LEGAL4SPAIN.COM - Blog-Updates

LEGAL4SPAIN.COM - Blog-Updates

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Spanish Wills
Estate Planning
Probate in Spain
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Is non- resident Spanish Succession Tax illegal?

Spanish Succession TaxPosted by Andrew Thu, February 02, 2017 14:17:45

April 8th, 2013

The issue in contention, which many families with Spanish properties are very concerned about is that the amount of Spanish Succession Tax payable by non- Spanish resident beneficiaries can differ substantially from the amount payable by Spanish resident beneficiaries.

Where the individuals concerned are European Union Citizens, there should not (according to European Law) be discriminatory treatment on the grounds of residency/ non- residency.

A firm ruling is awaited from the European Commission, but pending that, the anomaly remains that (whether or not they are EU Citizens), non- Spanish resident inheritance cases are in practice generally subject to significantly more onerous Spanish Succession Tax treatment.

We are monitoring the situation and will advise our clients and contacts as and when there are further developments in this regard.



Will Spain follow Cyprus and tax bank deposits?

Spanish Wills &Estate PlanningPosted by Andrew Thu, February 02, 2017 14:16:20

March 17th, 2013

The EU bailout conditions for Cyprus have sent shockwaves throughout Europe and beyond. Indeed, anybody with bank accounts in what are perceived to be the weaker European countries should review carefully where their funds are held; and assess the risk of exposure to bank insolvency and taxation.

We are certainly not subscribing to the knee-jerk reaction of many-being immediately to transfer all funds out of Spanish banks (save for the minimal amount to cover property outgoings and day to day requirements). The official line remains that Spain does not require the form of bailout which Cyprus has sought; and for which the draconian conditions have been imposed.

Indeed, it would be reckless in the extreme to recommend a run on the Spanish banks, as the consequences would be disastrous. We would hope therefore, that an urgent assurance is given by the Spanish Government as to Spain’s position; and also that a categorical assurance is given that no such levy will in any circumstances be imposed on Spanish bank accounts.

Failing the immediate provision of those assurances, irrespective of calls for caution to avoid dramatic liquidity problems for Spanish banks, it is worrying but perhaps inevitable, that a significant outflow of funds from Spanish banks will now be seen.

Aside from this latest development, many of our clients have also expressed concerns about what they are reading in the Press about the security of their savings in some of the Spanish banks.

Also, although there is a capped Spanish Government guarantee of funds deposited with Spanish banks, many are expressing concerns as to:

· the limit of the Spanish Government guarantee;
· the ability of the Spanish Government to honour the guarantee in the event of the insolvency of a Spanish bank;
· how long it would take for the Spanish Government to honour the guarantee;
and finally,
· the fact that many Spanish savings products are not covered by the Spanish Government Guarantee.

Obviously each individual’s circumstances and banking arrangements are unique, so it is impossible to provide ‘standard’ advice on the issue; and to attempt to do so could be misleading.

But we do encourage those with savings in Spanish banks to take this opportunity review their arrangements; and take such action (or take no action) as they conclude to be prudent in their own circumstances.

In terms of cash holdings being returned to other countries, if conversion to Sterling (or another currency) is required, there can be significant variances in the rates given between banks and the best specialist Foreign Exchange (FX) brokers. So, there can be a very substantial hidden cost in this process or repatriation of funds for individuals who do not give the matter careful thought and attention.

We are able to refer our clients to a leading specialist FX broker, so that we can provide the required certification to have an FX facility set up in a matter of minutes. This ensures that the clients we introduce have a fast, secure and top quality FX service; saving substantial sums on each and every FX transaction. The service is available for all major currencies.

We will be happy to provide further details on request



Am I forced to leave my Spanish house to my children under Spanish Law?

Spanish Wills &Estate PlanningPosted by Andrew Thu, February 02, 2017 14:11:06

March 11th, 2013

For English nationals with property in Spain, in the majority of cases we deal with, the answer to this question is: no. Most English nationals are not subject to the Spanish law of succession (which would otherwise require parents to leave specified proportions of their estates to their children).

However, individual circumstances have individual legal consequences. So, this is a matter which has to be considered carefully in each client case in dealing with Spanish Wills and estate planning- both from the Spanish and UK legal perspectives. This ensures that correct legal advice is given; and appropriate and secure legal documentation is signed.

To have clear, correct and individual advice on this point, helps to avoid anxiety and uncertainty when it comes to Spanish estate succession.



How can I be confident about professional standards and expertise in Spanish legal services?

Spanish Wills &Estate PlanningPosted by Andrew Thu, February 02, 2017 14:08:34

February 22nd, 2013

Back in 2011, a widely publicised BBC television programme, Panorama, highlighted concerns about the levels of professionalism and regulation of will writing and probate services under English law. Following that, a major regulatory review was undertaken in the UK, which concluded with much stricter regulatory controls. So, effective consumer protection in the UK for this area of legal services is now firmly established.

It is equally important (if not, even more so) when choosing your Spanish legal adviser, that you make the same enquiries of your Spanish legal adviser, as you would make of professional advisers in your own country.

Due to the professional background of our team (see “Our Team“), these are matters which have always been extremely important to us.

Our professional body in the UK is The Society of Will Writers and Estate Planning Practitioners (www.willwriters.com). Also, the Spanish lawyers handling our Spanish legal cases are fully qualified and highly experienced in Spanish legal matters. They are accountable to; regulated by; and professionally insured through their own professional body in Spain (the Colegio de Abogados).

In addition to this, every single Spanish legal document we provide for execution in Spain is specifically approved by an authorising Notary- and in the case of Wills, also accepted by the Central Wills Registry in Madrid. As such, the level of accountability and professional protection afforded to our clients is second to none.

It is essential if you are not a Spanish national, but have assets in Spain, that the legal advice you receive is from legal professionals, who are appropriately qualified and experienced in Spain. But equally importantly, your Spanish legal professionals must also have the necessary qualification and experience of such matters in your country of origin. Otherwise, it is impossible for you to be confident that your legal position and responsibilities in Spain are correctly “dovetailed” with your legal position and responsibilities in your country of origin. Getting it wrong by not having proper professional advice could end up being very costly for you and your family.

Also, it is important to note that before confirming instructions in any Spanish legal matter, you must be certain that you are completely clear about all applicable charges and costs and how they are calculated; and further, you should ensure that any client monies will be securely held on your behalf, in a designated client account.

We are more than happy to give our clients the comfort they need on all these matters, as we are dedicated professionals, committed to 100% client security and satisfaction.



Do I have to be in Spain to inherit Spanish assets?

Spanish Legal IssuesPosted by Andrew Thu, February 02, 2017 14:04:20
January 25th, 2013

This is often the first question we are asked by clients who have been informed of a right to a Spanish inheritance – but are leading a busy life elsewhere in the world. The short answer is: ‘it is not necessary to be personally present in Spain, provided that you have a reliable and trusted legal representative in Spain’.

We have agreed form documentation for signature with Public Notaries throughout the UK and all 3 Spanish Consulate offices in the UK (and also with the Spanish Consulate offices; and with public Notaries in numerous other countries), which enables the legal procedures to be securely and professionally conducted in Spain on behalf of our clients. This avoids the requirement for our clients to be physically present in Spain.

This form of representation also enables all other dealings with Spanish properties (eg. sales and purchases) to be conducted for clients who are unable to be in Spain for the duration of the transactional process.



Professional Conduct Risks in Estate Planning Cases with Spanish Assets

Spanish Wills &Estate PlanningPosted by Andrew Thu, February 02, 2017 14:02:14

Professional Conduct Risks in Estate Planning Cases with Spanish Assets

November 29th, 2016

The existence of Spanish assets in cases handled by UK practitioners can give rise to specific considerations, which can be professionally risky to disregard. A few of the key stages requiring particular care are as follows:

Spanish Property Acquisition

Estate Planning assessment and advice can be critically important at the point of Spanish property acquisition. It has to be borne in mind, that in the event of subsequent inheritance, there can be significant exposure to Spanish Succession Tax- even potentially between spouses. Lifetime changes of ownership of Spanish properties can be extremely costly to transact, so it is important to have matters structured correctly- and tax efficiently- from the outset.

It is fundamentally important that, prior to completing the purchase of a Spanish property, the proposed ownership structure is very carefully thought through- and the future succession route (and fiscal consequences) are factored into the purchase process. Otherwise, unnecessary/ avoidable fiscal exposure can arise.

Fiscal Compliance

Owners of Spanish properties (both those who are resident in Spain; and those who are not resident in Spain) have a series of fiscal obligations in Spain, which must be performed correctly and promptly, otherwise there can be significant repercussions in terms of exposure to escalated costs/ Spanish fiscal liability. It is important that estate planning advisers in cases where there are Spanish assets are aware of these responsibilities, in order to provide correct cross-border advice.

In many cases, a Spanish property owner remains responsible for fiscal compliance obligations in Spain until the end of the calendar year following the year of sale of a Spanish property. It cannot therefore be assumed that the completion of a purchase or a sale of a Spanish property concludes matters for the professional adviser.

Residency

Many people- particularly in their retirement- dream of a move to a warmer climate and the more relaxed- and economical- lifestyle Spain seemingly offers. However, making a full time move to Spain; and becoming an official Spanish resident, can cause specific complications in the fiscal affairs and liabilities of non-Spanish nationals. Also, for their families in the event of inheritance.

Any Estate Planning advisers involved in the context of their clients considering moving to Spain, need to ensure that the clients have a full understanding of the fiscal consequences for them and their family of taking Spanish residency- both in Spain and in their home jurisdiction. In many cases, the fiscal consequences (and some of them being fairly oblique to the uninitiated), are so far reaching that it is better to remain UK resident whilst enjoying lengthy stays in Spain- to the extent legally permitted, without triggering Spanish residency.

Spanish Wills and Estate Planning

Many UK Estate Planning professionals seemingly continue to be unaware of the risks of endeavouring to deal with Spanish assets in English Wills- rather than following the correct convention of advising that separate Spanish Wills should be made in respect of Spanish assets.

It continues to surprise us in taking on Spanish probate cases, how many UK practitioners endeavour to ‘muddle through’- seeking to deal with Spanish assets in English Wills. This gives rise (in the event of probate) to additional procedural hurdles in the Spanish process. Furthermore, it is typical in these cases, that Spanish assets are implicitly (or even explicitly) placed in Trust structures, which are incompatible with Spanish law.

In any event, the risks of delays, complications and additional costs in the legal probate process in Spain where there is no Spanish Will have been widely covered in articles in the professional Press over the years. But there are also situations in which the absence of a separate Spanish Will can have the effect of an increased Spanish Succession Tax liability. Hence, UK professionals need to be completely clear and accurate in their advice as to Will structuring, to avoid the risk of exposing their clients to unnecessary/ avoidable fiscal exposure and costs.

In principle, post-death variations to Wills are not permitted under Spanish law. So, that sometimes-useful fiscal device in the UK does not exist as a facility in respect of Spanish assets. However, UK testators (for example) with Spanish assets are entitled to include in their Spanish Wills (along with a properly drafted choice of law clause), a certain amount of flexibility in the succession route, enabling their beneficiaries to elect for the most tax efficient succession route to be applied at the time.

So, this enables post- death up to date fiscal advice to be obtained, in order to select the most expedient succession route/ structure. But a Will writer who does not take into account this highly valuable facility which is available to non-Spanish owners of Spanish assets, can leave the testator’s beneficiaries exposed to a significantly greater fiscal liability than might otherwise be the case, with correct advice and a thorough approach to Spanish Will writing.

Probate

In the Spanish probate process, it is essential that the practitioner engaged to deal with the Spanish Estate is professionally regulated, PI covered; and specifically experienced in the conduct of Spanish probate cases for the estates of non- Spanish individuals. This type of case is significantly different to a ‘regular’ Spanish probate case; and if the case is not conducted absolutely correctly, this can not only cause problems in the Spanish process, but can also impact adversely on the home jurisdiction probate case.

The practitioner handling the home jurisdiction probate case and the Spanish process need to liaise closely- especially on fiscal issues. Particular regard must be had to: the succession route of the Spanish assets (and evaluation of the fiscal consequences of any discretion as to the succession route); how asset values are assessed and declared; and the availability of any deductions/ credits under dual jurisdiction taxation treaties.

A failure by a UK practitioner (for example), to agree to the appointment of an appropriately qualified and experienced practitioner in Spain; or to liaise closely with the appointed Spanish practitioner to achieve the best result overall for the estate, can leave the Estate/ beneficiaries financially disadvantaged.

The above is a non-exhaustive list of situations requiring particular care and attention.

The Legal 4 Spain team is always available to provide preliminary advice on a no-obligation basis in relation to Inheritance and Estate Planning cases where there are Spanish assets.



Spanish Inheritance- Applicable Succession Law and Brexit

Spanish Wills &Estate PlanningPosted by Andrew Thu, February 02, 2017 14:01:08

January 3rd, 2017

Introduction

Spanish law provides for ‘forced heirship’, which is completely different to English law, for example, where there is freedom as to appointment of beneficiaries.

The issue of cross-border inheritance- where a deceased person has assets in different countries, in principle subject to different/ conflicting laws as to succession- has traditionally been fairly complex and potentially confusing.

The EU Regulation 650/2012 (‘Brussels IV’) simplified matters where the deceased died after 17th August 2015, owning properties in different EU member states.

Habitual Residence

Prior to Brussels IV, the deceased’s nationality and location and type of assets were contributory factors in determining the applicable law of succession relating to EU assets.

But for deaths after 17th August 2015, the default succession law relating to EU assets will be determined by the deceased’s ‘habitual residence’ at the time of death.

Choice of Law

Brussels IV also provided for certainty- that an election can be made in a Will as to which succession law applies. This can override ‘habitual residence’ in applicable cases, where that is advantageous.

This is particularly important, for example, for a UK national who is resident in Spain. If no election is made as to applicable succession law, then the ‘habitual residence’ test would mean that Spanish succession law would apply to that individual’s estate. However, by making a Will which includes a valid election of English succession law, this overcomes the potential problem.

European Certificate of Succession

Brussels IV also provided for European Certificates of Succession, to simplify probate in cross-border estates. But this does not assist in the case of a UK national who is habitually resident in the UK, as the UK’s opt-out from Brussels IV means that the UK cannot issue a European Certificate of Succession.

For this reason, the probate procedures for most UK nationals who own Spanish properties are not changed by Brussels IV.

Wills

It has always been recommended for a UK national (for example), with a property in Spain, to make a separate Spanish Will to deal with the Spanish assets. This has always assisted in avoiding unnecessary complications, costs and delays in the Spanish probate process. Brussels IV has not changed this. Furthermore, it is necessary in many cases, to ensure that a choice of law election is included in the Will, to be certain that UK succession law will apply.

Probate

As noted above, for the estates of deceased UK nationals with assets in the UK and Spain, there remain two separate legal succession processes- one in the UK; and one in Spain. But where the deceased leaves up to date and valid Wills in the UK and Spain respectively, the legal processes can be conducted simultaneously, and the situation need not be complex, lengthy, or costly.

Taxation

Brussels IV has not directly affected the pre-existing position regarding succession taxation. There can be succession tax liability in each jurisdiction in which the deceased owned assets (subject to double taxation treaties/ relief). However, in making Wills and considering choice of applicable succession law, careful consideration must be given to succession tax exposure; to ensure that legal and legitimate opportunities to reduce succession taxation are not lost.

Brexit

The precise effect of Brexit on the application of Brussels IV to UK nationals will depend on the negotiations and final agreements between the UK and the remaining EU member states. But although Brussels IV is an EU Regulation, it does also apply to third party countries. So in principle, a UK national’s election to apply UK succession law to their Spanish assets should remain valid following Brexit.

Also, the risk under English law that (for UK nationals with Spanish properties), Spanish succession law should apply to their Spanish assets, is contradicted by Spanish law, which provides for the application of the National Law of the deceased person- if so elected in a Will.

So in any event, to be certain, UK nationals with Spanish properties are very strongly advised to make a separate Spanish Will dealing with their Spanish assets; and making a clear election for their succession law of choice to apply to their Spanish assets.

The Legal 4 Spain team is always available to provide preliminary advice on a no- obligation basis, in relation to Wills of Spanish assets and Spanish estate planning generally.



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