Inheritance of real estate in Spain, or what you need to know about Spanish inheritance law

The experience of law firms that work with foreigners in Spain clearly shows that drawing up a will in this country greatly facilitates the inheritance of real estate and the inheritance procedures themselves, while failure to do so will complicate and delay the transfer of assets.

Is a will drawn up abroad valid to inherit property in Spain?

Yes, a will drawn up before a foreign authority is valid for inheriting property in Spain. However, the heirs must legalize it, certify that it is the last version of the will, translate it and apostille it. All this will make the procedures longer and more expensive. In addition, it must be taken into account that in Spain the time limit for initiating succession procedures is six months from the death of the testator. Therefore, it is worth considering making a will in Spain.

Advantages of making a will in Spain

Making a will in Spain streamlines many important inheritance issues, such as

• Facilitates the transfer of assets in Spain (only applies to assets in this country).
• Cancels the costs of legalizing a document abroad to inherit property (including real estate) in Spain.
• It significantly improves all inheritance procedures.
• It counteracts possible misinterpretation of a will drawn up abroad.

The functioning of the inheritance tax law in Spain on the example of Andalusia

In 2018, Andalusia established a tax-free allowance of one million euros per heir for the "next relatives" of the deceased.

Individuals are considered "closest relatives" in Andalusia

In Andalusia, "next relatives are considered to be:

• Descendants (children, grandchildren or great-grandchildren) or adopted children.
• Spouse or civil partner (provided the partnership has been registered in the Register of Partnerships of Andalusia).
• Ascendants (parents, grandparents, great-grandparents).
• Adoptive parents (people who adopted a deceased person).

This means that none of these people will have to pay inheritance tax on inherited assets, unless they inherit more than one million euros from the deceased person.

Are there any other requirements to not pay inheritance tax on inherited property in Andalusia?

NO. Until 2022, there was a condition that the heir could not own pre-existing assets worth more than one million euros, but this year this requirement has been lifted.

What happens if you inherit more than one million euros?

You can claim another 99% discount on the tax due.

This means that if you inherit more than one million euros from your parent, child or spouse, you will not have to pay tax on the inherited one million euros and you will receive a 99% discount on the tax payable on the amount exceeding the first one million euros.

Example:

You inherit property in Spain worth €1,300,000 from your parent, child or spouse. You don't have to pay tax on the first million. And on the remaining €300,000 you pay inheritance tax at a 99% discount.

What is the inheritance situation in other parts of Spain?

In principle, this mechanism is similar in other Comunidades Autónomas and works almost identically in the well-known archipelagos: the Canary Islands and the Balearic Islands.

Important:

A slightly more difficult tax situation is in the Province of Valencia, i.e. on the Costa Blanca. There, the reduction, which in Andalusia for the closest heirs is 99% of the tax due (because de facto you do not pay 1%, but - according to the letter of the law - you are exempt from 99% of the "tax base"), in most cases does not exceed 75%.

Of course, the casuistry of the tax base option and its interest rate is huge. When analysing it, it is necessary to take into account the estimated inheritable wealth and the fact that its value is not static, because property  prices and account turnover do not stand still.

Other elements are:

• number of heirs,
• degree of kinship with the testator,
• their heirs' age (generally discounts apply until the age of 21),
• life situation (studies, works, has someone to support, is a victim of violence or persecution, etc.),
• possible damage to health (tax discounts in the case of a disability certificate, but only confirmed by an expert doctor

and the intention to use the property that is inherited. Without going into nuances: the issue of taxation of a house that is to become the heir's "first residence" is approached differently from one that is to serve as a source of income, e.g. from tourist rental. It is also necessary to take into account the dynamics of tax regulations in Spain, which are changed almost every year.

From the author:

I recommend an individual approach to the issue of inheritance. It is worth using the help of lawyers who know the issue and have experience in this field to find the optimal form of wills for you. It is also worth consulting existing wills, because perhaps the reform of certain provisions would result in a significant reduction of possible taxes.

How to make a will of a non-resident in Spain?

The will of a non-resident in Spain must be drawn up before a notary public. Since a will must be written in Spanish for it to be valid, the content of the will is usually translated into the language of the signatory and the document is signed in two languages. 

What happens to a Spanish bank account if a non-resident dies?

It is blocked until the execution of the will, after which it is released to the heirs. If the account belongs to spouses, half of the funds are blocked when one of them dies. The same applies to other assets. 

How is the inheritance procedure in Spain?

First, it is determined whether a will exists by applying for a so called "Certificado de actas de últimas voluntades" from the civil register. This can be done 14 days after the testator's death and it takes about 10 days to receive the relevant document. After receiving it, the inheritance procedure begins: appropriate tax returns, taxes, rewriting ownership in the register, etc.