If you are Fiscal Resident in Spain, you must comply with the Spanish Inheritance Law and pay taxes in Spain over your worldwide inheritance.
Inheritances in Spain have two aspects that are ruled by two different laws, the Spanish Civil Code that fundamentally establishes the distribution of assets between the heirs and the Fiscal Law that defines the taxes to be paid and by whom.
We will start by saying that it is very important to have a Will, so we will see below regarding the distribution of the inheritance. Wills in Spain are written with a Notary, who signs and records it. In some cases, you can request in the Will to apply the US Law, or you may have an American Will (more below)
The wills must include the names of the beneficiaries and, if desired, the assets to be distributed. So, you only need one will well written.
What to do when a person dies?
- The first thing is to obtain the death certificate that is obtained in the Civil Registry where the death occurred or electronically through the website of the Ministry of Justice. If the death is in Spain, the US consulate issues an American Death Certificate, which may be necessary in the future.
- Fifteen days after death, you can request a Certificate of Last Will in the General Registry of Last Will Acts. Then you will know whether or not the deceased person has made a will.
- Then you must pay a fee of € 3.70 at any bank with the Model 790.
- The Certificate of Coverage can be consulted / requested at the electronic headquarters of the Ministry of Justice to find out if the deceased had Burial Insurance.
- Then you have to make the Declaration of Heirs which is a document that is made before a notary and that defines who are the relatives with the right to the inheritance of the deceased am the total value of the inheritance to be share.
- Inheritance without a will: They will inherit, in equal parts, in the following order, first the children (descendants), failing that, then the parents (ascendants), in the absence of these the spouses, and after them the siblings or half siblings, leaving in last place to the nephews. Ex-husbands and ex-wives will not have any right to inherit if there is no will, since there is no legal bond at the time of death. If there are no living relatives, it is the State that inherits all the assets.
- Inheritance with Spanish will. The inheritances are divided into three parts or thirds. The first third called the legítima, the second third of mejora (improvement) and the third third is libre disposición (free dispousal). The Civil Code marks who each of these parts can be left to. What the Will does is help to distribute them.
- The third of the legítima (legitimate): One third of the inheritance will be distributed among the legitimate heirs, who are their children or their descendants when they have died. This third has to be divided equally among the legitimate heirs. With a will you can define who is going to keep what when, for example, there are works of art, cash and goods with different value. In other words, it allows an ad hoc division of the inheritance to avoid disputes between the heirs. A father can disinherit a son and leave him without his percentage of the legitimate one. Of course, the child may also claim the legitimate inheritance if he considers that the legal reasons to do so have not occurred.
- The third of mejora (improvement): This third of the inheritance serves to improve the legitimate one, as long as it is not an inheritance where there are children and a widow or widower. In this case, the bare ownership will be owned by the children and the usufruct by the spouse. The improvement third is used, as its name suggests, to improve what one of the legitimate heirs will receive, it can be used to give more to one child than another in a legal way.
- The third libre disposición (free dispousal): The laws of inheritance allow to allocate up to a third of the inheritance to whoever you want, whether or not they are family members and whether or not they are a legitimate heir. Of course, by doing so he will have to pay more taxes for the inheritance than a family member.
Inheritance Law for marriage with children.
In general, when one of the parents dies, it is normal for the testament to establish that the third of free disposition is left to the widowed spouse, together with the usufruct of the improvement third: This usufruct can be legally exchanged for the property of some goods.
Inheritance Law for marriage without children.
If the couple does not have children, the order of inheritance that we have already discussed on 5.1 will apply. As there are no children, the parents will be the legitimate heirs and will have the right to inheritance. The law protects the spouse by granting him/her half of the inheritance in usufruct, but not in property.
Inheritance Law for grandparents to grandchildren.
If a grandfather wants to leave some goods to his grandchildren, they can do so in inheritance through the third of free disposal. Only if the parent had died would the grandchildren take his/her place as legitimate heirs or it could also be that the parent renounces the inheritance, then the grandchildren would inherit.
Inheritances according to the Autonomous Communities.
All the above is the general state standard and applies if there is no different standard in the autonomous community, which are those that have been transferred the powers on inheritance:
There are important differences between autonomous communities. For example:
– Catalonia: the legitimate of the children and parents is 25% of the inheritance, instead of the state third. In the same way, the widower has the right to another 25% if s/he does not have the capacity to survive with his own or inherited assets. To this is added the right of usufruct of the home for one year from the death.
– Galicia: the children also have the right to collect 25% of the inheritance, while the spouse may have the life usufruct of another 25% if s/he concurs with descendants, while, if s/he does so alone, s/he will have the right to the usufruct of 50%.
– Balearic Islands: in this case the children or their descendants, the parents and the spouse are considered heirs. The children will have the right to a third of the inheritance if there are four or less, but if there are more, it will be extended to half the inheritance. Similarly, when the spouse presents with children, s/he is entitled to the usufruct of half of the inheritance.
– Aragon: the legitimate heirs are the descendants, who are entitled to half of the inheritance and not to two thirds.
– Navarra: the legitimate heirs are the children, who will receive as legitimate a formal attribution of five salaries for movable property and one stolen from land in the common mountains for real estate.
– Basque Country: the children and descendants are the legitimate heirs, who will have the right to one third of the inheritance as legitimate. For its part, the spouse will have the universal usufruct of the entire inheritance.
Inheritance with American Will.
It is of application a general rule of the country that was the last habitual residence of the deceased, and it provides several exceptions. Two main exceptions may occur:
- The first is that, due to the circumstances of the specific case, at the time of death the deceased had a manifestly closer relationship with the US than to Spain. In this case, the US law would apply for both distribution and taxation.
- That an express declaration has been made in a Will in which the testator orders which law he/she wishes to be applied to his/her inheritance. In this case the testator may choose between the law of his habitual place of residence or that of his nationality. If he/she has several nationalities, he/she may choose which of them shall apply.
|Single and universal succession (unavailable to the deceased)||Compulsory inheritance is not recognized.|
|Descendants are entitled to receive 2/3 of the estate.||The person is free to dispose of his property in the way he chooses.|
|1/3 in equal shares among the children or descendants. 1/3 of improvement between some of the children or other descendants and 1/3 of free disposition.||The “Scission of Estate” governs, which implies that a part of the estate (real estate) will be governed by one law and another part of the estate will be governed by another (the rest of the property).|
US Tax Consultants is preparing the second part of this article: Inheritances for Expats, from the Fiscal point of view. Taxation in Spain and in the US.