How do I pay less Inheritance Tax in Spain?

Our lawyer with expertise in inheritance Law is here to advise you on how to structure and configure your will to prevent your heirs from paying too many taxes.

In the following lines we will give you some examples on how to pay less inheritance tax in Spain:

1. Donate before inheriting: There are situations in which transmitting while alive (inter vivos) means more tax savings than transmitting due to death (mortis causa), especially if it involves donations of money to relatives for the acquisition of a first home, Although you have to walk with leaden feet, since, if goods are donated in which there is a capital gain, what we save in donation and inheritance tax we could pay in personal income tax. This savings in donation and inheritance tax will depend on each Autonomous Community, since in some laws it is estimated that a donation prior to death is an inheritance succession. The minimum term is four years.
2. Spread the inheritance among many heirs: The more you receive, the more you pay. However, there is a tax-exempt minimum for each heir, the greater the number of heirs, the greater the distribution of the inheritance, applying to each of them the exempt minimum; for example, part of the inheritance could be left to the grandchildren, which would increase the number of heirs and, therefore, the exempt amount. Keep in mind that those who pay the least taxes are the spouse and children under 21 years of age.
3. Main residence: If the son who inherits the habitual residence continues to live in it, there are tax exemptions of up to 99%. It must be done through a delegate to avoid problems later.
4. Moving to another Autonomous Community with better tax advantages: The tax that must be paid for the acquisitions of goods after an inheritance is not governed by the community where the goods are located, but rather that of the last domicile of the testator. However, this change of ‘official’ residence (real and effective) must be done well in advance. Ask us about the deadlines and requirements that must be met.
5. Do not donate the goods that do not generate income: The assets or income generated by the goods that are donated, even if they do not pay the donation tax, are not exempt from being taxed and will do so through the income tax of the recipient. For this reason, we must focus on those assets that do not generate income (shares without dividend or investment funds), recommending that these assets be transferred through inheritance, since the performance of these assets will not be taxed in the personal income tax of the recipient, which if it would happen if they are transmitted through donation.
6. Transmit assets through a family business: There are important tax benefits but provided that certain requirements are met (that more than half of its assets are linked to its activity …) and according to which Autonomous Communities. It should be noted that special attention must be paid to which company assets are or are not used for business activity and the tax may be reduced in that proportion. In the case of donations, if certain requirements are met, it will be understood that the value for which it is acquired is the same as that transmitted, so it would not be taxed in personal income tax.
7. Life insurance: This is a benefit for the heirs. The amount derived from these insurances must not be included in the 33% that corresponds to the legitimate heirs, which are usually the children. For what they allow to redistribute the heritage. In addition, it is possible to avoid tax progression. If the patrimony is high, they can suppose a considerable saving in the tax.