Changes To Spanish Wills and Inheritance Tax

Posted in Legal on 15 Mar 2016

Do you need to act now?

2015/2016 brought some important changes to both Spanish Wills and Inheritance Tax.

Inheritance Tax

As of 1st January 2016, the Canarian Government has re-introduced a hugely popular Inheritance Tax discount of 99.9%. The discount applies to gifts (both during lifetime and under a Will upon death) left to Class 1 (spouse) and Class 2 (children) beneficiaries. The property being left or gifted must be situated in the Canary Islands. The discount applies equally to residents and non-residents, although certain small print exclusions apply - e.g. where a larger percentage of the estate property is held in other regions of Spain outside the Canary Islands.

Given that this tax break could easily be withdrawn by a future government, many Tenerife property owners are now taking advice as to the benefits of gifting property to loved ones now whilst the tax break is in place, rather than rolling the dice under their Will upon death.

Changes to Spanish Wills

The European Union has introduced a new Regulation (650/2012) which came into force on 17th August 2015 and applies to all Spanish Wills for individuals who die after that date.

This new law was introduced to harmonise the administration of the Wills of European citizens. The primary intention of the new law is to avoid the situation whereby different and potentially conflicting laws are applied to an individual's Will(s) in different European countries that he or she might hold assets.

Prior to the introduction of this new law, where a foreigner made a Will in Spain, the Spanish authorities would not actually apply Spanish law upon death. Instead, they would apply the law of the individual's relevant country of nationality (e.g. England, Scotland, Ireland etc) as required by Article 9 of the Spanish Civil Code.

So what has now changed? Well, in a nutshell, individuals are now required to expressly state in their Wills that they wish for their law of nationality to apply. If they fail to do so, then any Wills that they leave in any European Union country must be administered under the law of the country of where the individual was habitually resident at the date of death.

For example, if an individual is English and leaves separate Wills governing his assets in England and in Spain, and if those Wills do not specify which country's laws are to apply, then the question will be where the individual was habitually resident at the date of death. If that was in England, then English law must be applied. However, if the individual was resident in Spain, then Spanish law must apply.

For anybody who spends any considerable amount of time in Spain or who envisages spending more time in Spain in the future, this could have serious implications for their Will(s).

If Spanish law ends up being applied, this can have a rather unexpected outcome, namely that the deceased's assets must be divided between certain family members in fixed shares. Such rules of division override anything to the contrary written in the Will. In most cases, it is impossible to circumvent those rules.

For certainty and peace of mind, foreigners resident in Spain or who spend a considerable amount of time in Spain are strongly advised to now review or update their Wills to ensure that their assets will be left in accordance with their wishes and not in accordance with the fixed government rules.

Tenerife Solicitors can advise and assist you in reviewing and updating your Will, or indeed in making your first Spanish Will. We also offer a free check to ensure that your Spanish Will does not clash with, or inadvertently cancel, any Will from another country that you hold.

As registered English Solicitors, we also offer (or we can review) English Wills valid in England & Wales.

Where more than one Will is prepared at the same time (e.g. Two Spanish Wills for a couple, or one English and one Spanish Will, a discount is also available.

For more information, please contact Tenerife Solicitors on 922 717845 (or 0871 218 0063 from the U.K.) or by email to info @ tenerifesolicitors.com

You can also access and complete our Spanish Wills Questionnaire at the very bottom of the following web page: http://tenerifesolicitors.com/spanish-wills.php