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 Iht.firstname.lastname@example.org or visit www.winchamiht.com