Can a UK Will cover Spanish property?

Inheritance tax and estate planning with Spanish assets

If you own property in Spain, you may wonder whether you need a separate Spanish Will or whether an English Will can cover the property.

In many cases, an English Will can deal effectively with Spanish assets from a succession perspective.

However, passing the property to the intended beneficiary is only one part of the planning.

Spanish inheritance tax, access to funds and the practical administration of the estate can be just as important. These issues are usually easier to manage when Spanish assets are identified early.

When a property only comes to light at the last minute, there may be little opportunity to take coordinated Spanish and English advice or plan how any tax liability will be funded.

Can an English Will cover Spanish property?

An English Will can usually be recognised in Spain and used to pass Spanish property to the intended beneficiary.

Whether that is the right approach depends on the wider circumstances, including the existence of any other Wills, the ownership structure, the beneficiaries involved, and the tax and administrative implications in both jurisdictions.

The key questions are therefore not limited to whether the Will is valid, but:

• Will Spanish inheritance tax be payable?
• Who will pay it?
• Will the beneficiary have access to the funds needed?
• Who will handle the Spanish administration?
• And have those issues been identified early enough for meaningful planning?

Case study

The Sotogrande secret

Alex was a successful UK businessman with a wife, adult children and a long-standing London-based solicitor, Venetia, who had acted for him for many years.

Shortly before leaving for a high-risk endurance event, Alex contacted Venetia with an urgent request. For the first time, he disclosed that he owned a marina penthouse in Sotogrande. The property had never previously been discussed as part of his estate planning.

The reason soon became clear. Alex wanted the apartment to pass to his partner, Ramona, rather than to his wife. The position was sensitive and time was limited. He wanted a new Will prepared and signed before he left.

Venetia advised that an English Will could be used to ensure that the apartment passed to Ramona after his death. She also explained that this was only part of the picture. Spanish inheritance tax, funding requirements and local administrative procedures might all need to be considered separately.

Specialist Spanish advice would normally be obtained so that the likely tax consequences, administration and practical arrangements could be reviewed before any final decisions were made.

However, Alex was due to leave within hours and there was no realistic opportunity to obtain further advice. The immediate priority became making sure the apartment passed to Ramona rather than forming part of the estate inherited by his wife.

The Will was signed. Alex did not return from the trip.

What happened to the Spanish property?

The Will achieved its immediate objective. The Sotogrande apartment passed to Ramona, consistent with Alex’s intention that she should inherit the property.

The difficulty arose afterwards. Spanish inheritance tax became payable before the transfer could be completed. Because Ramona was neither a spouse nor a direct descendant, the tax position was significantly less favourable than it might have been for a close family member.

Ramona had inherited a valuable asset but not the cash needed to deal with it. The question was no longer who should inherit the property. It had become how the Spanish inheritance tax bill would be paid.

At that point, what had begun as a private arrangement could no longer remain quietly in the background. The inheritance itself was no longer the issue. Funding it had become the problem.

Why the Spanish Inheritance Tax problem mattered

The problem was not that the Will failed. It achieved its immediate objective and ensured that the apartment passed to Ramona.

The difficulty was that the Spanish property emerged so late that there was no realistic opportunity to consider the wider consequences.

There was no time to obtain Spanish advice, assess the likely inheritance tax position, consider how any liability might be funded or plan for the practical administration of the estate after death.

What this case shows about UK-Spain estate planning

When Spanish property forms part of an estate, the question is rarely limited to who should inherit it.

A valid Will may successfully direct the asset to the intended beneficiary, but succession is only one part of the picture. Tax, liquidity and administration can be equally important.

The earlier Spanish assets are identified, the more opportunity there is to understand the consequences of the proposed inheritance and take appropriate Spanish and English advice before decisions become irreversible.

You can read more about Spanish estate planning in Dennis’ article – What happens if a UK Will excludes Spanish property?

How Morr & Co can help with Spanish Wills and estate planning

If you own property or other assets in Spain, coordinated planning can help ensure your wishes are recorded clearly and the arrangements in each jurisdiction work together.

Find out more about our Will Writing for Spanish Estates and our wider Anglo-Spanish Property and Inheritance service, or contact our Private Client team by emailing info@morrlaw.com or calling us on 0333 038 9100.

Disclaimer
Although correct at the time of publication, the contents of this newsletter/blog are intended for general information purposes only and shall not be deemed to be, or constitute, legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. Please contact us for the latest legal position.