- 1 Expatriates in Spain
- 1.1 Wills
- 1.2 What if I hold dual British/Irish nationality which law applies?
- 1.3 Inheritance tax
- 1.4 Example of inheritance tax implications pre Brexit
- 1.5 Example of inheritance tax implications post Brexit
- 1.6 Consequences of becoming a Spanish Citizen on wills and inheritance
- 1.7 What if I don’t have children?
Expatriates in Spain
For many of you both resident and non-resident with assets in Spain you will have Spanish wills in place. The European Directive 650/2012 also known as Brussels IV was introduced in order to streamline cross border successions across the European Union. Although the United Kingdom never opted into this regulation it still affects UK nationals with assets in regulation member states such as Spain. The regulation also allows for more flexibility and you can now choose which law applies to your succession on death. For those persons who passed away prior to the 17th August 2015 the rules of their nationality automatically applied. As a result of the directive coming into force, since this date for those habitually resident in Spain then Spanish law would automatically apply on death unless otherwise stipulated in their will. In contrast to the UK, in Spain you don’t have the same flexibility with regards to successions and are obliged to allocate a certain percentage of your estate to direct descendants. Many of you will be aware of these changes and would have already made new wills adding the clause that the law of England and Wales will apply.
As this is a European Directive people have expressed concern that on the UK leaving Europe will be left with invalid wills. However, Brexit will not affect this for the following reasons:
– The UK has never signed up to the directive anyway.
– There is no requirement that law chosen should be that of a member state you could be from the USA/China or any other country outside of the EU.
What if I hold dual British/Irish nationality which law applies?
If you hold dual nationality then the regulations state you can choose which law of nationality applies to your succession.
Prior to 2015, Spain applied a different tax regime to that of Spanish residents and non-residents including those from the EU who had to pay a higher rate of inheritance tax. Non-resident beneficiaries in Spain previously were subject to the rate of inheritance tax laid down by state rules as opposed to the rules of the autonomous communities where the assets were located. Following a 2014 European Court of Justice Case, it was found that this different treatment was discriminatory as the same rules for Spanish residents should also apply to EU citizens. As a result claims for refunds from the Spanish tax authorities were made.
A consequence of Brexit is likely to be that when we are no longer EU citizens we will go back to paying a higher rate of inheritance tax and beneficiaries will no longer be able to apply the more favorable allowances specific to the autonomous communities.
Example of inheritance tax implications pre Brexit
Currently, if you have been left a property valued at €125,000 in Andalucía by a parent in their will then unless the value of the inheritance exceeds the allowance of €250,000 and the beneficiary’s existing wealth is not greater than approximately €402,000 there will be no inheritance tax to pay.
Example of inheritance tax implications post Brexit
In a post-Brexit world whereby the beneficiaries are no longer EU citizens then it is likely that they would revert back to state rules.
In the same set of circumstances above after Brexit, unless there is an agreement to the contrary between the UK and Spain, then only an allowance of €16,000 would apply and therefore an inheritance tax bill of around €15,000 would be payable in these circumstances.
Consequences of becoming a Spanish Citizen on wills and inheritance
For those thinking about becoming a Spanish Citizen, they would need to consider the impact on any wills made or planning to make in the future. As a Spanish national you would be subject to the forced heirship rules meaning that you are required to leave at least a third of your estate to your children in equal parts. The second third of your estate you would also need to leave to your children but this does not have to be equally distributed and the final third you are free to leave to whoever you wish. As a Spanish Citizen, any will made not complying with the forced heirship rules would be null and void under Spanish law. Under UK law if you become estranged from your children you can choose not to leave them anything in your will however you would be prevented from doing this under Spanish law.
What if I don’t have children?
In these circumstances, you are forced to leave a percentage of your estate to surviving parents. In absence of surviving parents then spouses have the right to inherit. In the absence of a spouse, collateral relatives would then have the right.
I have produced this note which is for information purposes only and is general in nature and not a substitute for specific legal advice.
Victoria Westhead, Solicitor and legal adviser to BREXPATS IN SPAIN