Inheritance Law in Spain is Very Different to the UK!

Spanish succession law restricts your freedom to leave your assets to anyone you please.  This is designed to protect the family and provide for the children, and requires a parent to leave two-thirds of his estate to his children, even by-passing the surviving spouse.

A surviving spouse gets to keep:

·            All assets acquired before the marriage

·            Half of the goods acquired during marriage

·            All personal gifts or inheritances which have come directly to them

Of the rest of the assets, only one-third can be freely disposed of.

When a person dies leaving children, the estate is divided into three equal parts.

·            One-third must be left to surviving children equally

·            Another third must also be left to the children, but the testator can decide how to divide it. A surviving spouse has a life interest (usufruct) over this third.

·            The final third of the estate can be freely willed to anyone.

The question is, as a British national, are you bound by Spanish law?

In theory, the law applies to foreigners with property in Spain. However, Article 9 of the Spanish Civil Code states that when a foreigner owning Spanish property dies, (even if he holds an official residence permit) the disposal of any Spanish assets will be governed by the law of the country of nationality.  A British person, therefore, could bequeath his assets as he wishes.  (This does not free the inheritors from Spanish succession tax though).

This freedom applies only when the foreigner has an existing foreign Will or Spanish Will. If he dies intestate Spanish law will be applied to his assets in Spain.

While this sounds simple enough, for UK nationals a complication arises - British law states that the disposition of real estate is be governed by the law of the country where the property is located.

So Spanish law says that UK law will apply, and UK law says that Spanish law will apply…

In practice, British people can make a Spanish Will bequeathing their Spanish property to whomever they like.  The Spanish Registrar of Wills has in the past accepted this.

Although the law also says that any foreigner officially resident in Spain is subject to Spanish succession law on his worldwide estate, in practice the authorities seem not to question the residence aspect and simply accept as valid the Spanish Will disposing of only the Spanish property. The only requirement enforced by Spain is the payment of Spanish succession tax on assets located in Spain.

All of the above works perfectly well in most cases. But, it is not exactly in agreement with the law. This means that, if you write your Spanish Will cutting out one or more of your children, they could contest it on the grounds that the law stipulates that part of the inheritance is theirs… and win.

So, if you foresee any possible challenge from a legitimate inheritor, you should make other arrangements during your life, such as transferring the title of the property to your chosen heir while you are still alive. This is will trigger succession tax at that point, but may achieve what you want. You can always reserve the usufruct over the property, which gives you the right to use it for the rest of your life, although the underlying title has passed to another person.

Most people in Spain leave their widow or widower a "usufruct" in the family house, which is a life interest, rather than leave them their half of the property.  This can reduce Spanish succession tax.

By leaving your spouse a usufruct, ownership of your house can pass to the children, whilst your spouse can live in the property free for the rest of their lifetime. This device can save a lot of Spanish inheritance tax.

Problems may arise, though, if the surviving spouse or children want to sell the property, so independent advice should be sought in advance to ensure everyone understands and agrees with what the structure entails.

  The above are summaries of complex issues and usually specific advice should be sought.

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