Estate Planning and Inheritance: What Expats Need to Know About Spanish Law
Estate planning and inheritance may not be pleasant things to think about, but they are crucial. Not only do they save your loved ones the hassle and money of working out your will later on, but knowing how the system works in Spain also ensures that your exact wishes are carried out in the event of your death.
For many people buying property in Spain, it’s somewhere they either want to live to retire to – so it’s only natural that estate planning is a cause for concern. There are several questions people ask especially as the system is so different to other countries.
In this article, we’re going to answer those questions so you can seek the legal advice you need to make sure your assets are protected and passed on to those you wish.
How Do Wills Usually Work in Spain?
Wills are not a legal requirement in Spain, based on the fact that the country has a forced heirship system. But as you can see from this article, having a will in Spain if you have relocated to Spain is important as the law is not only different to most other countries in Europe, some of the Spanish regions have their own local laws that apply.
Spain’s succession law imposes ‘forced heirship’. In general terms, children are entitled to receive two-thirds of an estate’s assets, so under Spanish law you cannot, for example, leave everything to your spouse. This applies to foreign nationals living in Spain by default.
As you can see, there’s not much room for other family members when it comes to wills in Spain, which is why it’s important for expats living in the country to take the correct steps. This is particularly true for those who have remarried and would like to include step-children or other family members in their will.
What’s The Order of Inheritance in Spain If No Will Is Made?
If an expat living in Spain does not make a will before they die, the following order of inheritance will apply, according to Spanish law:
Children – both natural and adopted
Parents of the deceased
Surviving spouse
Other relatives, such as nieces and nephews
The state. When there are no rightful relatives to inherit the estate, it will pass over to the state.
This order of inheritance is common in many areas of Spain, but it’s worth remembering that some autonomous regions have their own rules and regulations.
Why Make a Will in Spain?
If you don’t make a will in Spain, your assets will be distributed according to Spanish law, or if the region have its own laws, according to these.
Making sure you’ve made a Spanish will or included your wishes in an international will gives you more flexibility and ensures your desires are met.
Foreign Inheritance Laws in Spain
According to the European Inheritance Regulation of 2012, anyone who dies after 17 August 2015 has the right to choose whether the inheritance laws of their home country or the country of residence (in this case Spain) apply.
This must be stated in your will, your choice to opt for the European Succession Regulation ‘Brussels IV’ for the succession law of your country of nationality to apply on your death.
If you are a resident of Spain when you pass away but have clearly stated in your will that you wish your home country's laws to be applied to your will, your assets in Spain will be divided as you please. It’s recommended to have a Spanish will to make the process as easy as possible.
What Happens If You Don’t Amend Your International Will as A Spanish Resident?
If you live in Spain and do not amend your will stating that you wish the laws of your home country to apply to your will, Spanish law will apply to your entire estate – meaning the Law of Obligatory Heirs will also come into effect.
Do You Need a Will as a Non-Resident in Spain with Assets in The Country?
If, for example, you have a holiday home in Spain but you’re a resident of a different country, the local laws in the country where you are a resident will apply and not the Spanish laws. A will might still be useful but this depends on your preferences. A Spanish will can simplify up the inheritance process in Spain.
Do Expats Have to Pay Inheritance Tax in Spain?
Yes, expats with assets in Spain will have to pay inheritance tax regardless of whether they’re residents or not. Inheritance tax, also called Succession Tax in Spain, is progressive and depends on the value of the assets in question. The one receiving the inheritance is responsible for paying the tax, not the estate.
How Much Is Inheritance Tax in Spain?
Inheritance tax in Spain varies from region to region. Andalucia, for example, has one of the lowest inheritance tax rates in the entire country. There are other factors that determine the final inheritance tax rate, including the relationship between the deceased and the beneficiary and the value of the inheritance.
The general inheritance tax rate in Spain varies from 7.65% to 36.5%. In 2023 the Balearics, Valencia and the Canary Islands followed Andalucía, Murcia and Madrid in eliminating or virtually eliminating inheritance tax for immediate family.
UK nationals can be liable to both Spanish and UK inheritance tax since UK inheritance tax is based on domicile not residence, but a credit is given in Spain for tax paid in the UK to avoid double taxation.
It’s worth speaking to a legal expert in your region if you’d like to know how much money those in your will are expected to pay in tax.
Spanish Inheritance Tax on Foreign Assets
All assets in Spain are subject to inheritance tax. But, if your assets are located outside of Spain (such as a home in a different country) Spanish inheritance tax is not applicable.
The only way Spanish inheritance tax would apply to assets outside of the country is if the chosen beneficiary is a Spanish resident.
Gift Tax Laws for Expats in Spain
If you’re planning on sending someone a financial or asset gift, it’s important to know that they’ll have to pay gift tax. Again, the rates of gift tax vary from region to region in Spain, so speak to a financial advisor before gifting something of value.
What’s The Deadline for Paying Inheritance and Gift Tax in Spain?
Before an estate can be released in Spain, the beneficiary must pay the inheritance tax. Usually, they have 6 months in which to do so, although it is possible to get an extension. If the tax is not paid, an additional 5% will be added every 3 months up to a maximum of 20%.
Gift tax, however, needs to be paid within 30 days of the gift being made.
Final Thoughts – The Importance of Estate Planning in Spain
Estate planning, wills and inheritance all work differently in Spain. It’s therefore really important that anyone who has property or other assets in the country is aware of what they need to do to make sure their last will and testament are administered as they wish.
If you are a resident of Spain and don’t specify that you want the laws of your home country applied to your will, Spanish law will automatically be applied. It’s important to remember that both residents and non-residents will have to pay inheritance tax on assets in Spain.
By familiarising yourself with the laws of the country, you can ensure everything is in place for your loved ones and concentrate on enjoying spending time with them in Spain.
Note that this article is general and is shared as information. Property, tax, finance and other legal topics are personal and can vary not only from person to person but between the different regions of Spain. We recommend that you seek professional guidance if you need advice on matters covered in this article.