After the Inheritance

Once the inheritance taxes have been submitted, the inheritance deed can normally be presented to the Land Registry.

The registration records the new ownership and the share acquired by each beneficiary.

Correct registration is particularly important if the beneficiaries intend to:

• Sell the property.
• Mortgage it.
• Divide ownership between themselves.
• Transfer it to another family member.
• Deal with an existing mortgage or registered charge.

We can also update the property ownership details held by the Spanish Cadastre where required.

Where the estate includes money or investments held with a Spanish bank, the bank will normally require evidence of the beneficiaries’ entitlement and confirmation that the relevant tax requirements have been satisfied.

The bank’s requirements may vary, but it may request documents such as:

• The Death Certificate.
• The Certificate of Last Wills.
• The Will or declaration of heirs.
• The inheritance deed.
• The inheritance tax documentation.
• Identification documents and NIE numbers for the beneficiaries.

We can liaise with the Spanish bank and assist with the release or transfer of inherited funds.

Inherited property may be subject to an existing mortgage, embargo or other charge.

The inheritance of the property does not automatically remove these liabilities.

Depending on the circumstances, the beneficiaries may need to:

• Continue making mortgage payments.
• Repay and cancel the mortgage.
• Negotiate with the lender.
• Register the mortgage cancellation.
• Deal with other debts or legal charges affecting the estate.

These matters should be identified during the initial estate review so that the beneficiaries understand their position before completing the inheritance.

Where two or more beneficiaries inherit a property together, each person normally acquires a percentage of ownership.

The beneficiaries must then decide how the property will be managed.

They may choose to:

• Retain and use the property together.
• Rent the property.
• Sell it and divide the proceeds.
• Allow one beneficiary to acquire the shares of the others.
• Complete a formal dissolution of joint ownership.

Joint ownership should be managed carefully, particularly where the beneficiaries live in different countries or have different plans for the property.

Where one co-owner wishes to retain the property, a dissolution of joint ownership may sometimes be more appropriate than a standard sale between the beneficiaries. The legal and tax consequences should be reviewed before proceeding.

Once the inherited property has been registered in your name, you become responsible for the legal, tax and administrative obligations associated with ownership.

Depending on your circumstances, these may include:

• Non-Resident Income Tax or Resident Income Tax.
• Property Tax, known as IBI.
• Rubbish Collection Tax.
• Community of Owners fees.
• Electricity, water and other utility accounts.
• Insurance.
• Rental income tax if the property is rented.
• Tourist-rental registration or licensing requirements where applicable.

These obligations may apply even if the property is used only occasionally or remains empty.

Following the inheritance, it may be necessary to update:

• IBI ownership and direct-debit details.
• Rubbish Collection Tax records.
• Community of Owners records.
• Electricity and water contracts.
• Insurance policies.
• Bank-account details used for property payments.

Failing to update these records may result in bills continuing to be issued in the deceased’s name, missed payments or difficulties dealing with service providers.

After completing the inheritance, beneficiaries may decide to keep, rent or sell the property.

Each option has different legal and tax implications.

If you retain the property, you must comply with the ongoing obligations associated with Spanish ownership.

If you rent it, you may need to declare the rental income and comply with regional and national rental regulations.

If you sell it, the transaction may involve Capital Gains Tax, municipal Plusvalía Tax and, for non-resident sellers, the statutory 3% retention from the sale price.

Obtaining advice before making a decision can help you understand the likely costs and choose the most appropriate option.

Many beneficiaries live outside Spain and are unfamiliar with the ongoing responsibilities associated with owning a Spanish property.

For this reason, many of our clients choose our Sweet Home Service, which provides continuing assistance with property-related tax, legal and administrative matters throughout the year.

Sweet Home can help you stay informed, manage your annual obligations and deal with practical issues affecting your Spanish property.