Can I transfer my Spanish property to my children now and will this mean they will not have to pay inheritance tax

I have recently discovered the likely impact of Spanish inheritance tax and have been very concerned at the financial costs to both the surviving spouse and my children. who would inherit after us.                                                                                                                We did not buy our property to sell for a profit or to rent out but as a long term holiday option for ourselves and our family and to keep it in the family. We are happy to pay any normal payments but this tax - appears aimed at hitting non residents in a very punitive and unfair way So I wondered  if we could transfer the property now to our three children ? Does anyone know if this is possible and if it would avoid inheritance tax. I am aware that there could be all sorts of other difficulties but I am happy to trust that the children ( who are all over 21) will behave responsibly in the situation. After all we all use it to holiday now but we pay all the running costs, taxes etc and would in practice continue to do so as they would struggle to pay. I would be interested in hearing from Maria or Roberto about how much this would cost to do - the transfer to the children, -if it would mean they would not have to pay inheritance tax when their father and I die and if it would be possible to keep any payments in our names. Would the children all have to get NI numbers and all have to make tax returns. This is all beginning to sound complicated as I write it. I think the only sensible solution is to sell up. It is so sad because this is not what we bought the property for and we have so enjoyed holidaying in Spain but I cannot see another    solution. We will have to get used to holidaying in the UK again! Has anyone any ideas to help?

 Hi, We bought a property at the end of October 2008. I think we must be one of the few who bought last year! We have bought the property as a long term holiday/ second home. We put the property into our sons name. He had to obtain an NIE number as we did and he is now on our bank account in Spain. The solicitor prepared all the documents in his name and we have an agreement that we can stay in the property for as long as we want at no rent. We also got our son to make a Spanish will leaving the property to his brother if something happens to him. However, I had to come up with all the suggestions to get around this problem and the solicitor was reactive rather than proactive. I'm sure someone is going will point out I have made a big mistake in the way I organised this! I believe that this seems to get around all the problems that I could discover at the time. 

We have asked the solicitor to do any tax returns that are required. The main difference with your situation is that the property was bought in our son's name in the first place. I think you might have to pay tax to transfer it over to your children. Good luck.

Dear Theresac:

Please have answers below in bold green ( same text of your message):

 I have recently discovered the likely impact of Spanish inheritance tax and have been very concerned at the financial costs to both the surviving spouse and my children. who would inherit after us. We did not buy our property to sell for a profit or to rent out but as a long term holiday option for ourselves and our family and to keep it in the family. We are happy to pay any normal payments but this tax - appears aimed at hitting non residents oh, not, it is not, believe me when it hits, it hits everyone  in a very punitive and unfair way So I wondered if we could transfer the property now to our three children ? Does anyone know if this is possible and if it would avoid inheritance tax It would avoid inheritance tax in the future but will accrue donation tax now.. I am aware that there could be all sorts of other difficulties but I am happy to trust that the children ( who are all over 21) will behave responsibly in the situation. After all we all use it to holiday now but we pay all the running costs, taxes etc and would in practice continue to do so as they would struggle to pay. I would be interested in hearing from Maria or Roberto about how much this would cost to do - the transfer to the children, -if it would mean they would not have to pay inheritance tax when their father and I die and if it would be possible to keep any payments in our names. You can donate the property to the kids and keep making paymnet yoursleves but, there is a doncation tax ( actually equivalent to inheritance tax), which you will not be able to avoid. Would the children all have to get NI numbers and all have to make tax returns. This is all beginning to sound complicated as I write it. I think the only sensible solution is to sell up. It is so sad because this is not what we bought the property for and we have so enjoyed holidaying in Spain but I cannot see another solution. We will have to get used to holidaying in the UK again! Has anyone any ideas to help?

Are you thinking on selling just because of the future inheritance tax? Well, I think there are many other possible solutions. I know there is a formula to set a Uk company and reduce tax burdens. You may find it interesting.

Are you thinking on selling just because of the future inheritance tax? Well, I think there are many other possible solutions. I know there is a formula to set a Uk company and reduce tax burdens. You may find it interesting

Maria

Can you please supply details either here or pm me if possible.

Thanks

dd

I am sure you will find   information on this on the web. I know few on how it really works.

You can donate the property to the kids and keep making paymnet yoursleves but, there is a doncation tax ( actually equivalent to inheritance tax), which you will not be able to avoid.

Maria, could you explain what this is please as I have been thinking of putting our Spansh property in the children's names. Is this a tax payable on the transfer, is it based on the property value? Is it only payable if transferred to another owner without selling it to them?

Many thanks, Poppyseed

http://www.winchamiht.com/?gclid=CMPN8rXD4J0CFYIA4wod83MbLw

I found this link on EOS about the UK limited company option.

I worote an appraisal on expenses related to IHT under Spanish Law  for that company. By my side ( no EOS) that is my relationship with Wincham.

I see that as an alternative to reduce IHT in Spain. Even though under specific requisites IHT can be almost unexistent in many regions of Spain.

There is a recent blogpost on this:

http://www.eyeonspain.com/blogs/costaluz/2463/legal-tip-170-4-conditions-to-pay-0-€-as-iht-in-andalucia.aspx

Best regards,

Maria

You may want to read the following article we wrote a couple of months ago on Spanish Inheritance Tax:

Spanish Inheritance Tax: Advantages of Making a Will in Spain - 3rd September 2009

In it we explain how many regions in Spain have supressed this tax subject to certain requirements that almost invariably involve taking up residency in the region where the bequeathed assets are located in, amongst others.

We also explain how in many other regions, such as Andalucía, despite not having abolished it yet, the IHT exposure can be mitigated to the point of it being almost nil providing certain requirements are met. We give as an example the region of Andalucía.

There's an ongoing trend to abolish Spanish IHT much like there was to abolish Wealth tax, which was finally abolished early last year.

Regards,

Thanks for the link Maria. Our property is in the Valencia region so I'm not sure what applies there. Can you confirm what doncantion tax is please? Is it a tax payable on the transfer of ownership, is it based on the property value, is it only payable if ownership is transferred and not actually sold? Is it for residents and non-residents?

I am really concerned about this as we are planning to write Spanish wills.

Many thanks, Poppyseed

Thanks Lawbird, our posts overlapped. As non-residents with a mortgage free property (value not known!!!) it would seem it would be better to leave each of our shares to our non-resident children rather than each other.

Regards, Poppyseed

Donation tax is tax on gifts which is equivalent to Inheritance tax.

Thanks Maria.

Regards, Poppyseed

 is a resident of spain lieable for inheritence tax from asl company

Lawbird.

                  You said,    "There's an ongoing trend to abolish Spanish IHT much like there was to abolish Wealth tax, which was finally abolished early last year."

 You failed to say that Patrimonio Tax  has been reintroduced !

johnzx, Lawbird's post was in 2009........!

Thanks Poppyseed. I had not noticed the date, but it just goes to show that things are forever changing !!!

 Andalusia PP candidate has among his government programm, to abolish Inheritance tax