Losing a loved one is a terrible blow now matter where you happen to live, but if you are living in a foreign country, such an event can be devastating in more ways than one. Laws concerning Spanish death duties and inheritance tax (IHT) are very different from, say, the UK, and many British property buyers have been caught out by the pitfalls of Spanish wills and probate regulations. It is therefore imperative to consult a lawyer in Spain or specialist law firm in the UK as soon as a property purchase has been completed in your chosen location.
Sadly, most people retiring or relocating to Spain realise that when their partner dies the surviving member of the household may be liable for IHT and death duties, not to mention legal and accountancy fees, costs for translation of vital documents and such. Worse, IHT may be payable in both their country of origin or main residence and in Spain. When the second partner dies of a couple owning a Spanish property, their children will have to pay an additional tax - and unfortunately, this amount cannot be paid by selling the Spanish property or any savings sitting in the bank account of the deceased.
The Spanish government may simply the freeze bank account and make it impossible for anyone to live at the Spanish property, until the death duties and IHT owed are paid. This usually has to be done within six months of the deceased's death - fines may actually be incurred, if payment is not made within the specified period. Spanish probate won't happen until all monies owed are paid.
The rate of IHT is not a fixed one. IHT gives an initial allowance of 15,957 euros, after which the balance will be taxed at rates ranging from 7.65% up to 34%. In addition, each heir must obtain a NIE number, or probate cannot occur. When the heir is not a close relative of the deceased person, IHT goes up even further, bringing the total amount to a maximum of 81.6% of the whole estate/property.
Death duties apply to the heir, and Spanish law allows no exemption for non-resident marriage partners.
It is therefore incredible important to make a Spanish will as soon as you have purchased a property, as legal implications will arise that could cause the heir to be seriously hurt by needless tax payments. The beneficiary of a Spanish will be asked to attend in person to hand over various documents, and for this reason it is best to give a power of attorney to a multi-lingual lawyer who specialises in Spanish wills and probate.