Many people are concerned about Inheritance Tax in Spain. There are many ways of trying to put it down, some of them not very legal, but there are some ways of reducing this tax and accomplish Spanish Law.
The law which must be followed in order to draw up a will in Spain is the law of the country where the testator comes from. This is the reason why many British with a property in Spain follow the British pattern and have a will very close to their wills back in the UK.
However, if the Spanish pattern for drawing up wills is followed, Inheritance tax can be lower or delayed in time and paid in smaller parts. In this case, the inheritors must be the children or the parents of the testator, together with the surviving spouse.
The Spanish law distinguishes between two different levels of ownership of a property: the pure ownership and the life interests. The pure ownership does not give the right to use a property, it is just a legal state; the property will be used by the inheritor who owns the life interests of the property.
Following the Spanish standard pattern, and in very general terms, the surviving spouse inherits just the life interests, and the children inherit just the ownership.
In case that the widow or widower gets only the life interests, he or she will be able to live in the property forever. Once the surviving spouse also passes away, the children will also inherit the life interests, having then the combined ownership as their parents had when they bought the property.
It is important to study each case individually, the Spanish pattern doesn’t guarantee tax saving in all cases, but it may be interesting to have a legal approach to it from the point of view of your goods and properties in Spain, to check if it is really convenient.
There are more legalities to be taken into account, but this could give an idea of how you can save taxes legally.
Please, do not hesitate to contact me for further information.