The Costa Blanca not only attracts holidaymakers, but also property owners from abroad. But what happens in the event of inheritance? In an exclusive CBM interview, lawyer Lotta Hilgers explains the special features of Spanish inheritance law - from compulsory portions to the EU Inheritance Regulation.
If you own a property on the Costa Blanca or are planning to settle here permanently, you should consider inheritance law at an early stage. Spanish inheritance law differs significantly from that of other European countries - especially when it comes to compulsory portions and intestate succession. In this interview, the renowned lawyer Lotta Hilgers from Valencia provides valuable insights into the special features of Spanish inheritance law, explains what measures owners should take to protect their heirs and what residents should definitely bear in mind when drawing up a will.
This interview covers everything you need to know about inheritance in Spain: How does the EU Inheritance Regulation affect foreign property owners? What obligations do heirs have? And what tax aspects should be considered?
Answers to these and many other questions can be found in the following interview.
What are the special features of Spanish inheritance law compared to
other European countries?
One major difference is the jurisdiction for legislation. The substantive law of succession (e.g. the question of who is an heir) is governed by the Spanish Civil Code (Código Civil). However, Spain has a federal structure and in the following federal states there are special regulations in the local foral laws: Aragon, Balearic Islands, Basque Country, Galicia, Catalonia and Navarre. These are then applied in addition to the Spanish Civil Code.
In Spain, there is the so-called right of inheritance. This means that a compulsory portion is reserved for certain family members. The notary's inheritance right is therefore not an entitlement to payment in the amount of the compulsory portion as in Germany, for example. Instead, the notary's heir becomes a co-owner of the estate assets in the amount of his or her share.
Spouses receive significantly less in Spain than in other countries according to the legal order of succession. In addition to children, they are only entitled to usufruct of one third of the estate.
How does the legal succession affect
in Spain affect foreign property owners?
According to the EU Inheritance Regulation, which came into force in 2015, Spanish law and thus the statutory succession applies if the testator had their habitual residence in Spain at the time of their death and had not specified otherwise in a last will and testament during their lifetime. It should be noted that the habitual residence is primarily determined by subjective characteristics, i.e. by the question of where the deceased felt at home. In case of doubt, the answer to this question can lead to a lengthy legal dispute between the heirs. However, the testator can stipulate during his lifetime that the law of his nationality should be applied to the succession.
What should residents in Spain bear in mind when drawing up a will in order to avoid problems later on?
I generally recommend that you only draw up one will. The notary fees for notarising a will are significantly lower in Spain than in other European countries. However, if the will is not a simple will, it should be notarised by a notary in the country whose law is to be applied, even if the testator is resident in another country. A simple will would be the appointment of the spouse and children in equal shares. Many property owners notarise a second will in Spain. In my opinion, this is generally not advisable and is very dangerous if the content of the will does not match that of the other will.
An example: A notarises a Berlin will in Germany together with his wife, in which they appoint each other as sole heirs and their two daughters as last heirs. However, in order to simplify the inheritance process in Spain and to bring the children on board directly for cost reasons, he notarises another will in Spain, according to which he appoints his wife and his two daughters as equal heirs to his assets located in Spain. Strictly speaking, however, this cancels the German will. It is not possible to appoint different heirs in two wills. Although this is only problematic if one of the parties disputes the validity of the first will, it can have dramatic consequences and, in case of doubt, the more recent will always takes precedence.
I would also advise against drawing up a handwritten will if Spanish law is to be applied, as the opening of the will is not straightforward. The notary must establish the authenticity of the will and check that the content corresponds to the will of the testator. As a rule, a written report must be obtained in this context and at least two witnesses must appear before the notary to confirm that the testator had no other children, for example, and that the contents are in accordance with the testator's wishes. Furthermore, the will must be published for one month and no objection may be raised by an authorised person. The opening of handwritten wills is therefore a cost-intensive and lengthy procedure.
Are there compulsory portions in Spain, and how do they differ from the German regulations?
Yes, in the form of what are known as notarial rights. The main difference is that the notary's heir becomes a co-owner of the estate assets in the amount of his or her quota, unless otherwise agreed.
If the testator has children, under Spanish law he can only freely dispose of 1/3 of his estate assets; the remaining 2/3 are due to his children. The right to a compulsory portion in favour of the children is therefore generally higher in Spain than in Germany.
What deadlines and formalities must heirs comply with in Spain?
In Spain there is no time limit either for accepting the inheritance or for renouncing it. However, there is a deadline of 6 months for declaring the inheritance tax.
The inheritance must be accepted before a notary. The following documents are required in particular: international death certificate, inheritance title (certificate of inheritance, European certificate of inheritance, will together with a decree of opening, etc.), extract from the Spanish central register of wills and life insurance policies, documents relating to the estate assets located in Spain.
How does the recognition of a German will work in Spain?
Spain recognises foreign wills if they are recognised in the country whose law is applicable. The notary who draws up the Spanish deed of inheritance decides whether the will is recognised without further ado or whether additional documents are required. Most notaries already have experience with German wills and recognise simple wills. However, if, for example, guardianship of the estate has been ordered or the will is a complicated pre-inheritance will with restrictions on disposal, it is quite possible that the notary will request a certificate of title. In this case, a German notary would explain to the Spanish notary in a deed what legal effects the dispositions made by the heir have.
Are there differences in inheritance tax rates depending on the region in Spain, and how can heirs
optimise them?
Yes, there are sometimes considerable differences. Since a legal reform last year, the Comunidad Valenciana in Spain has one of the lowest inheritance taxes, so that comprehensive optimisation for private individuals is generally not necessary here.
As a rule, the tax law of the federal state in which the heir has his or her tax domicile is applicable. If the heir lives in another European country, the law of the federal state in which the majority of the estate assets are located applies. However, if the tax domicile of the heir is not in the EU, the supra-regional inheritance and gift tax law applies. In this case, the heir is only entitled to an allowance of less than €17,000. There are no further tax reductions.
In the case of private individuals, inheritance tax can be reduced by including several close relatives. If all three children inherit a property, they are entitled to an allowance totalling €300,000 in the Comunidad Valencia and in many other federal states. However, if only one child inherits the property, the tax-free amount is €100,000.
In the case of high-value properties, it may also make sense to purchase the property directly via a foreign company. In this case, however, tax aspects of the country in which the company is based must be taken into account.
Inheritance in non-marital partnerships - does the partner have the same rights as a married couple?
First of all, it should be noted that in Spain, registered cohabitation is a kind of mini-marriage for all couples. This means that heterosexual and homosexual couples can marry or enter into a registered partnership in Spain.
The section on inheritance law was not updated in the Civil Code following the introduction of cohabitation, so this is not taken into account there. If a cohabiting partner dies without leaving a will, the surviving cohabiting partner receives nothing unless local formal law stipulates otherwise.
Whether a life partner is entitled to tax benefits in the event of inheritance depends on the respective federal state. In the Comunidad Valenciana there are no tax benefits.
What tax aspects should heirs consider when inheriting in Spain?
Tax jurisdiction for inheritance and gift tax in Spain lies with the federal states, although there is a supra-regional inheritance and gift tax law if no local law applies.
It is important to note that throughout Spain there is a deadline for declaring inheritance tax of 6 months from the date of death. This period can be extended to a total of 12 months if a corresponding application is submitted within 5 months.
In the Comunidad Valenciana, inheritance tax for close relatives (children and spouses) was largely abolished last year for all deaths occurring after 28 May 2023. In addition to the tax-free amount of €100,000 per heir, there is a tax reduction of 99%, so that the heir ultimately only has to pay 1% of the tax rate.
How is an inheritance organised in Spain? if the deceased has his regular place of residence abroad?
The procedure is identical to that for persons living in Spain. The inheritance must be accepted before a Spanish notary and the notary allocates the estate assets to the heirs in the deed in accordance with the inheritance quotas or another agreement between the parties. The heirs must then declare the inheritance tax in Spain. Only then can an application be made, for example, for the heirs to be entered in the land register as owners of the property.
Does it make sense to leave a will both in Spain and in my home country?
See above. No, with the sole exception that the two wills are identical in content.
By following these steps, buyers and sellers can navigate the property market on the Costa Blanca safely and well-informed, ensuring that their transactions are legally sound and free from risk