The importance of making Spanish Wills to avoid Inheritance Problems in Spain
All non-Spanish owners of properties in Spain should (save for very exceptional cases) make a Spanish Will. Failure to have an up to date, valid and correctly signed and registered Spanish Will in place can create the following risks:
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The chosen beneficiaries can lose their right to inherit Spanish property.
- Beneficiaries can face a lengthy and stressful Spanish legal process to claim their Spanish inheritance.
- Beneficiaries can face very high legal fees to secure their Spanish inheritance.
- Beneficiaries can face very high Spanish Succession Tax charges, significantly eroding the value of their Spanish inheritance.
Naturally, the very last thing most owners of Spanish properties would wish for would be to leave their families with the nightmare scenario of an uncertain, expensive and complex probate process in Spain.
Scale of failure to make a Spanish Will
It is estimated that well over 50% of non-Spanish owners of Spanish properties have either failed to make Spanish Wills; or have failed to update their Spanish Wills, such that their current Spanish Wills no longer reflect their actual wishes.
The position for British owners of Spanish properties is even more surprising, as the consensus of succession practitioners is that the percentage of British individuals without adequate Spanish Wills is even higher.
Although many do make Spanish Wills- for example, when they purchase Spanish properties- these Wills are often made as an afterthought, without regard to the pitfalls which are open to foreigners- particularly the British- with properties and other assets in Spain. Also, valuable opportunities legally and legitimately to reduce tax exposure are simply missed.
Some brief examples of particular problems which often arise; and which therefore require special consideration are:
- Language. It is essential in making Wills when there are assets both in Spain and in another country or countries, to ensure that there are no inconsistencies or conflicts in the use of language. The consequences of a poor quality translation, for example, can be disastrous, as the complete sense of the Will can be lost.
- Accidental intestacy. A particular danger of multiple Wills (i.e. separate Wills of Spanish assets and non-Spanish assets respectively), can be that due to incompatibility, the Wills can be accidentally invalidated. This means that the testator’s actual wishes can be completely overridden; and this can lead to unexpected (and usually inconvenient) results in the distribution of assets, following a death.
- Succession. The legal systems of many countries (including the UK) permit individuals, within reason, to leave their assets to whom they choose. This is not the case in Spain, where the Spanish Civil Code imposes strict rules as to inheritance by family members. However, correctly worded Spanish Wills enable foreigners to enjoy the flexibility of their own country’s legal system, which can also often be beneficial in their Spanish estate and tax planning.
- Taxation. The era of non-Spanish owners of Spanish properties simply “forgetting” their Spanish properties for the tax purposes, is now in the distant past. The Spanish Tax Authority (‘Hacienda’) is very serious and efficient about tax collection; and combating tax evasion. Further, Hacienda and other countries’ Tax Authorities (including HMRC) are now in closer contact than ever before. For non-Spanish owners of Spanish properties, these developments simply cannot be ignored. The only real option now for well advised Spanish property owners is to recognise and accept that owning a foreign property does create taxation issues. However, provided that correct professional advice is obtained, the position can be managed, so as not to be unexpectedly onerous. In terms of making a Will, it is essential to have a clear understanding of the taxation liability. In many cases, Spanish Wills and estates generally can be structured quite legitimately, to reduce, or even completely (legally) avoid, taxation liability.
- Expertise. As in many other countries, there are minimal controls in Spain regarding the qualification and training of those engaged in the preparation and provision of Wills and estate documentation. As a Will is one of the most important documents you will sign in your lifetime, (at least, in terms of protecting your family’s wealth and future financial security), it is essential that only the best quality advice and documentation is obtained. Failing to take expert professional advice can result in mistakes and missed opportunities to save tax which, in the long run, can prove to be extremely costly and upsetting for families and loved ones.
- Cost. Because multi-jurisdictional estate planning is a complex area of professional practice, the fees for advice in this area can be prohibitively high. However, in many cases, it is simply unnecessary to incur such high charges. The use of expert advisers in this area of legal practice, who specialise only in this type of work, can enable the correct documentation to be quickly, expertly and professionally provided, but on a surprisingly affordable fixed fee basis.
- Preparation for a straightforward succession process. It is essential that Spanish Wills are designed appropriately to provide the basis for the most convenient, efficient and straightforward succession process possible in the circumstances. This means avoiding conflicts of language; the dangers of inconsistency and mutual incompatibility of Wills; and confusion over succession issues and taxation liability.
In conclusion, it is essential when making Wills- particularly Wills covering assets in two (or possibly more) countries, that appropriate expert professional advice is obtained.
This ensures that the documentation operates correctly, and as intended; in the context of the legal and fiscal systems of each country.
It can be extremely dangerous and costly in the long run, to sign a Will, or to deal with estate planning in one country without also considering the position in any other country where the testator also has assets.
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