Myth-busting: Inheritance tax

LAST UPDATED: 20 Apr, 2012 @ 17:01
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Myth-busting: Inheritance tax

In the second of two parts Mark Roach, from Wincham International, puts to bed some more common misconceptions about property succession…

Re-financing the property will avoid inheritance tax.

If there is a mortgage on the property (hipoteca), the owner does not actually own that part of the property subject to the loan.

Therefore inheritance tax is only payable on the net value inherited. However if the bank has an insurance policy which clears the loan on death, the full value of the property will be inherited and full tax payable.

The alternative is that the beneficiaries have a loan on the property and the borrowing is ultimately settled by the executor of the estate.

Joint ownership of the property with your children/beneficiary means they do not need to pay inheritance tax.

Passing ownership of your property to your inheritors has many complications, and potential implications in respect of gift tax, transfer tax and capital gains tax in both the UK and Spain.

If you transfer part of the asset, probate will still be required on any balance you retain. This tactic is also complicated because the asset could be at risk in the case of a marital or financial issue with one of your co-owners.

It is always possible a son or daughter could predecease their parents, which could then put the parents at risk of losing control of part of their asset, depending on the will of the deceased person.

For more information contact Mark Roach on [email protected] or visit www.winchamiht.com

4 COMMENTS

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  1. Dear Sir

    Rather than myth busting, I fear that the two articles by Mark Roach may be myth generating.

    Making a Spanish will is certainly a far better idea than expecting one’s beneficiaries to rely on an English will and Grant of Representation, for various reasons. Further, one owns whichever part of a property that one has acquired, irrespective of any loan secured against it. The comments in the articles in question demonstrate a fundamental lack of understanding of this area of law. They have already confused more than one of my clients.

    Yours faithfully

    Jonathan Eshkeri
    Abogado (Tarragona)
    Solicitor (England & Wales)

  2. Dear Jonathan,
    Having a spanish will for a non resident is making their life a complication, I think you should do some research and study the law, how is having a spanish will going to help against IHT in Spain for a non resident?
    If your clients are confused it´s because you are giving conflicting advice.
    I gather you would want every expat in Spain to have a Will so you can charge them the fees for probate, obviously it´s not helping your services but is definitely helping non resident of Spain.
    When the children inherit the spanish property and are tax resident of the UK, they will have a serious IHT liability to pay through spanish succession and your answer is to have a spanish WIll, you must be joking.

  3. Dear Jason

    Respectfully, you clearly do not have all of the information.

    Anyone reading this will be well advised not to rely on rhetoric as set out in a publication such as this, but to take the independent specialist advice of a lawyer qualified in Spain and also qualified in in any the other jurisdictions in which the reader’s estate may have an inheritance tax liability. Clearly that may mean taking the advice of more than one lawyer. I do not propose that course of action because it means jobs for lawyers, but because in general terms it is important to take advice from people that do know what they are talking about.

    Yours sincerely

    Jonathan Eshkeri
    Abogado (Tarragona)
    Solicitor (England & Wales)

  4. Ok, well Jonathan I see you haven´t answered my question and just put a comment that had nothing to do with my query.
    A spanish Will doesn´t help a non resident in Spain??? WHY?? because all inheritors will be charged IHT, True or false?
    advise from lawyers in Spain is irelevant, some advise from 1 lawyer may conflict another and not all are qualifies to give advise outside of Spain, it is important to do your own research and find out what is the most suitable arrangement regarding tax issues.
    If you are stating having a will in Spain is the best for any non resident, well that just shows how good your advise is.

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