When my wife and I moved here in 2005, Andalucia was the most expensive region to die in Spain. Compared to the simple system in the UK, Succession Tax here was an absolute nightmare to negotiate. We had been brought up living in a country where there was no UK IHT between spouses and on second death anything over the joint Nil Rate Band of £650,000 was charged at 40%. Furthermore, all this was sorted out by the Executor before being released to the beneficiaries………………….and then we moved to Andalucia where:
- The maximum allowance was just under €16,000.
- Anything over that was charged on a sliding scale between 7.65% and 34.0%.
- THEN you had to calculate the kinship group and if there was no direct line ascendency or descendancy the allowance was effectively halved or even abolished for non-related beneficiaries.
- And then there was a Multiplier Rate introduced depending on the kinship Group and the beneficiary’s net worth.
So leaving your estate to your already wealthy best friend could see a tax liability of over 81.6%. Oh and the tax has to be paid within 6 months of the date of death, not when the beneficiary actually receives the asset…………………….
Moreover, the Spanish legal system is a civil law based on comprehensive legal codes and laws rooted in Roman Law as opposed to the UK system of common law is based on precedent court rulings. In simple terms this means you can’t disinherit your children, where as in the UK you can leave your estate to anybody. Luckily Regulation (EU) No 650/2012 of the European Parliament and of the Council of 4 July 2012 on jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of Succession (commonly known as Brussels IV), allows you to amend your Spanish will and state that you wish your estate to be distributed under the law of your country of birth.
The good news: Andalucia amends Succession Tax rules
When in 2021 it was announced that from 1st January 2022 there would be a €1,000,000 allowance introduced for Kinship Groups I & II, “everybody” breathed a huge sigh of relief and words like: “IHT abolished in Andalucia” and “Andalucia is now one of the cheapest regions in Spain to die” flooded the newspapers and social media sites. It was a massive move forwards and very well received.
But what about people in a second or subsequent marriage? Cconsider how many people you know who have what is now called “blended families”? If the stepchildren have been adopted, then there is not a problem. However, if not then they are not then they could be liable to pay a hefty tax bill if they inherit.
“Remarriage rates are higher for men than for women, with 64% of divorced men remarrying compared to 52% of divorced women. In remarriages involving children, 18% of adults have one stepchild, and 12% have multiple stepchildren.” (source: https://gitnux.org/remarriage-statistics).
So how could this impact you?
Well let me start with my own story which is relatively simple. I was an only child and my mother’s will stated that her whole estate passed to me on her death – not a problem as it was a direct line of descendancy.
She remarried when she was 70 and left the house and money to her husband, my stepfather and at almost 35 I was a little too old to adopt! His intention was to pass on the house together with what was left of the investments to me when he died. He died recently so being unadopted and therefore unrelated, I fall into Kinship Group IV and have not only no allowances but the tax bill needs to be multiplied by a factor of between 2.0 and 2.4. So how can you avoid this happening to you?
Action Points:
- You need to consider your family structure extremely carefully, especially if Spanish property is being left to several beneficiaries.
- If the beneficiaries can’t afford to pay the Spanish tax, then the asset will revert to the State.
- Talk to the beneficiaries and ask them what they would do with the property.
- Definitely make sure you have a separate mirror will in every country you have assets.
As most things in Spain, the bureaucracy on death is complex and can be an absolute nightmare for those left to deal with the estate. I help people plan out the potential problems every day, so if you would like to have a confidential complimentary conversation about how I can help you, then please either WhatsApp me, send me an email or scan the QR code below to book a slot in my diary and we can have a face to face video meeting using Teams.
quentin.sellar@chasebuchanan.com
+34 679 018 284
