A to Mrs A was 59,000€ as they were both on the Title Deed. There was also 10,000€ in a Spanish bank account. Again, half of this amount was added. We then needed to add 3% on to this total – an amount that is automatically included to account for personal effects and furniture.
At last – the grand total against which Spanish inheritance tax was to be calculated was 65,920€. However, because the couple were married this meant that Mrs A had an allowance of 15,957 €, reducing the total amount to be taxed to 49,963€. The final figure that Mrs A would have to pay in tax was 4,944€.
Getting things sorted
When she was ready, Mrs A came over to Spain with her two daughters who had helped her to locate the documents she needed. This included the original death certificate, UK grant of probate, a certificate of law confirming inheritance law in the UK (all legalised by the foreign office) passports, NIEs, property deed, the last I.B.I. bill, water and electricity bills.
Fortunately for the couple, although they had not had the foresight to make a will, they had made allowances for inheritance tax and other contingencies. Before returning to the UK, Mrs A signed a Power of Attorney which allowed Ábaco to proceed with Spanish probate on her behalf. This meant she would no longer have to come to Spain, at least until she felt ready to enjoy her holiday home again.