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Estate planning for UK nationals in Spain 

British expatriates living in Spain need to be aware of, and plan for, a number of inheritance issues

Your last will and testament

If you live in Spain, it is advisable to make a Spanish will to deal with your Spanish assets. It is easier to wind up an estate using a local will.

A UK will may be effective in Spain, but a major disadvantage is that it will have to go through the UK probate process. This can create long delays and high costs, and it has to be notarised and translated before being accepted in Spain. If you have assets in the UK you can have two wills, one for each country.

Spanish succession law

In the UK you are generally free to distribute your estate as you wish, but Spanish succession law imposes ‘forced heirship’ rules. In general terms, children are entitled to receive two thirds of an estate’s assets, so under Spanish law you cannot leave everything to your spouse.

This Spanish succession law will apply to foreign nationals living in Spain by default.

You can however use a European Succession Regulation, ‘Brussels IV’, to opt for the succession law of your country of nationality to apply on your death instead. You must specifically state this in your will.

Spanish succession and gift tax

Inheritance tax in Spain works very differently to UK inheritance tax. Tax is paid by each recipient, not the estate, and tax rate varies depending on the relationship between the person passing the money and the person receiving the money. There is no blanket spouse to spouse exemption.

The state tax rates range from 7.65% to 34%. Multipliers based on the familial relationship and beneficiary’s net worth can take tax rates much higher.

Reductions and allowances are low. Spouses, descendants and ascendants only receive a reduction of €15,957; it is lower (or nil) for everyone else. There is a 95% reduction against an inherited main home, but only for spouses or descendants who keep the property for at least 10 years, capped at €122,606 per inheritor.

However, the autonomous communities can adjust the tax rates, allowances and reductions to make them more beneficial for residents in the different Spanish regions. In the Canary Islands, the 99.9% relief applicable for inheritances to Group II was extended to Group III beneficiaries for tax year 2019.
Spanish succession and gift tax is due if the asset being inherited or gifted is located in Spain or if the recipient is resident in Spain.

UK inheritance tax

Many British expatriates remain liable to UK inheritance tax since it is based on domicile rather than residence. Your estate could be liable to both UK and Spanish inheritance taxes, but credit is given in Spain for tax paid in the UK.

Succession planning

Start by establishing your goals. Who would you like to benefit from your estate? Do you want to control how they receive their inheritance? What can you do to make the inheritance process as easy and cost-effective as possible for them?

Then seek specialist cross-border advice on how you can achieve your wishes for your heirs, while keeping inheritance taxes as low as possible. Estate planning for Spain and UK can get complex, but with careful planning you can get peace of mind that you have the most suitable approach in place, for yourself and your family.

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.

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