# Inheritance Tax Rules



## eliefostermacro (Oct 8, 2014)

We are moving to Andalucia and will be tax residents. Does anyone know 100% what the inheritance tax rules are in Andalucia in the event one of us dies. We have no children. Our Spanish assets will be our residential property & money in bank. Our UK assets will be our personal pensions and life insurance policy (only valid 5 more years). We are planning to have a UK will for our pensions and life insurance policy and a Spanish will for our Spanish assets. Thank you Elaine


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## extranjero (Nov 16, 2012)

Luckily for you Andalucia does have very generous allowances against IHT, meaning you might not have to pay anything.
There is also the state allowance of just under 16 k euros
I presume you know that spouses pay IHT on the deceased's assets, unlike UK?
Even though you make a separate will in UK and Spain, you would be liable for IHT on the spouses worldwide assets if resident in Spain.
Most Methods of reducing IHT carry significant disadvantages.
A new succession rule means you have to include a clause in your Spanish will stating that you wish for the country of your nationality to apply to your assets otherwise the rules of where you are resident will predominate, and your assets will be dealt with Spanish style .
Lots of info online and in forums about this.


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## Lynn R (Feb 21, 2014)

For spouses and children, the amount which can be inherited in Andalucia free of IHT is €175,000 if the personal wealth of the beneficiary does not exceed €402,000.

So if a married couple jointly owned a property worth €350,000 the surviving spouse would pay no IHT (although that would depend on there being no other assets, of course, otherwise the value of the property which could be inherited free of IHT would be lower). The value of the property for IHT purposes is not the market value, btw, but the catastral value x the municipal multiplier.

Any assets you have in the UK (bank accounts, pension funds, etc) would also be subject t Spanish IHT if the surviving spouse is resident in Spain. However, if assets located in the UK (or anywhere else outside Spain) are left to a beneficiary who is not a Spanish resident, then Spanish IHT does not apply even though the deceased was resident in Spain.


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## eliefostermacro (Oct 8, 2014)

Hi there, thank you for the information and taking the time to answer. So if I understand you correctly, we need to state in our Spanish Will that we want our Spanish assets to be governed by English law and then UK inheritance tax rules apply and not Spanish? Meanwhile, our UK assets i.e. pension/life assurance are automatically governed by English law as they are UK assets.


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## Lynn R (Feb 21, 2014)

eliefostermacro said:


> Hi there, thank you for the information and taking the time to answer. So if I understand you correctly, we need to state in our Spanish Will that we want our Spanish assets to be governed by English law and then UK inheritance tax rules apply and not Spanish? Meanwhile, our UK assets i.e. pension/life assurance are automatically governed by English law as they are UK assets.


Not exactly. As Extranjero stated, you do need a clause in your Spanish will stating that the will relates only to assets held in Spain and that you wish your will to be governed by the inheritance laws of your own country. However, this relates only to whom you leave your assets (in the UK we can leave our assets to anyone we like, but in Spain as in many other countries, there are strict rules for example that a certain proportion must be left to any children you may have, and it is not allowed to disinherit a child).

Including this clause does not mean you can escape Spanish IHT, just the Spanish succession laws.

As stated earlier, assets held in the UK will still be subject to Spanish IHT if the person inheriting them is resident in Spain.


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## extranjero (Nov 16, 2012)

That's correct, but as I said , your wills determine to whom you leave your assets, but the survivor, if resident in Spain will still pay inheritance tax on the deceased's worldwide assets.
You may have to pay IHT in UK too, if the assets are more than £ 325 k as there is no double taxation treaty for IHT as there is for income tax. I think it can be offset against the Spanish IHT ?


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## snikpoh (Nov 19, 2007)

extranjero said:


> That's correct, but as I said , your wills determine to whom you leave your assets, but the survivor, if resident in Spain will still pay inheritance tax on the deceased's worldwide assets.
> You may have to pay IHT in UK too, if the assets are more than £ 325 k as there is no double taxation treaty for IHT as there is for income tax. I think it can be offset against the Spanish IHT ?



You don't, of course, need that clause if you are happy to follow the Spanish rules. It's worth checking these rules just in case you are not happy with them.


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## eliefostermacro (Oct 8, 2014)

Thanks again for your input Extranjero, can I query the following. You said Andalucia has very generous allowances against IHT meaning we might not have to pay anything. Are you able to elaborate further on this? Also you said most methods of reducing IHT carry significant disadvantages. Again could you elaborate further on what these are? Thanks a lot, I appreciate your assistance.


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## eliefostermacro (Oct 8, 2014)

Lynn R said:


> For spouses and children, the amount which can be inherited in Andalucia free of IHT is €175,000 if the personal wealth of the beneficiary does not exceed €402,000.
> 
> So if a married couple jointly owned a property worth €350,000 the surviving spouse would pay no IHT (although that would depend on there being no other assets, of course, otherwise the value of the property which could be inherited free of IHT would be lower). The value of the property for IHT purposes is not the market value, btw, but the catastral value x the municipal multiplier.
> 
> Any assets you have in the UK (bank accounts, pension funds, etc) would also be subject t Spanish IHT if the surviving spouse is resident in Spain. However, if assets located in the UK (or anywhere else outside Spain) are left to a beneficiary who is not a Spanish resident, then Spanish IHT does not apply even though the deceased was resident in Spain.


Hi Lynn, thank you very much for your input. What happens if the wealth of the beneficiary is more than Euro 402000? And what is the IHT tax percentage? Thanks for your assistance. Regards Elaine


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## Lynn R (Feb 21, 2014)

eliefostermacro said:


> Hi Lynn, thank you very much for your input. What happens if the wealth of the beneficiary is more than Euro 402000? And what is the IHT tax percentage? Thanks for your assistance. Regards Elaine


I have a feeling you are going to be sorry you asked that!

I know that if the value of the inheritance is over €175,000 then only the national state allowance against IHT of €16,000 is applicable and IHT is due on everything over 16,000.
With regard to the rates of IHT there is a sliding scale, which can be found on page 4 of the link below, together with information about how the personal wealth of the beneficiary affects the tax position. If you can work it out, have 10 gold stars because it makes my eyes glaze over to look at it.

http://www.spenceclarke.com/pdf/17.pdf

Andalucia also grants a 95% exemption on the value of a property if you have lived in it as your habitual residence for at least 3 years before the date of death, but this is only up to a maximum of €122,000. There are other conditions attached ie that you have to retain the property for at least 10 years after the death (you don't have to live in it, but you can't sell it) otherwise the tax becomes due.

It really is very complicated and I'm sure it would be a good idea to consult a tax professional who should be able to advise you of exactly what your potential liability might be based on your precise circumstances. Also, of course, none of the above precludes the possibility that either regional or national tax rules may change in the future.


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## eliefostermacro (Oct 8, 2014)

Lynn R said:


> I have a feeling you are going to be sorry you asked that!
> 
> I know that if the value of the inheritance is over €175,000 then only the national state allowance against IHT of €16,000 is applicable and IHT is due on everything over 16,000.
> With regard to the rates of IHT there is a sliding scale, which can be found on page 4 of the link below, together with information about how the personal wealth of the beneficiary affects the tax position. If you can work it out, have 10 gold stars because it makes my eyes glaze over to look at it.
> ...


Hi again Lynn, yes I see what you mean about the chart and yes, I think we definitely need to take some advice, however, can I just clarify with you about what you've said on only the state allowance of Euro 16K is applicable if the inheritance is over Euro175K. Am I understanding you correctly i.e. if the inheritance is Euro 176K for example, then the Govt only allow you Euro 16K before IHT is calculated? Sorry, I'm sure you have better things to be doing on a Sunday afternoon than thinking about IHT !!!


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## 90199 (Mar 21, 2010)

Take professional advice, we did, we will not now have to pay IHT on most of our assets.


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## Lynn R (Feb 21, 2014)

eliefostermacro said:


> Am I understanding you correctly i.e. if the inheritance is Euro 176K for example, then the Govt only allow you Euro 16K before IHT is calculated?


That's as I understand the position to be, yes. If anyone else knows otherwise, please speak up!


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## eliefostermacro (Oct 8, 2014)

Hepa said:


> Take professional advice, we did, we will not now have to pay IHT on most of our assets.


 Hi there, thanks for your reply. Could you recommend a good advisor? Thanks Elaine


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## 90199 (Mar 21, 2010)

eliefostermacro said:


> Hi there, thanks for your reply. Could you recommend a good advisor? Thanks Elaine


Depends where you are living. We live in the Canary Isles and have to travel to another island, Tenerife, we use one who works for Blevins Franks, for financial advice. We also use an accountant for income tax returns and advice.

Our English advisor was unable to represent us here in the Canaries, which was a shame we had used him gainfully for years, however the Tenerife man knows his stuff.


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## baldilocks (Mar 7, 2010)

Currently your will needs to be made under The Spanish Civil Code Article 9 paragraph 8. However from August 2015, the EU Succession Regulations 160/2012 take effect and you will need to make your will under Article 22 of the new regulations.

We have just been having problems with a new notary who would not allow somebody to inherit under UK law (actually there is no law of succession in England, Wales and Northern Ireland because it is under Common Law) but we have now pointed her in the right direction.


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