Many people are unaware that there are significant differences in the way that the inheritance process works when transferring a property to your spouse in Spain. In this article we outline what you should know and how you might prepare.
For many people, owning a property in Spain is a dream come true. The purchase is often a shared project between partners, whether you are married or not. It’s difficult to turn your attention to what the implications might be when one of you dies.
No one likes to think about these things but it is so important to make sure that following a bereavement there are not too many obstacles to the inheritance process. When you are grieving the last thing you want is to have to sort out financial and inheritance implications.
No automatic transfer
The first thing you should be aware of is that there is no automatic transfer of a property to a spouse in Spain. When your partner dies then it is up to you to change ownership and there is a legal process that is required to do this. An inheritance deed has to be signed before the notary and this must then be registered in the Land Registry.
Secondly, you cannot sell the property until this process has been completed. Inheritors particularly need to be aware of this if they are expecting to be able to use the sale of assets to pay any inheritance tax that is owed. This applies even when you are transferring a property to your spouse in Spain. You can only sell a property if you legally own it and whilst ever you are only the owner of a portion of the property the sale cannot take place.
Whether you are married, living together or a third party is set to inherit some of your partner’s share, the inheritance process must be put into operation once one of you dies. You have six months in which to do this before you can become liable for late payment interest.
The amount of inheritance tax to pay varies depending upon the relationship of the deceased to the remaining owner and in which autonomous community the property is located. It is something that can be calculated approximately beforehand which means that you do know what to expect. If you are married then there may be no inheritance tax, or very little, to pay at all on transfer of a property to your spouse in Spain.
There are four groups of inheritors:
- Children and grandchildren under the age of 21
- Children and grandchildren over the age of 21, parents, grandparents and spouse
- Brothers, sisters, uncles, aunts, cousins, parents-in-law, daughter/ son-in-law
- Anyone else
In some autonomous communities an unmarried partner might come into the ‘anyone else’ category even if you have been living together for many years. Therefore, this can have financial implications that you need to be aware of.
You should remember that inheritance tax isn’t just payable against your property. You will also have to pay tax against the transfer of money held in bank accounts, vehicles, deposits and other assets that you may have.
The good news is that there are allowances to offset any tax to pay, depending upon the relationship between you and the deceased. So, for example, in Valencia there is an allowance of 100,000€ for close relatives.
Payments up front
All payments that are as a result of the inheritance process have to be paid up front. The sales proceeds cannot be used to cover inheritance expenses as you cannot sell the property until the legal ownership has changed. However, any expenses you incur can be deducted from the amount that is taxable as a result of capital gains tax.
Because of this we strongly recommend that you take advice from a legal representative to confirm how much, if anything, inheritors will need to pay in order to ensure that they have the money available when needed. Having the correct information, and an idea of what to expect, can put your mind at ease now and can be invaluable in the future.
If you have any queries regarding transferring a property to your spouse in Spain do not hesitate to contact us today at firstname.lastname@example.org