Let us take as an example a man who dies leaving three children and a spouse. The only property is the house they are living in. If the widow's name is in the title as half-owner, she continues to own half the house. The other half of the house constitutes the estate, which is divided equally between the three children.
When the estate is settled, each child will own one third of the title in half of the house, i.e. each of them owns one sixth of the house, and the title deed has four names on it (the widow and each of the three children). The widow is, however, entitled to hold a usufruct (lifetime use) of the children's share. This means she can stay in the property until she dies.
However, all parties must then agree and sign the deeds if the house is to be sold. It is this provision of inheritance law that causes the situation frequently seen in the Spanish countryside and villages where six brothers are part owners of a finca.
Dying without a will can give rise to time-consuming and expensive legal procedures for your heirs, so if you really want to look after them and if you have definite ideas about how you want your estate to be apportioned, you should make a Spanish will.
All the tax rates and exemptions refer to national inheritance law, and apply to almost all non-residents. Residents will find regional differences.
Four things to consider with Spanish wills
1. You should make a Spanish will that disposes of your Spanish property in order to avoid time-consuming and expensive legal problems for your heirs. Make a separate will to dispose of assets located outside Spain.
2. As a foreigner, Spanish law does not require you to be subject to the Spanish law on the statutory division among the heirs according to which you must leave two-thirds of your estate to your children. Most foreigners enjoy free disposition of their estate so that you can bequeath your Spanish property to any person of your choice as long as your own national law allows this. Your estate will, however, be subject to Spanish inheritance tax, which can be high when property is left by a non-resident to non-relatives.
The law also states that any foreigner officially resident in Spain is subject to Spanish inheritance tax on his worldwide estate. However, in practice the authorities will not ask the testator if he or she is an official resident or not. The only requirement enforced by Spain is the payment of the inheritance tax on the property or assets held in Spain.
3. There are a few ways around the inheritance tax and these legal ways require advance planning. Spanish law does not allow any large exemption from inheritance tax, as many other countries do where the family home is concerned. Tax is payable after the first €16,000 (£12,600) for each beneficiary.
4. If you are an official resident of Spain leaving your property to a spouse or child who is also resident, you may be eligible for a 95 per cent reduction in the value of the property for inheritance tax calculation. This is not available to non-residents, and the reduction applies to the first €120,000 (£94,700).
Amongst the perfect legal possibilities is the formation of a family corporation or "trust", in which the family's assets pass into the hands of the company. If one member dies, it only involves a reorganization of the board of directors.
Equity release, reverse mortgage
You may borrow half the value of the property and pay back nothing until the property is sold or you die, at which time the full amount plus interest is due. Your heirs can repay the loan and take possession of the property.