The potential one million Spanish residential properties that the Spanish government estimates are owned by British citizens form part of the fixed assets each British citizen who owns a second home in Spain and forms part of the owner's estate which will, in due course, be passed to their heirs and beneficiaries. Owners of real estate in Spain should give serious consideration, not only as to whom they wish to be their heirs, but how best they can minimise the costs, procedures and tax liability for their heirs and benefactors.
Graziano Cecchetti, a partner in the Barcelona office, remarked "a beneficiary of a Spanish inheritance has a choice as to whether to accept or decline the inheritance. Should there be any debts against the estate, such as a loan or a mortgage attached to a property, by accepting the estate is also means you are accepting the debt. If you decline the inheritance and many beneficiaries take this option if the estate has a number of debts attached to it, rejecting your inheritance will mean it automatically reverts to the next in line to inherit." He further commented "there is a six-month time-frame by which Spanish inheritance tax must be paid and depending on whether the deceased died intestate or had made a Spanish or English will create a greater or lesser urgency to resolving the situation. Expert Spanish legal guidance and advice will considerably assist the heirs and beneficiaries."
As a beneficiary of a Spanish property, you will need to establish whether the deceased had drafted a will, if so, whether the will is an English will or a Spanish will. You may be required to produce documents as evidence of entitlement to your inheritance which may be drafted in English, such as Grants of Probate, death certificates, birth certificates, marriage certificates, etc., In order for the documents to be used as legal admission in Spain they will need to be legalised by the Foreign and Commonwealth Office and the translations of the English documents will also need to be translated and certified by an official translator.
The heirs and beneficiaries cannot receive their inheritance until all the Spanish inheritance tax that is due is paid, together with any debts. Spanish inheritance tax is due within six months of the death.
If the Spanish estate is enshrined in a Spanish will, which is the best option hoped for, this is the quickest route to dealing with the estate. All Spanish wills which have been drafted with the assistance of a Spanish notary are registered at the central Spanish Wills Registry in Madrid and an application to request certification to show the last known valid will for the deceased must be made. In order to make an application, a copy of the death certificate should be obtained and presented. If the deceased died in the UK and the death certificate is in English it will have to be translated into Spanish. All the heirs and beneficiaries must then be identified, after which the administration of the estate can then commence, assuming the documentation confirming your entitlement is in order. Normally, the starting point is with an inventory of the estate includes bank accounts, vehicles owned, property owned and cash, enabling a valuation of the estate to be calculated.
Foreign benefactors are required to apply for an Número de Identificación de Extranjero (NIE) number, this is obligatory for all foreigners involving their financial dealings in Spain regardless of whether they are resident in Spain or elsewhere. A NIE number operates as an identification number for the purposes of tax and is used for all transactions that involve the Spanish Tax Office and Public Registries. It is advisable to apply for a NIE from the beginning.
A document called a Deed of Adjudication, which must be dealt with before a Spanish Notary Public and registered in the appropriate public registries enables the registration of a change of ownership of the assets of the estate. Should you be unable to travel to Spain it is possible to appoint a person, usually your lawyer, to deal with all aspects of the administration of the estate by way of an ordinary Power of Attorney which can be drawn up by the lawyers in Giambrone's Spanish team in our London office.
A Spanish estate can be enshrined in an English will and distributed in accordance with the terms of that will. The process is far more complex and involves all the relevant documentation to the translated, by an accredited translator, notarised and legalised with an Apostille before it is deemed to be valid in Spain.
Verifying an English will also takes considerably more time and any financial responsibilities against any of the assets contained with the estate will accrue and become the responsibility of the heirs and beneficiaries.
As with a Spanish will there is a requirement to obtain a NIE number and all the formalities applied to foreign heirs and benefactors named in a Spanish will also apply to those named in an English will. Such as registration of the Deed of Adjudication.
No will – the deceased dies intestate
Should a person die without having made a will, the person is said to have died intestate, it becomes necessary to establish which country's laws of succession apply. The laws of succession vary from country to country and considerably affect the proportion of the deceased's estate is inherited by the heirs and beneficiaries.
Usually, in the case of a person dying intestate, the law is guided to the laws of succession of the domicile of the deceased. In the case of a British citizen dividing their time between the UK and Spain but whose country of domicile was the UK, the England & Wales laws of succession would apply but this can become less straightforward if the deceased had been resident in Spain for a considerable time. This situation may occur when a person increases the time that they spend in Spain over time, with a view to eventual retirement in Spain.
If the Spanish succession laws are deemed to be appropriate, forced heirship applies under the Spanish inheritance law, the Law of Obligatory Heirs in Spain. However, it should be remembered that Spanish inheritance law all derives from the Spanish Civil Code and that the autonomous regions enact their own regulations. This can result in similar estates in different areas being treated entirely differently when it comes to inheritance, as many areas have their own rules of succession.
Inheritance tax in Spain, known as Impuesto sobre Sucesions y Donaciones (ISD) is complicated and must be paid within six months of the death. It only applies to beneficiaries resident in Spain or when the inheritance is a Spanish based fixed asset. Giambrone's highly regarded probate and inheritance lawyers have extensive experience in dealing with complex estates and the tax issues that arise.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.