September 15th, 2014
A new European law will come into full effect on August 17th 2015, with the intention of simplifying inheritance cases across Europe.
This new law will apply to owners of Spanish properties.
The problem the new law addresses
There has been legal uncertainty previously in the estates of many non-Spanish owners of Spanish properties, as to whether Spanish succession law applies or the owner’s own national succession law.
The distinction is particularly important for English owners of Spanish properties, where their own (i.e. English) succession law effectively enables them freely to choose their heirs (including as to Spanish assets), without limitation in the majority of cases.
Conversely, if an English owner of a Spanish property were to choose (or be legally forced) to follow Spanish succession law, then a strict division of the Spanish estate would be imposed under Spanish law- with a minimum of two thirds passing to descendents; and very limited discretion generally as to who receives the Spanish estate.
The solution provided by the new law
The new law gives people affected by the problem, choice as to which succession law applies to their estate.
Well advised English owners of Spanish properties will in any event, have already made separate Spanish Wills in anticipation of the new law, clearly electing for their own national succession law to apply. So they can be certain that their Spanish estate will pass as they wish; and not pursuant to the strict Spanish legal requirements (which in the vast majority of cases, are incompatible with English testators’ actual wishes).
In any event, English (and indeed other nationality) owners of Spanish properties are advised to take this opportunity in anticipation of the new law, to review their Spanish Wills with their legal advisers, to ensure that they have clearly and unambiguously chosen for their own national succession law to apply to their Spanish assets (if that is what they wish). Also, to ensure that their Spanish Wills are in all other respects, fully up to date; legally compliant in Spain; and tax efficient.
In the event of a failure of by an English owner of a Spanish property to leave a valid Spanish Will electing for English succession law to apply to their Spanish estate, the position under the new law will be determined by a new statutory ‘habitual residence’ test, such that:
• If the English owner of the
Spanish property is habitually resident in Spain at the time of death, then
Spanish succession law will apply to the Spanish estate.
• If the English owner of the Spanish property is habitually resident in England at the time of death, then English succession law will apply to the Spanish estate.
• If the English owner of the Spanish property is neither habitually resident in Spain at the time of death nor in England, then it could be either English law or the law of the actual country of habitual residence. This scenario would need to be legally determined on the circumstances of the case.
In order to avoid uncertainty- bearing in mind also that many people change residential status in the final period of their lives, particularly due to healthcare considerations- it is always best not to rely on the ‘default’ position under the new law. Instead, it is always best practice for a Spanish property owner to sign a professionally prepared, up to date Spanish Will with a clear statement of their wishes as to the succession of their Spanish estate. This can also ensure that any up to date tax saving opportunities are used to their full advantage.
This general commentary is not intended to be exhaustive; and case-specific legal advice should always be sought.
The Legal 4 Spain team provides a full estate planning and Will writing service for properties and other assets anywhere in Spain. We are always happy to provide a competitive cost estimate in the first instance, on a no-obligation basis.