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Protecting your clients and their legacies

Estate planning is not just about having a will. It is also about protecting your clients’ assets during their lifetime.

A comprehensive estate plan should cover your clients’ current lifestyle needs, tax position, business arrangements (where applicable), and retirement plans. It should also protect against unforeseen events such as divorce.

But, should your clients have assets in Spain, estate planning can be even more complicated – not least because Spain has different succession rules to the UK.

Inheritance Tax

Unlike in the UK, Spanish inheritance tax is paid by the person receiving the legacy. Inheritors have six months to pay taxes, but can claim a one-time extension of an additional six months or pay in instalments. It is due where the beneficiary has tax residency in Spain, or where the legacy includes assets located in Spanish territory.

However, Spanish inheritance tax rates can vary depending on the relationship to the deceased. In general, unmarried couples and step-children pay more tax than spouses and biological children. Likewise, inheritance tax rates differ depending on the region of Spain, with particular areas providing distinct tax allowances and reductions.

Where property is involved, there is also another tax called the Plusvalia to be paid by beneficiaries. This is a local tax charged by the town hall on properties when they are sold or passed on. It is calculated on the rateable value of the property and the number of years that have passed since the property last changed hands.

Where an individual’s legacy goes

For people who live in Spain, their legacy may be automatically divided between their spouse and children, regardless of what their will says. This is because the law in Spain requires a parent to leave two-thirds of their estate to their children. Furthermore, of the rest of the estate, only a third can be freely disposed of.

Choosing UK law

Under the EU Succession Regulation, British citizens can opt to apply UK law to all their assets. However, this must be done through a statement in their will. If a British citizen dies without leaving an official declaration, Spanish law will apply, assuming that they have lived in Spain for the last five years.

Estate planning in Spain

When looking at how to protect an individual’s needs, while leaving assets to the people they want to inherit, it is necessary to take both Spanish and UK rules into account. But, if you are asked to help a client with estate planning involving Spanish assets, it can be difficult to know where to start.

With an understanding of both the Spanish and UK system, we help you to weigh up the options available to your clients, and make sure that their legacies go exactly where they want them to, in the most tax-efficient way.

To find out more about how we can help you and your clients, contact us and a member of our team will get in touch with you soon.