To value or not to value? That is the question.


The other day a client was in the process of filing an Inheritance tax form and he asked me which value he had to give to a Spanish property he had just inherited. In England the answer is quite simple: you must use the open market value. This generally means getting the property valued. In Spain the situation is, as usual, quite different.

Spanish law states that it should be the “real value” but there is no clear definition as to what the real value is. There is some guidance as to what could be understood as “real value”. For instance, the price shown on the deeds when the property was purchased or the value used by the tax office the last time the property was assessed by the tax man. However, the most common practice is to use the fiscal value. This is obtained applying a specific multiple to the rateable value of the property, which is usually shown on the annual property tax receipt.  

In the end, what happens in most of the cases is that the beneficiaries give the values that they consider appropriate and then these values are assessed by the Tax office. If the Tax office believes that the property is worth more, the Tax office will issue a tax request for the difference and any interest accrued.

In my opinion, it is advisable to use the market value and ensure that this value is definitely higher than the fiscal value. However, each case needs to be looked separately as there could be many factors affecting the final decision i.e. was the property  purchased a few years before the death? is there an intention to sell the property in the short future, etc.

What is clear is that if you are an executor of the estate, both English and Spanish, then the best way to proceed is to get the property properly valued and use that value for tax purposes, both in England and Spain. Otherwise, there could be some personal liabilities for the executor.

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To be, or not to be, that is the question:
Whether ’tis nobler in the mind to suffer
The slings and arrows of outrageous fortune,
Or to take arms against a sea of troubles,
And by opposing end them? To die, to sleep,
No more; and by a sleep to say we end
The heart-ache, and the thousand natural shocks
That flesh is heir to: ’tis a consummation
Devoutly to be wished. To die, to sleep;
To sleep, perchance to dream – ay, there’s the rub:
For in that sleep of death what dreams may come,
When we have shuffled off this mortal coil,
Must give us pause – there’s the respect
That makes calamity of so long life.
Hamlet by William Shakespeare

 Amazing monologue of the genius William Shakespeare. By the way, who do you think has best incarnated Hamlet on the silver screen? Many generations think of Laurence Olivier.  Personally, I really enjoyed Kenneth Brannagh’s take on Hamlet

Mistakes made when granting a Spanish will- Part IV


This is my last article on the topic that I started some weeks ago. I could write about wills for weeks as this is a subject that I enjoy quite a lot but I am aware that this would make my blog quite boring and repetitive. I have therefore decided to conclude with an article on one of my favourite topics within Wills and Succession and then move to new topics.

The topic I will cover today is jurisdiction.  Lets imagine a person called Joe Bloggs. He is British, English national and domiciled, lives in England and has assets in England and Spain.  Joe is a cautious man, no surprise his nickname is Cautious Joe, and he has made 2 wills. One for Spain and the other one for England. On his death, his beneficiaries appoint an English law firm to deal with the estate. As there are some Spanish assets, the English law firm has to instruct a Spanish lawyer to help with the Spanish side. The first question the English lawyers ask the Spanish is the following: is the Spanish estate regulated by Spanish law or English law? The Spanish lawyer will probably look at the Spanish Civil Code and confirm that English law applies to the deceased’s estate as this is what is stated in article 9.8 of the Spanish Civil Code.

The above would be the usual scenario but things are not as simple as they look because English law states that immovable assets (properties) are regulated by the law of the place where these are located. This means that there seems to be a conflict between English law, which states that Spanish law should apply, and Spanish law, which states that English law should apply. In general terms the conflict is resolved and English law is applied but this is not always the case, specially when the deceased died living in Spain with all his assets in that country.

There are two good ways to avoid the potential application of Spanish law  to the Spanish estate of an English person (and therefore avoid the strict forceship rules of Spanish Inheritance Law). The first one is to include a clause on the Spanish will to confirm that the testator wants English law to apply to his Spanish estate. The second one is to keep some assets in England to ensure that the jurisdiction is not returned back to Spain.  Sometimes is sufficient with keeping a parking space or a bank account with a relevant amount of money but when in doubt a property would prove the best option.

If the above is not done, then the testator may have his will challenged by one of the forced heirs under Spanish law (spouses, children and, in certain occcasions, parents) if he/she has been ignored in the will.

This is a fascinating topic that is evolving constantly. However, the above recommendations will help to avoid future problems for the loved ones.

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Mistakes made when making a Spanish Will- Part III

This week I will talk about a mistake that is made after making a Spanish Will. I am talking about marriage.

Obviously, I am not saying that marriage is a mistake (although some of my divorced friends may have something to say in this respect…). It is what happens with the marriage what worries me.

In certain jurisdictions, like England for example, when  you marry any existing Will is automatically revoked. This means that if you had made a Will and you marry or re-marry for the second time, that Will gets revoked. This is quite clear when it comes to English Wills but what is the position with respect to Spanish Wills?

Spanish law does not contemplate a similar scenario. Basically, if you marry your Will is not automatically revoked. Therefore, it is necessary to revoke it, otherwise that Will continues to be valid.

The problem arises with English nationals owning property in Spain as Spanish law states that, in general terms, English law should be applied to the Spanish Estate (although there are some exceptions which will be explained in a future article). If this is the case and we do have to apply English law to the Spanish Estate, then clearly any marriage will also revoke any Spanish Will granted before tying the knot. This means that we need to be very careful if we marry as we may be revoking the Spanish Will.

The truth is that Notaries and Land Registrars in Spain are not usually aware of this peculiarity of English law and therefore in many occasions this issue is not picked up when dealing with the Spanish estate. However, this situation can cause potential problems in the future, mainly as Notaries and Registrars are becoming more and more versed in international private law matters. The increased pressence of inmigration and North-Europeans retirees in Spain is forcing those professionals to update their knowledge of international private law at considerable speed and therefore are more likely to be able to detect scenarios like the one I have described above.

Having said that, what should you do if you marry and have assets in Spain?

If you have granted a Spanish Will before being married then it is advisable to grant a new one. If you have not granted a Spanish Will then there is nothing to fear, although it would still be advisable to grant one to ensure that you provide for your loved ones.

As always it is better to be safe than sorry or as we say in Spain “Más vale prevenir que curar”.

Mistakes made when granting a Spanish will – Part II

About two weeks ago I started a series of posts on the most common mistakes made when granting a Spanish Will. Now is time for another post.

In my previous post I made mention to the tax aspects of leaving the property or a share on a property to the surviving spouse. This time I want to talk about a mistake that is made after the signature of the Spanish will. I am talking about the granting of a Will in the UK.

Lets imagine the scenario. Mr Six-Pack grants a will in Spain and deals accordingly with his Spanish Estate. Fine, so far. Then he returns to the UK  and life goes on as normal. Around 5 years later he decides to change his UK will. He has had another child and wants to include the child in his UK Will. He then goes to a UK solicitor and grants a UK will where he deals with his estate in the UK. Unfortunately, he forgets to mention that he has a property in Spain and a Spanish will. The solicitor, unaware of the Spanish element, drafts the usual will which contains the following standard clause: I hereby revoke all my previous wills. Full stop. Nothing else is added. No clause saying “except those granted outside England and Wales”  for instance. By doing that, Mr Six-Pack is revoking his Spanish will. Obviously, this will not be discovered until Mr. Six-Pack has passed away and by then it will be too late to ask him if he really wanted to revoke the will.

The most likely interpretation of the said clause will be that Mr. Six-Pack did want to revoke his Spanish will and therefore any solicitor, based in UK or in Spain, who is in possession of both testaments will consider the Spanish, and any other will granted, revoked.

I have seen the above happening in more than one occassion. The name of the client was obvisouly not Mr Six-Pack and the casuistic is not necessarily the same but the truth is that the above happens quite often.

How to avoid it? Any person who has made a Spanish will should inform his solicitor to ensure that he does not revoke the Spanish will. At the same time, solicitors in the UK should always ask the question to their clients. In my firm we have a client questionnaire that is sent to the client prior to taking any instructions. The questionnaire always contains one paragraph where the client is asked on whether he/she has any assets abroad and whether a foreign will has been granted. This precaution can save the solicitor from more than one headache (and lawsuit). It also helps to ensure that the client’s wishes abroad for after his death are respected.

More next week.

Mistakes made when granting a Spanish will- Part I

As some of the readers of this blog are aware, I am a Spanish lawyer based in Manchester, UK. Most of my clients are British with interests or assets in Spain.  I think I have lost track of the number of Spanish wills I have drafted in the last 7 years since I came to the UK. I would say that the total number is getting close to 100.

In many occasions, clients ask for guidance on the tax side. You cannot do many miracles with Spanish wills as there is no nil rate band in Spain and Trusts are not recognised by the Spanish legal system but you can still manage to minimise your client’s tax liabilities if the will is properly drafted. However, in many occasions some clients are reluctant to listen to your advice and end up signing the will as they please. This is absolutely fine with me. It is their right in the end and their wishes you should always be respected. However, as a lawyer you always feel that the decision taken may not be the most appropriate from a legal or tax point of view. This is why I take the opportunity to write about some of the most common mistakes that I have seen when drafting Spanish wills.

The first and perhaps most important is the usual misconception that the surviving spouse is Spanish Inheritance Tax exempt. Many English clients extrapolate the situation in England, where the spouses do not pay tax, to Spain, thinking that the surviving spouse will not pay Inheritance Tax and then leaving the property on the second death to the children. This is a big mistake because the surviving spouse does pay Inheritance tax in Spain. In fact, the surviving spouse only benefits from an allowance of €15,956.87. Then on the death of the surviving spouse, the children or whoever inherits the assets will pay inheritance tax again.

A good way to avoid the above is setting up a usufruct-or life interest- for the surviving spouse. This means that the surviving spouse will inherit the right to use the asset and no one will be able to sell it without his/her consent. At the same time, the inheritance tax to be paid by the spouse will be much lower than the tax that would be paid should he/she inherit the asset in the first place. This system also allows the final beneficiaries, usually the children, to inherit the asset in stages and space their tax liability.

Another option, although this should only be used when there is a good relationship between the different members of the family, is to leave the asset directly to the children. This is quite useful in those cases where a couple with children own a property in equal shares. The spouses can leave their share directly to the children on the understanding that the surviving spouse already owns 50% and therefore the children will respect the parent’s right to use the property. This option should never be used when problems can be expected from some of the beneficiaries, ie. one of them is willing to sell the asset or by no means should be used when the children are not the issue of the surviving spouse.

I realise that I have written too much. It is easy to extend your posts when you are enjoying the subject but I do not want the posts to be long and boring comments on the wonders of Spanish wills. I will therefore continue this topic on my next post. That will be next week.

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Charities, the EU and Spain- Tax differences

On the 10th February, the European Court of Justice issued an important Judgement in connection to the tax treatment to Charities within the UE in respect of Inheritance Tax. 

The Judgement is a response to the current variety of regulations within the Union in connection to Inheritance taxes and more particularly to Charities. In this specific case, a Belgian national appointed a German Charity as heir of her estate. Belgium laws grant attractive tax allowances to charities in respect of assets acquired via an inheritance but this only applies to charities domiciled in Belgium or in the deceased’s country of domicile. This treatment is clearly unfair and the aforementioned Judgment stated that the Belgian laws contravene article 63 of the Treaty of the Functioning of the European Union, as this implies a restriction to the free movement of capital within the state members.

This Judgment is extremely positive because it implies that European charities inheriting assets in another state member can benefit of the same allowances as the equivalent resident charity would do. However, this is of little help with my beloved country of origin. As some of you may know, Spain makes no allowances to Spanish charities when inheriting assets. On the other hand, UK Charities are usually Inheritance Tax exempt. This means that any UK charity inheriting assets in Spain will be tax exempt in the UK but will face an Inheritance tax bill in Spain.

In light of this, it may not prove convenient to leave in a will a Spanish asset to a UK charity because the latter will be charged quite heavily. Furthermore, there might be some legal problems to transfer the title over the asset as Spanish law does not recognise trusts and most UK charities are formed through a Trust.

As usual, proper legal guidance is advisable prior to leaving an asset in Spain to a UK charity through a will as there might be more legal and tax efficient ways to transfer the assets to the desired beneficiary.

About the “international wills” and other confusing type of wills

The World is getting smaller. There is no doubt about it. In this era of globalisation, we have seen British acquiring properties in other countries such as Spain, France, Italy, you name it. The British affair with sunny places is well known. Programs such as “A place in the sun” are a good example of it. However, not everyone has taken the necessary measures to deal with the assets they own abroad and to ensure that their loved ones are covered if something were to happen. I am talking obviously about the convenience of making a will.

Fortunately, not everyone has neglected this particular point as many have signed wills to cover their assets abroad. Some have even signed a peculiar type of will called “international will” which I personally find very confusing. This so called “international will” is presented to the testator as the panacea, the magic solution, the philosopher’s stone that will cover the entire testator’s worldwide estate.

I have seen a couple of these “international wills” and they have raised several alerts on me as they do not appear to comply with a specific jurisdiction and therefore are under the risk of being considered null. For instance, the wills I have seen were signed by English nationals and were supposed to deal with assets in Spain. However, the form of the wills was neither compliant with Spanish or English law. This could involve a potential nullity that will inevitably lead to intestacy as Spanish law states that it is possible to sign a foreign will as long as this complies with the formalities of the country where it’s signed. Unfortunately, the “international wills” I have seen do not comply with a specific jurisdiction and therefore the potential problems are numerous.

I might be wrong but my opinion is that if someone has signed one of those “international wills” then the person should seek legal advice as it may be the case that the will is not valid. He/she may still be on time to change the will and grant a proper will that will be recognised in the necessary countries.

About the convenience of making a separate Spanish will

Many Britons own property in Spain. The majority of them will know by now how convenient is to make a Will to cover their Spanish assets. They will have seen it on TV programs or read about in in the press or on the internet. However, I still find many cases where a Spanish Will has not been made.

Let’s clarify first that making a Spanish Will is not compulsory, as UK Wills can be perfectly valid in Spain. However, in reality, the situation proves to be quite different. The costs involved in having to translate and legalise a UK Will for its use in Spain are noticeably higher than those involved in making a Spanish Will. At the same time, the Spanish estate will suffer unnecessary delays as it will be necessary to wait for Probate in the UK prior to doing any paperwork in Spain. The problem becomes even bigger when the UK Will refers to terms of Common law such as “Trusts” and “Executors” which are not always recognised in the Spanish legal system. If that is the case, then applying a UK Will to the Spanish estate of a UK national could turn into a bureaucratic nightmare.

Last but not least, the British trend to appoint executors in their Wills could also become a problem as now, under Spanish law, any person mentioned in the Will should have a non-residents fiscal number, known as NIE. This implies that the executors would also have to obtain a NIE number, which could prove complicated and expensive when not being able to fly to Spain and request this in person.

It is then no exaggeration when we say that making a Spanish Will can simplify the process of winding up a Spanish estate.

The Spanish Will has to be restricted to the Spanish assets and should be drafted by a fully qualified Spanish lawyer or Spanish Notary. The former can be found in Spain and the UK (as some UK law firms do count with in house Spanish lawyers) and the latter can only be found in Spain.  The Will can be signed either in Spain or in the UK and will be valid as long as it complies with certain formalities.

To summarise, there is no obligation to have a Spanish Will to cover the Spanish assets but this is advisable and failing to make one would not benefit the beneficiaries of the deceased who will incur unnecessary  expenses and suffer complicated delays that could have been easily avoided.