Bridging borders: The international guide to Spanish inheritance for foreigners

Senior man signing insurance agreement with his wife sitting next to him

Introduction

Spain, with its rich history and distinct culture, also has a unique legal framework for inheritance. If you’re a foreigner with assets in Spain or familial ties, it’s crucial to understand these regulations to navigate the succession process seamlessly.

Types of Succession

Understanding Spanish succession laws is crucial for effective estate planning. Essentially, there are two primary forms of succession in Spain, each governed by distinct articles in the Spanish Civil Code:

  1. Testate Succession (by will). This applies when a person leaves a will detailing how they want their assets to be distributed upon their death.
  2. Intestate Succession (without a will). If no will exists or the existing will is declared void, Spanish laws dictate how the deceased’s assets are distributed.

‘Legítimas’ (Forced Heirship)

Spain’s concept of “legítimas” enforces a system where a portion of the deceased’s estate is mandatorily allocated to specific close relatives, regardless of the will’s stipulations.

According to the Spanish system, the estate is allocated to:

  • Descendants. They usually receive two-thirds of the estate.
    • See Articles 806 – 812 of the Spanish Civil Code
  • Ascendants. In the absence of descendants, ascendants (like parents or grandparents) come next.
  • Surviving spouse. Their share varies depending on the presence of descendants or ascendants.

Legitimate heirs have the option to challenge a will if it doesn’t honour their protected share of the assets. They can request a court to modify the will’s provisions to ensure their rights are respected. However, there are circumstances in which a testator can disinherit a legitimate heir for specific legal reasons, such as severe mistreatment. In such cases, if the disinheritance is legally justified and explicitly stated in the will, the heir may not be entitled to their legitimate portion.

This is why proper estate planning is crucial for safeguarding their rights and interests, ensuring assets align with the testator’s wishes, without the limitations of “legítimas”. 

Expert guidance in International Private Law can help inheritors avoid these strict allocations and future conflicts and financial complications.

Making a Will in Spain

For foreigners in Spain, while it’s not strictly mandatory to create a will for their Spanish assets, it’s highly recommended.

Creating a Spanish will specifically tailored to assets in Spain can streamline the inheritance process, eliminating potential ambiguities and ensuring your wishes are clearly understood within the framework of the Spanish legal system.

There are various types of wills you can draft in Spain, such as open, closed, and holographic wills (see Articles 688 – 692 of the Spanish Civil Code).

Heirs might face a more complex, time-consuming and potentially costly probate process by not having a Spanish will. It’s also worth noting that without a Spanish will, Spanish intestate succession laws could apply, potentially leading to distributions that might not align with your wishes. Thus, while not obligatory, having a Spanish will can offer clarity, peace of mind, and a smoother transition for your beneficiaries.

Inheritance Tax

Inheritance tax (IHT) in Spain is a crucial consideration for anyone who owns assets within the country, whether they reside there or not.

Since 2015, both residents and non-residents have been subject to the same IHT rates. How much is due largely depends on the heir’s relationship to the deceased, classified into four distinct groups, with children and spouses generally receiving more favourable rates.

Since the 2015 amendments, introduced in line with European regulation 650/2012, Spanish inheritance laws have undergone notable changes. In instances where an inheritance goes unclaimed or is rejected, the assets default to the Spanish State. This is why those with wills made before 2015 should revisit them to ensure they reflect their wishes and align with current regulations. 

Both residents and non-residents are subject to inheritance tax in Spain. However, the exact rates and allowances can vary depending on the region. It’s therefore essential to consult local tax regulations or a tax advisor who is familiar with regional variations.

Here, you can check out our post on Inheritance Tax Law in Spain.

Double Taxation

The tax landscape gets more complex for foreign residents or those with assets outside of Spain. This can sometimes lead to issues with double taxation.

Spain has agreements with several countries to avoid double taxation on inheritances. Among them are France, Greece and Sweden. Additionally, Spanish Inheritance and Gift Tax Law has provisions for nations without a direct treaty.

Under Law 21/2001, dated December 27, Autonomous Communities in Spain can create additional tax deductions and bonuses. In most cases, when you owe taxes due to personal obligations, you can reduce the amount you owe in two ways:

  1. You can deduct the actual amount you paid in taxes to another country for a similar income or asset that’s also being taxed in Spain.
  2. You can compute a deduction by using the foreign country’s average tax rate and applying it to income or assets situated outside Spain that have already been taxed in that foreign country.

It’s important to note that these regional deductions and bonuses can’t change national tax laws but are applied in addition to them. 

EU Inheritance Laws (Brussels IV)

In international inheritances, the principles of International Private Law (Derecho Internacional Privado) determine which country’s succession laws apply, especially when the deceased had connections to multiple countries.

Before Brussels IV (Regulation EU 650/2012), many EU countries, like Spain, used the deceased’s nationality to determine applicable succession law. However, Brussels IV introduced a significant change, making the law of the deceased’s habitual residence at the time of death the primary criterion for succession.

That said, the testator can choose the law governing their succession.  For instance, a German national residing in Spain could elect for German succession laws to apply to their worldwide assets, despite being resident in Spain.

This simplifies and harmonises the rules in the EU, making cross-border inheritance management easier. 

Notably, the UK did not adopt Brussels IV, so British nationals in Spain must plan carefully to address both Spanish and UK inheritance laws.

Non-EU Inheritance Laws

While Spain and EU countries follow unified rules through Brussels IV, non-EU nations have their own laws that can create conflicts when combined with Spanish regulations.

Assets in Spain are subject to Spanish inheritance laws, but non-EU nationals can choose for their own country’s rules to apply, if specified in a will. However, this can conflict with Spanish principles like “legítimas”, and beneficiaries may face Spanish inheritance taxes and potential double taxation unless a treaty prevents it. Recognising non-EU documents in Spain might require additional steps, such as getting an apostille for validation.

For example, consider María, a Spanish national who spent most of her life in the United States. She has diverse assets: a villa in Andalucía, Spain, tech stocks in Silicon Valley, US, and an esteemed art collection in Moscow, Russia. Her will, created under US law, lacks clarity on the governing laws for her global assets. This would be what happens upon her death:

  • Spanish assets: Spanish laws apply by default to her villa in Spain, but Spanish courts might recognise the US will if it complies with Spanish international private law. However, “legítimas” could still pose challenges unless it’s argued that US law, which lacks forced heirship, should prevail.
  • US assets: The US state law, where the will originates, governs the fate of her stocks. If María’s state of residence accepts the will, the stocks can be inherited as specified.
  • Russian assets: Russian inheritance rules typically govern the art collection in Moscow. Since Russia also emphasises family rights in succession, like Spain’s “legítimas”, the children might face challenges if the distribution doesn’t align with Russian principles.

María’s children would need to navigate different legal systems, potentially conflicting inheritance laws, and varying tax obligations in each country. This scenario therefore highlights the importance of expert guidance in international private law for complex cross-border inheritance cases.

The Importance of Estate Planning

In the context of global assets and cross-border inheritances, estate planning is a crucial tool for protecting an individual’s wishes. It serves several key purposes:

  1. Clarifying intent: Estate planning ensures the asset holder’s intentions are legally articulated, providing clear guidance for heirs and legal professionals, especially when dealing with multiple legal systems.
  2. Mitigating conflicts: A well-structured will can prevent disputes among beneficiaries by specifying asset distribution and which country’s laws should apply.
  3. Optimal tax planning: Testamentary planning can optimise the distribution of assets to minimise tax burdens, benefiting beneficiaries.
  4. Considering local nuances: Regional and country-specific differences can affect inheritance, so testamentary planning should account for these nuances.
  5. Flexibility for changes: Planning allows for updates as life circumstances change, keeping the will relevant.

Testamentary planning serves as both protection and guidance. It shields against unexpected problems, legal issues, and conflicts among heirs, while also directing the seamless transfer of assets to uphold the deceased’s wishes.

How to Claim an Inheritance in Spain

Claiming an inheritance in Spain involves several key steps to ensure legal compliance and respect for the deceased’s wishes:

  • Obtain a death certificate.
  • Acquire a legal certificate indicating the validity of the will.
  • In the absence of a will, obtain a “declaración de herederos abintestato,” which legally declares the legitimate heirs based on statutory inheritance laws. Beneficiaries typically request this when no will exists to legally claim and distribute the deceased’s assets.
  • Calculate and pay the relevant inheritance tax.
  • Register the inherited assets in the Property Registry.

Potential Challenges

In some cases, inherited properties might not be registered or might have some legal discrepancies. Legal procedures like the Notarial Declaration of Ownership may be needed in such cases.

Get specialist help with your cross-border estate planning

For inheritances across international and regional borders, it’s important to consult with tax experts who are knowledgeable about the treaties and regulations that will govern your assets when you’re no longer around.

At Costaluz Lawyers, we can help you with Succession Planning!

In situations with assets spanning EU and non-EU countries, effective estate planning is essential. A well-crafted will brings clarity, reduces legal conflicts, and ensures the deceased’s desires are honoured in diverse jurisdictions.

If you want to ensure that your estate is processed according to your wishes and with minimal fuss, get in touch with us now!

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