Inheritances and wills in Spain

Who is entitled to the inheritance? How much tax is payable? How is the inheritance divided?

¿QUIÉN HEREDA?

The answer to this question depends on whether or not the person made a will before dying.

If a will exists...
If a will has been made, its provisions will be followed, although the so-called "legitimate", which limits the freedom to make a will, being determined by the Civil Code or by the laws of the Autonomous Community in question, if it is Aragon, the Balearic Islands, Catalonia, Navarre, Galicia or the Basque Country.
The beneficiary of the statutory share is always a forced heir.However, in some Autonomous Communities, the beneficiary only has a mandatory claim against the heirs or the estate.
The spouse, descendants and, in the absence of descendants, the parents or other ascendants of the deceased have a right to the statutory share. According to the Civil Code, the statutory shares of all heirs can represent a maximum of two-thirds of the estate. In the Autonomous Communities, these shares can reach up to four-fifths of the estate, with specific regulations depending on the origin of the assets.
A forced heir cannot renounce their share of the inheritance before the deceased's death. A renunciation is only permitted after the deceased's death. This renunciation must be formalized in a public deed or submitted for court approval. The renunciation also has legal effect on the descendants of the person making it.


If there is no will...
In the absence of a will, the Civil Code or certain regional laws (in the case of Aragon, the Balearic Islands, Catalonia, Galicia, Navarre, and the Basque Country) define the principles that will apply to the different scenarios presented below. The examples provided correspond to the regulations of the Civil Code.
  1. If the deceased was single and childless, the heirs are the parents. In the absence of parents, the siblings; in the absence of siblings, the nephews and nieces; in the absence of nephews and nieces, the cousins; and in the absence of cousins, the State.
  2. If the deceased was single with children, they will be the heirs in equal shares.
  3. If the deceased leaves a spouse but no children, the surviving spouse becomes the sole heir in the absence of descendants and ascendants of the deceased.
  4. If the deceased leaves a spouse and children, they will be the heirs in equal shares. Furthermore, the surviving spouse receives the usufruct of one-third of the inheritance. The children inherit the remainder of the inheritance in equal shares. The share of a predeceased child passes to their descendants by representation, by lineage.


THE DIVISION OF THE INHERITANCE: THE PARTITION

Once the heirs have been determined, either through a will or through a declaration of heirs, the inheritance must be accepted and distributed.
The first step is to dissolve the matrimonial property regime of the deceased, if one existed.
Regarding who can carry out the division of the estate, if the deceased left a will, the testator may have already made the division within it (for example, by bequeathing one property to one heir and another to a different heir) or may have appointed a third party, known as an executor, to perform these operations. If the testator carries out the division, the distribution of assets will be respected unless it is detrimental to the heirs entitled to a forced share. If the division is carried out by a third party, it can be challenged in court if the beneficiaries disagree with the valuation of the assets or their allocation.
If the deceased did not leave a will: In these cases, if the children or heirs are of legal age, or if, being minors, they are duly represented, they may distribute the inheritance among themselves as they wish. If they cannot reach an agreement, they may go to court, where a judge will appoint an executor to divide the inheritance.
The partition deed must include an inventory of the assets, with their description and valuation, as well as the allocations in proportion to each heir's share of the inheritance. The aforementioned deed, called the "deed of partition and allocation of inheritance," will allow the beneficiary to transfer ownership of the real estate (apartments, farms, etc.) to their name in the Land Registry, although they must first pay the Inheritance Tax and the Tax on the Increase in Value of Urban Assets, commonly known as "municipal capital gains tax."
If there is no agreement among the beneficiaries of the inheritance, regardless of whether there is a will or not, the division will be carried out or may be challenged in court.


JUDICIAL PROCEDURE FOR THE PARTITION OF THE INHERITANCE

Any co-heir or legatee may request the division of the inheritance, provided that it is not to be carried out by a person designated by the deceased in the will, or unless the will requires the beneficiaries to carry it out by mutual agreement. In such cases, it will be necessary to wait until the division has been carried out before challenging it.


The legal procedure to request the division of the inheritance begins with a claim that must be signed by a lawyer and a solicitor and which must be accompanied by the death certificate, the certificate from the Registry of Last Wills and Testaments, the document that proves that the plaintiff has the status of heir or legatee as well as the documentation relating to the assets that make up the inheritance.

Once the division has been requested, and in cases where necessary, the intervention of the assets and the formation of an inventory can be agreed upon, as well as the appointment of a person to be in charge of their administration.

The heirs will be summoned to a meeting where the interested parties must agree to appoint a "divider-accountant" to carry out the division operations, as well as any experts necessary to value and appraise the assets.

If no agreement is reached, he will be appointed by lottery (the position of accountant-partitioner must fall to a practicing lawyer).

The partitioner is the person who carries out the division operations and is obliged to respect, if they exist, the rules for the valuation of the assets that have been imposed by the testator, provided that these do not harm the legitimacy of the forced heirs.

The division operations will have a maximum duration of 2 months.

The report issued by the accountant-partitioner must contain a list of the assets that make up the inheritance, their valuation, the division that is made of them and their allocation to each of the heirs.

These operations will be communicated to all parties involved in the proceedings so that, if they disagree, they may object to them within ten days. This objection must be made in writing.

At this point, two possibilities arise again:

1.If no objection is raised, the judge will issue a resolution (an “order”) approving the division operations.

2. If an objection is raised, the judge will summon the parties to a new hearing in which the reasons for the objection will be stated and in which the taking of some evidence may even be agreed upon (for example, the heirs do not agree with the valuation given to the assets and a new appraisal is requested), and the procedure will continue according to the procedures of the oral trial.

Once the partition and allocation have been carried out, each co-heir acquires ownership and possession of the assets that are granted to him.

The court order that may be issued will allow the beneficiary to change the ownership of the real estate in the Property Registry in their favor.


INHERITANCE TAX PLANNING

"It's important to plan the tax impact with a professional."

Good tax planning substantially reduces the inheritance tax liability.


In any legal transaction, understanding and planning its tax treatment is important, but it is especially crucial in inheritance matters. Inheritance Tax, which levies the transfer of assets and rights upon the death of an individual, is a very burdensome tax. Therefore, tax planning for the inheritance is essential, taking into account the wishes and personal circumstances of the testator, as well as those of the heirs and legatees. Factors such as the heirs' degree of kinship, the deceased's legal domicile, the heirs' place of residence, their number, the assets comprising the estate, and so on, are also essential.


The Inheritance Tax is regulated in Law 29/1987, of December 18, on Inheritance and Gift Tax (BOE No. 303, of December 19) and in Royal Decree 1629/1991, of November 8, which approves the Regulation of the Inheritance and Gift Tax (BOE No. 275, of November 16).


For the time being, it is a tax ceded to the Autonomous Communities, so each of them has different deductions and bonuses applicable to it, so there is a big difference between settling the tax, for example, in Madrid and in Andalusia.


There are a number of reductions depending on the degree of kinship, family business, and habitual residence.


INHERITANCE TAX

The deadline for filing the tax return is six months from the date of the deceased's death or from the date the declaration of death becomes final, unless an extension of the same period is requested within five months of the date of death. Such an extension entails the payment of late payment interest. If there is a contentious proceeding affecting the inheritance, a suspension of the tax filing deadline can be requested. In this case, according to this law firm's opinion, no late payment interest should accrue, although some tax authorities maintain a different position.


Self-assessment must be carried out for each heir, the acquisition of assets and rights by inheritance, legacy or any other succession title, taking into account mainly the deductions for kinship, housing, business as well as the reductions to be applied.



A PRACTICAL EXAMPLE OF TAX SAVINGS IN AN INHERITANCE



Maria, 89 years old, and her sister Lourdes, 83 years old, both single and without descendants, have made wills in which they name each other as heirs and the one who survives names her three nieces, Ana, Laura and Alicia, as heirs.


Maria and Lourdes don't own any property, but they do have checking accounts and FoInvestment options:

Maria 255,000.00

Lourdes €160,000


According to the contents of this will, if Maria dies, Lourdes would have to pay €60,000 and when Lourdes dies her nieces would have to pay approximately €67,000, so the total tax bill amounts to approximately €127,000.00.


Simply by modifying the will of Maria and Lourdes, bequeathing the life usufruct from one to the other and naming their nieces as heirs, while maintaining the same intent as the previous will, the tax bill for both inheritances is reduced to approximately €70,000.00.