INHERITANCE TAX ON DEATH = NO SPOUSE EXEMPTION, THEY'RE TAXED ON 1/2

I found this on a Spanish IHT website, basically saying ALL SPOUSES pay IHT on 1/2 the valueof a property.

AND if you don't have a Spanish Will thus you die intestate,everything goes to the equivakent of the State .

I interpret this as follows :

I die, the wife inherits but is taxed 50% on the value of the property.

if she dies and hasnt made a spanish will - the kids get bypassed and get nowt as the state has first call.

Have I read this right?

Inheritance Tax (IHT)

This tax is assessed on the recipient - the heir - and if a non resident would normally be taxable on Spanish assets only.

One of the main things to grasp here is that there is NO spousal exemption. So if you jointly own a property, and one of you dies, the surviving spouse is subject to tax on the half value!

Rates of tax range from 7.65% on up to 7,993 euros, to 34% above 797,555 euros. It is then subject to another calculation based on the heir's relationship to the deceased as well as their own wealth.

So, as a rough example, if the deceased spouse's share was worth 160,000 euros, then the IHT would be circa 23,000 euros.

A very important action point here is to ensure that you have a Spanish Will, and that you inform your UK solicitor of the fact to ensure the Wills are linked. Then Spanish law deals with Spanish assets and UK law with UK assets.

I have a fear of upsetting someone here so please take the questions as genuine and simply for the need to ask.

Is it possible to get around the info i posted a while ago with the equivalent to a "UK Trust" eg, you buy in the name of a trust which is then outside the value of ones estate therefore not subject to IHT.

I am trying to collate as much info so that as and when my time is up I know I have done everything to save those left behind are financially secure etc.

I ask because somebody may be also looking at this option if it exists in spain and someone may have already taken this path and have the answers, which I am sure would be welcome by others.

In advance, I am humble to those such a question upsets if they are dealing with a deceased or know someone dealing with such affairs.

Your not upsetting anyone, feel free to ask anything you like and many will reply if they can help you, you do get the odd one or two horrible people on this site but overall everyone is lovely and friendly and will help if they can.

Good luck and hope you get the answers you want.

Hi Gravitating South,

Hope you saw my response to you on the other thread before it was deleted? If not just want to say again to you, keep posting and don't take any notice of negative answers. When i first joined I was asking all sorts of silly questions but there were a lot of kind people who didn't tell me that, just answered and helped if they could. Where have they gone?????? That's what I thought a forum was for, helping people?

 Hi GravitatingSouth,

You keep posting this is what we are here for to help.

Well regards Inheritance tax I believe even if you make a Spanish will you l still have to pay it. I know

of someone last year who lost her husband and she was quite shocked at how much she had to pay

so this is something I willbe looking into you can I believe put it into your children's name, but am not sure of the legal rights. to this.

But there is a thread on the forum How to avoid paying the Inheritance Tax might be worth you looking at.

Hope this helps a bit Pat 

Hi gravitatingsouth.

I am sure when I was last over at my apartment before xmas

that I read about inheritance tax. If you are a resident you can

avoid paying inheritance tax ie up to 99 per cent for a spouse

IF you elect to be taxed in spain instead of england AND it comes

into effect after you have been a spanish tax resident for 3 years.

MAYBE SOMEONE ELSE ON THIS FORUM CAN CONFIRM IF

I AM CORRECT.!!

,

Are you resident or non resident? We had our Spanish wills drawn up last July. Basically it says that as a British national upon mine and/ or my Wife's death, the property should be treated as it would be in the UK. Not sure on the tax side of things though.

Mark

Hi,

Is it possible to take out insurance cover to pay the taxes on the surviving partners liability?

I remember my IFA mentioning something of the sort this some time ago. 

Edited to say I think he meant you should take out a policy (possibly life cover) with a payout that would cover the debt. So I expect it will be pricy if you are over 55 yrs. Not much help am I?
 

Reductions on the taxable amount in Andalucia are due to:

Famly relationship with deceased, disability, Life Insurance, for acquisition of companies, for acquisition of Historic goods, for acquisition of permanent residency and  for  acquisition of agrarian property.

Maria

Your estate may not be subject to inheritance tax (often referred to as succession tax in Spain). Much depends on whether you live in Spain, and if so where.

If you're not habitually resident in Spain the state succession tax rules will apply to your estate. However, if you're a resident in Spain and have been for at least 5 years your estate will be treated according to the rules set by the autonomous community where you live.

Non Resident Property Owners

If you don't live in Spain, but you own a holiday home here, the beneficiaries of your estate (note that the liability rests with the inheritor rather than the estate) when you die will be liable for succession tax on your Spanish situated property - when I say beneficiaries this includes the spouse of the deceased. Under the state rules each non resident beneficiary is entitled to an allowance of approximately €16,000 above which tax is payable at the scale rates (7.65% - 34% depending on the value of the estate).

E.g. Let's say you own a Spanish situated property with an escritura value of €150,000 and this is your only Spanish asset. You die, and in your will you leave the property to your spouse. Your spouse has a tax-free allowance of €16,000, so the taxable estate is €150,000 - €16,000 = €134,000 and the associated succession tax liability will be €18,000.

Resident Property Owners

As for non residents, the liability to succession tax rests with the inheritor rather than the estate, and the inheritor is liable for Spanish succession tax on any assets they inherit regardless of whether the assets inherited are situated in Spain or not. However, if you inherit assets located outside Spain you can usually claim an allowance for any foreign inheritance taxes paid.

There are quite a few reliefs and allowances, and they vary between each autonomous community, but I'll try to give you a flavour of what's available below: -

The following allowances apply for spouses and children: -

Andalucia - 100% of the inheritance providing the amount inherited is less than €125,000 and the beneficiary has personal wealth of less than €402,678. Otherwise circa €16,000 per beneficiary.

Cataluna - €18,000 per beneficiary.

Islas Baleares (IB) - 99% of the tax due for habitual residents in IB (defined as resident for at least 1 year before the death); €25,000 for each non resident beneficiary.

Islas Canarias - 99.9% of the tax due for habitual residents; €18,500 for each non resident beneficiary.

Murcia - 99% of the tax due for habitual residents; circa €16,000 for each non resident beneficiary.

Comunidad Valenciana - 99% of the tax due for habitual residents; €40,000 for each non resident beneficiary.  

So in certain communities there's no tax to pay providing you're a resident (read as paying resident's taxes). The length of time that you need to be resident before you qualify for the higher levels of relief available in certain communities varies from one to five years. If you live in a community where the five year rule applies I'd recommend a short term life policy to pay the potential tax liability.

If you benefit from a foreign inheritance you need to take expert advice. For this and more information about Spanish tax matters e-mail me direct.

www.stalwartwealthmanagement.com