What law governs the inheritance of an estate located in Spain?
Firstly, the heirs must establish whether or not there is a will. There are centralised registers of wills in both countries for this purpose. The good news is that German and Spanish wills are generally recognised in the other country. However, caution is advised in the case of joint wills, as Spanish law – with the exception of some regional jurisdictions – does not recognise joint wills. If there is no will, the applicable law is based on the testator’s last habitual residence. Many German property owners are unaware of this. If Germans have their centre of life in Spain at the time of death, Spanish law is therefore applicable to their estate. It is therefore highly recommended that a will be drawn up in such cases. German law should be expressly chosen in the will.
In which country should the property owner make a will?
Even though wills are generally mutually recognised in both countries, it makes sense for Germans to make a will in Germany. This is especially true if they also have assets in Germany. Under no circumstances is it advisable to draw up a separate will in Spain for a Spanish property. This could quickly lead to contradictory testamentary dispositions, which should be avoided at all costs, especially in the case of cross-border estates.
What are the tax implications for inherited property in Spain?
In principle, there is an inheritance tax liability in Spain because the property is located there. In some Spanish regions, inheritance tax has already been completely or partially abolished, e.g. in the Balearic Islands. However, the inheritance of a Spanish property must also be declared by the heirs in Germany. Inheritance tax paid in Spain is credited against the German tax liability on application.
This applies in any case if the deceased was not subject to unlimited tax liability in Spain. Otherwise, the entire estate would be taxed in Spain. The tax implications depend on many details, which must be determined and assessed on a case-by-case basis.
Property owners should consider the possibilities of anticipated succession or testamentary arrangements for inheritance in Spain at an early stage. This can avoid ‘nasty surprises’ when an owner dies. There are structuring options in the form of inter vivos agreements that help to avoid typical inheritance problems with assets abroad.
Summary of the key facts
- Heirs of a property in Spain must check whether a will exists. If there is no will, the applicable law depends on the last habitual residence of the deceased.
- German owners of a property in Spain should draw up a will in Germany, especially if they also have assets in Germany.
- Inheritance tax is payable in Spain if the property is located there. However, the inheritance must also be declared by the heirs in Germany. Inheritance tax paid in Spain is credited against the German tax liability upon application.