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Inheritance and gift tax: Your guide to how it works, who pays, and how much
26/09/2023
IN LIGHT of the news that four regions have axed inheritance and gift tax – either entirely, or for first-degree relatives – residents in Spain who have not had to deal with these as yet may not be clear on when it is payable, how much, or by whom.
Confusion is sure to arise among expatriates in particular – those who inherit property or money from relatives or friends in their home countries, or who are unsure whom to include in their wills in case their loved ones in their nation of origin are hit with a huge bill.
They may also be wondering whether it is best, when they become very elderly or if ever they are gravely ill, to sign over their home and cash to their chosen beneficiaries before they die, in order to reduce the workload for their executors when the time comes.
We checked in with one of Spain's largest high-street banks, the BBVA, which gave us the lowdown on how inheritance and gift tax works, and why it is such a big issue leading to some regional governments' decisions to reduce or axe it.
What is inheritance and gift tax?
A proportion of assets or funds inherited from a person who has died, or transferred to you when the owner is still alive, is paid to the regional government of whichever of Spain's 19 autonomous communities the original owner lived in – 15 regions on the mainland, plus Ceuta, Melilla, the Balearic and the Canary Islands.
'Gift tax' relates to when a property, investment, land or other significant part of someone's estate is transferred to them without payment – perhaps if the owner is very elderly or knows they are terminally ill, and wants to save the beneficiaries of their will the time and paperwork involved in the transmission after their death.
'Inheritance tax' is paid when the transmission happens after the owner's death, at their request or, in the absence of a will, to their next of kin.
There is no set percentage charged on this type of tax; the figure depends upon individual regional governments' criteria, and rises in line with the value of the inheritance or donation in vivo.
Typically, it can be as low as 7.65%, or as high as 34%, and the figure decreases in line with closeness of family ties between the original owner and the beneficiary, through discounts applied.
Can I pay inheritance or gift tax out of the assets I receive?
You cannot usually pay inheritance tax out of the funds inherited – as in, if someone leaves you their house in their will, you cannot sell or remortgage the property to pay the tax. This has to be paid first, although it may be possible to acquire an unsecured bank loan to do so, then pay it back through a remortgage or sale.
The recipient of the inheritance or in vivo donation is liable for the inheritance tax, meaning the benefactor cannot pay it on your behalf or make arrangements to do so after their death.
In the case of life assurance policies, for example, some insurance companies underwriting these allow the beneficiary to release a set portion of the funds in advance to cover inheritance tax.
Note that there is a difference between 'life assurance' and 'life insurance': The latter is designed to cover a specific financial risk, such as paying off the policyholder's mortgage if they die before the end of the term, whilst 'assurance' is a form of savings, paying out a lump sum or an income to a named beneficiary after the policyholder's death.
Where is inheritance and gift tax paid?
In Spain, inheritance tax is paid to the government of the region the deceased was registered as resident in at the time of their death, even if the property or funds are based somewhere else, such as in a different region or overseas.
Gift tax, where an 'inheritance' is transferred to the future inheritor by the owner before they die, is paid to the government of the region where the recipient lives.
If the in vivo donation is property, or fixed assets – land, buildings or similar – gift tax is paid to the government of the region where this is based.
This means if the beneficiary lives abroad in a country where no such tax exists, they will not have to pay gift tax where a live donor gives them a sum of money, life assurance policy, shares, or similar.
If that same person living abroad is given a house or piece of land by the owner before the latter's death, they will have to pay gift tax to the government of the region where the property is located.
Should the beneficiary living abroad inherit a person's home or money after the owner has died, they will pay inheritance tax to the government of the region where the deceased owner was living at the time.
If, however, a person living in Spain receives an inheritance of a property or funds from someone living in a different country, any inheritance tax they pay will be to the authorities in that country, not in Spain.
Where a Spanish resident receives an in vivo donation of a property from someone living abroad, they will pay any gift tax due to the government of that country.
But if someone living in Spain receives money as a live donation from a benefactor abroad, the Spanish resident will have to pay gift tax to the government of the region where he or she lives.
A person living in Spain inheriting funds after the death of an owner living in a country where inheritance tax does not apply will not have to pay inheritance tax in Spain, but depending upon the sum left to them, may well have to pay income tax on it.
As a general guide, Spain's tax authorities will investigate any sums of money landing in a resident's bank account totalling €2,000 or more, unless it is clear this is their wages or earnings as a self-employed person.
Banks are required by law to flag up these amounts, or any other figure they consider unusually high for the account holder, to the tax authorities.
How do reductions on inheritance and gift tax work?
Independently of the value of the property or funds, which dictates the percentage of tax due, discounts apply in line with closeness of family ties.
'Group 1' beneficiaries are the deceased's children, including adopted children, aged 20 or under, and receive the largest discount.
'Group 2' beneficiaries are the deceased's biological or adopted children aged 21 or over, their legal spouses, or parents.
Note that the description of 'biological children' does not cover those given up for adoption or conceived through donating eggs, sperm or embryos to a clinic. The former are considered at law to be the legal descendants of the parents who adopted them, and the latter are deemed to be no relation whatsoever to the donor – in fact, at present, donations to IVF or reproduction clinics are strictly anonymous, whether or not the donor wishes them to be, and even the recipient is not allowed to know anything about the person they came from, or choose their own donor.
'Group 3' and 'group 4' are described by the BBVA bank as 'second- and third-degree relatives, ascendants [older generations], descendants [younger generations] through affinity [such as step-children, or nieces and nephews through marriage rather than blood relatives], fourth-degree descendants and ascendants through affinity, or beneficiaries more distant from the deceased'.
This effectively means that if you are no family relation of the deceased – perhaps if you inherit your best friend's home – you will pay the full amount of inheritance tax.
Non-cohabiting romantic partners who are not married to each other will fall into the latter end of group 4, along with friends, and will have to pay the full amount of inheritance tax.
Who is considered a beneficiary after the owner's death?
Even if you are not Spanish and your future beneficiaries do not live in Spain, you should still make a will via a Spanish notary for any funds or property you own in the country.
Spanish nationals are required by law to leave a minimum of a third of their assets to their children or, if they do not have children, their nearest blood relative; even where this is not stipulated in their will, it is not possible to disinherit your children without applying to the courts. The only permitted legal reasons for doing so are where your adult children have been estranged from you for many years, have been abusive or violent, or neglected you in old age or declining health.
Non-Spanish nationals who want to make sure someone else inherits their assets in full – for example, a childless person who wishes to leave their home to a partner or spouse rather than their parents, siblings or cousins – will need to discuss this with their lawyer to find out which clauses they need to add to their will.
What if there's no will?
If a person dies intestate, their assets will be inherited by family members in order of closeness of ties: First, their children and other descendants, including adopted children, if they have any; if they are childless, their parents, followed by their grandparents if they are still living but the parents are not; if none of these applies, the assets will be offered to the deceased's spouse, if they are married.
For married couples who are cohabiting in the property subject to the inheritance, the surviving spouse is automatically entitled to what is known as usufructo: The right to continue living in the home until their own death.
Note that, in Spain, since the year 2005, same-sex couples have been legally allowed to marry in exactly the same way as a man and woman have always been able to. This means that, for the past 18 years, a deceased man's husband or a deceased woman's wife will be treated, for inheritance purposes, identically to the surviving spouse in mixed-sex marriages.
Where the deceased is single and childless with no surviving parents or grandparents, their siblings, if they have any, will be offered their assets.
If there are no siblings, the offer of the deceased's estate will continue down the family line – through aunts and uncles, cousins, nieces and nephews, and so on.
In the event there is no will and the deceased has no children, surviving blood relatives, 'affinity' relatives, or spouse, their assets will, as a last resort, become the property of the State.
How does this work in practice?
According to secretary-general of the Treasury Technicians' Syndicate (GESTHA), José María Mollinedo, most people offered an inheritance in Spain are entitled to a discount.
“Approximately 83.5% of those who receive an inheritance or in vivo donation are group 2 family members – descendants aged 21 and over, spouses, and ascendants - and account for 81.41% of taxable assets inherited,” Mollinedo explains.
“This means the majority, being group 2, only has to pay 44.33% of the total tax due.
“Group 3 beneficiaries represent a much smaller amount of taxable assets [the amount these more distant recipients inherit is much less], meaning they only need to pay around 45% of the total tax levied.”
Given that the percentage of tax payable works on a sliding scale in line with asset value, inheritance tax paid in Spain across the board is, as it turns out, relatively little.
Mollinedo says: “Group 2 beneficiaries, in 81.93% of cases, inherit less than €64,000, whilst just 13.54% inherit between €64,001 and €160,000.
“Only 4.53% of beneficiaries inherit more than €160,000, and those who inherit the highest amounts – over €800,000 – account for barely 0.28%.”
How the percentage payable is calculated
Briefly, this involves regional government tax collection, or Treasury, departments' applying a 'coefficient', or base rate, to the assets inherited, and then calculating this base rate in line with the tiers in place for specific asset values.
The base rate is anything from 1 to 2.4, and is set in accordance with the beneficiary's existing assets – whether they have multiple properties and substantial funds in their own name, or nothing at all, and everywhere in between these two extremes – combined with the family-tie 'group' they fall into.
Tiers of percentage by value of inheritance differ by region and may change from year to year or in accordance with whichever regional government comes into power following the four-yearly elections.
Hypothetical scenarios
Purely as an example, let's say a bottom-tier figure of 8% applied to assets valued at under €100,000, and a top-tier figure of 34% applied to assets valued at over €1,000,000.
Here, a person who inherited €50,000 in assets would pay 8% of this, or €4,000, if the property and wealth they held in their own name prior to this and their family 'distance' from the deceased gave them a coefficient, or base rate, of 1. If that same person was much wealthier and unrelated to the deceased, giving them a base rate of 2.4, they would pay €9,600.
Where the person who earns a coefficient of 1 inherits €2,000,000, the percentage of tax in the top tier means a full bill of €680,000, or if they were placed in the least-lucrative coefficient, of 2.4, the tax bill could be up to €1,632,000.
However, discounts then apply for degrees of family separation where applicable, ranging from 95% down to 0%, differing by regional government. This might mean that, whilst the full tax bill appears to swallow up the bulk of the inheritance, the actual sum due may make only a very minimal dent in it.
How soon do you have to pay inheritance or gift tax?
If you inherit assets from someone who has died, you are required to declare it within six months of the person's death being confirmed. You will then receive a formal bill from the tax authority with a specified deadline, normally a matter of weeks, to hand over the amount due.
The declaration deadline reduces to 30 days when you receive a donation in vivo.
If you cannot pay the sum in full, you may be able to apply for staggered payments; typically, you will suggest a specific number of payments and the Treasury will write back to you to confirm or deny.
Once the tax is paid in full, the inheritance or donation passes into your name.
If you miss the deadline, this does not necessarily mean you have missed out on the inheritance – but interest charges will begin to apply, maybe with penalty fees on top.
Where you are named in a will or are an automatic beneficiary due to being the nearest blood relative, the inheritance will not necessarily be 'lost' due to delays in making the tax declaration. You will usually have to formally renounce, or refuse to accept, the inheritance for this to happen.
Why would anyone refuse an inheritance?
The usual reason for renouncing, or refusing, an inheritance is because the beneficiary cannot afford to pay the tax out of their own funds in advance of receiving it, cannot obtain a loan to do so, or the benefactor has outstanding debts that the beneficiary does not want to have to be saddled with. Other reasons might involve a property or piece of land being left to someone who considers them to be financially worthless, or too much hassle – perhaps if they would be difficult to sell, are based too far away, and would involve considerable expense, time and work in their upkeep.
For the majority, though, it is the amount of the inheritance tax and the impossibility of paying it that leads to beneficiaries renouncing the assets, especially where the deceased has no family or spouse and has left their estate to friends.
Pandemic sparks spike in inheritance refusals
The Covid-19 pandemic in 2020 led to rising numbers of deaths and, with these, a rising number of inheritance refusals – over 44,000 beneficiaries signed formal refusals that year.
By 2021, the second year of the pandemic and before the vaccine roll-out was completed – and taking into account the time taken to process inheritances, meaning the increased mortality of 2020 continued to influence the situation – the number of wills executed multiplied yet again, and the number of inheritances renounced more than doubled from 2020.
This means the State has ended up being left with more buildings and land than ever before, and some of it difficult or impossible to sell, but needing to be maintained and the usual bills and taxes on them still paid.
As a result, the State has not necessarily gained financially from the spike in inheritances being refused.
Changing demographic affects inheritances
Also, increasing numbers of benefactors have no family to leave their assets to. Spain's birth rate has been in free-fall for over 30 years, with three-quarters of women aged 35 and over not having had children, even if they want to, and as is the case in most of the western world, divorces and people choosing to remain single constantly rising in number.
Meanwhile, life expectancy in Spain is among the highest on earth, and consistently more so for women, who are now more likely to be living alone, especially after middle age. Shrinking families, more single people, more transient and shorter-term romantic partnerships, and more unmarried couples living together, along with rocketing property values since the turn of this century, mean those relatives who automatically benefit from a will are likely to receive much higher inheritances, resulting in higher taxes that are far harder to pay, and are gradually becoming more distant along the family line from the deceased, which reduces the discounts they are able to claim.
This changing world, particularly post-pandemic, is what has led several regional governments to rethink their stance on inheritance tax.
Related Topics
IN LIGHT of the news that four regions have axed inheritance and gift tax – either entirely, or for first-degree relatives – residents in Spain who have not had to deal with these as yet may not be clear on when it is payable, how much, or by whom.
Confusion is sure to arise among expatriates in particular – those who inherit property or money from relatives or friends in their home countries, or who are unsure whom to include in their wills in case their loved ones in their nation of origin are hit with a huge bill.
They may also be wondering whether it is best, when they become very elderly or if ever they are gravely ill, to sign over their home and cash to their chosen beneficiaries before they die, in order to reduce the workload for their executors when the time comes.
We checked in with one of Spain's largest high-street banks, the BBVA, which gave us the lowdown on how inheritance and gift tax works, and why it is such a big issue leading to some regional governments' decisions to reduce or axe it.
What is inheritance and gift tax?
A proportion of assets or funds inherited from a person who has died, or transferred to you when the owner is still alive, is paid to the regional government of whichever of Spain's 19 autonomous communities the original owner lived in – 15 regions on the mainland, plus Ceuta, Melilla, the Balearic and the Canary Islands.
'Gift tax' relates to when a property, investment, land or other significant part of someone's estate is transferred to them without payment – perhaps if the owner is very elderly or knows they are terminally ill, and wants to save the beneficiaries of their will the time and paperwork involved in the transmission after their death.
'Inheritance tax' is paid when the transmission happens after the owner's death, at their request or, in the absence of a will, to their next of kin.
There is no set percentage charged on this type of tax; the figure depends upon individual regional governments' criteria, and rises in line with the value of the inheritance or donation in vivo.
Typically, it can be as low as 7.65%, or as high as 34%, and the figure decreases in line with closeness of family ties between the original owner and the beneficiary, through discounts applied.
Can I pay inheritance or gift tax out of the assets I receive?
You cannot usually pay inheritance tax out of the funds inherited – as in, if someone leaves you their house in their will, you cannot sell or remortgage the property to pay the tax. This has to be paid first, although it may be possible to acquire an unsecured bank loan to do so, then pay it back through a remortgage or sale.
The recipient of the inheritance or in vivo donation is liable for the inheritance tax, meaning the benefactor cannot pay it on your behalf or make arrangements to do so after their death.
In the case of life assurance policies, for example, some insurance companies underwriting these allow the beneficiary to release a set portion of the funds in advance to cover inheritance tax.
Note that there is a difference between 'life assurance' and 'life insurance': The latter is designed to cover a specific financial risk, such as paying off the policyholder's mortgage if they die before the end of the term, whilst 'assurance' is a form of savings, paying out a lump sum or an income to a named beneficiary after the policyholder's death.
Where is inheritance and gift tax paid?
In Spain, inheritance tax is paid to the government of the region the deceased was registered as resident in at the time of their death, even if the property or funds are based somewhere else, such as in a different region or overseas.
Gift tax, where an 'inheritance' is transferred to the future inheritor by the owner before they die, is paid to the government of the region where the recipient lives.
If the in vivo donation is property, or fixed assets – land, buildings or similar – gift tax is paid to the government of the region where this is based.
This means if the beneficiary lives abroad in a country where no such tax exists, they will not have to pay gift tax where a live donor gives them a sum of money, life assurance policy, shares, or similar.
If that same person living abroad is given a house or piece of land by the owner before the latter's death, they will have to pay gift tax to the government of the region where the property is located.
Should the beneficiary living abroad inherit a person's home or money after the owner has died, they will pay inheritance tax to the government of the region where the deceased owner was living at the time.
If, however, a person living in Spain receives an inheritance of a property or funds from someone living in a different country, any inheritance tax they pay will be to the authorities in that country, not in Spain.
Where a Spanish resident receives an in vivo donation of a property from someone living abroad, they will pay any gift tax due to the government of that country.
But if someone living in Spain receives money as a live donation from a benefactor abroad, the Spanish resident will have to pay gift tax to the government of the region where he or she lives.
A person living in Spain inheriting funds after the death of an owner living in a country where inheritance tax does not apply will not have to pay inheritance tax in Spain, but depending upon the sum left to them, may well have to pay income tax on it.
As a general guide, Spain's tax authorities will investigate any sums of money landing in a resident's bank account totalling €2,000 or more, unless it is clear this is their wages or earnings as a self-employed person.
Banks are required by law to flag up these amounts, or any other figure they consider unusually high for the account holder, to the tax authorities.
How do reductions on inheritance and gift tax work?
Independently of the value of the property or funds, which dictates the percentage of tax due, discounts apply in line with closeness of family ties.
'Group 1' beneficiaries are the deceased's children, including adopted children, aged 20 or under, and receive the largest discount.
'Group 2' beneficiaries are the deceased's biological or adopted children aged 21 or over, their legal spouses, or parents.
Note that the description of 'biological children' does not cover those given up for adoption or conceived through donating eggs, sperm or embryos to a clinic. The former are considered at law to be the legal descendants of the parents who adopted them, and the latter are deemed to be no relation whatsoever to the donor – in fact, at present, donations to IVF or reproduction clinics are strictly anonymous, whether or not the donor wishes them to be, and even the recipient is not allowed to know anything about the person they came from, or choose their own donor.
'Group 3' and 'group 4' are described by the BBVA bank as 'second- and third-degree relatives, ascendants [older generations], descendants [younger generations] through affinity [such as step-children, or nieces and nephews through marriage rather than blood relatives], fourth-degree descendants and ascendants through affinity, or beneficiaries more distant from the deceased'.
This effectively means that if you are no family relation of the deceased – perhaps if you inherit your best friend's home – you will pay the full amount of inheritance tax.
Non-cohabiting romantic partners who are not married to each other will fall into the latter end of group 4, along with friends, and will have to pay the full amount of inheritance tax.
Who is considered a beneficiary after the owner's death?
Even if you are not Spanish and your future beneficiaries do not live in Spain, you should still make a will via a Spanish notary for any funds or property you own in the country.
Spanish nationals are required by law to leave a minimum of a third of their assets to their children or, if they do not have children, their nearest blood relative; even where this is not stipulated in their will, it is not possible to disinherit your children without applying to the courts. The only permitted legal reasons for doing so are where your adult children have been estranged from you for many years, have been abusive or violent, or neglected you in old age or declining health.
Non-Spanish nationals who want to make sure someone else inherits their assets in full – for example, a childless person who wishes to leave their home to a partner or spouse rather than their parents, siblings or cousins – will need to discuss this with their lawyer to find out which clauses they need to add to their will.
What if there's no will?
If a person dies intestate, their assets will be inherited by family members in order of closeness of ties: First, their children and other descendants, including adopted children, if they have any; if they are childless, their parents, followed by their grandparents if they are still living but the parents are not; if none of these applies, the assets will be offered to the deceased's spouse, if they are married.
For married couples who are cohabiting in the property subject to the inheritance, the surviving spouse is automatically entitled to what is known as usufructo: The right to continue living in the home until their own death.
Note that, in Spain, since the year 2005, same-sex couples have been legally allowed to marry in exactly the same way as a man and woman have always been able to. This means that, for the past 18 years, a deceased man's husband or a deceased woman's wife will be treated, for inheritance purposes, identically to the surviving spouse in mixed-sex marriages.
Where the deceased is single and childless with no surviving parents or grandparents, their siblings, if they have any, will be offered their assets.
If there are no siblings, the offer of the deceased's estate will continue down the family line – through aunts and uncles, cousins, nieces and nephews, and so on.
In the event there is no will and the deceased has no children, surviving blood relatives, 'affinity' relatives, or spouse, their assets will, as a last resort, become the property of the State.
How does this work in practice?
According to secretary-general of the Treasury Technicians' Syndicate (GESTHA), José María Mollinedo, most people offered an inheritance in Spain are entitled to a discount.
“Approximately 83.5% of those who receive an inheritance or in vivo donation are group 2 family members – descendants aged 21 and over, spouses, and ascendants - and account for 81.41% of taxable assets inherited,” Mollinedo explains.
“This means the majority, being group 2, only has to pay 44.33% of the total tax due.
“Group 3 beneficiaries represent a much smaller amount of taxable assets [the amount these more distant recipients inherit is much less], meaning they only need to pay around 45% of the total tax levied.”
Given that the percentage of tax payable works on a sliding scale in line with asset value, inheritance tax paid in Spain across the board is, as it turns out, relatively little.
Mollinedo says: “Group 2 beneficiaries, in 81.93% of cases, inherit less than €64,000, whilst just 13.54% inherit between €64,001 and €160,000.
“Only 4.53% of beneficiaries inherit more than €160,000, and those who inherit the highest amounts – over €800,000 – account for barely 0.28%.”
How the percentage payable is calculated
Briefly, this involves regional government tax collection, or Treasury, departments' applying a 'coefficient', or base rate, to the assets inherited, and then calculating this base rate in line with the tiers in place for specific asset values.
The base rate is anything from 1 to 2.4, and is set in accordance with the beneficiary's existing assets – whether they have multiple properties and substantial funds in their own name, or nothing at all, and everywhere in between these two extremes – combined with the family-tie 'group' they fall into.
Tiers of percentage by value of inheritance differ by region and may change from year to year or in accordance with whichever regional government comes into power following the four-yearly elections.
Hypothetical scenarios
Purely as an example, let's say a bottom-tier figure of 8% applied to assets valued at under €100,000, and a top-tier figure of 34% applied to assets valued at over €1,000,000.
Here, a person who inherited €50,000 in assets would pay 8% of this, or €4,000, if the property and wealth they held in their own name prior to this and their family 'distance' from the deceased gave them a coefficient, or base rate, of 1. If that same person was much wealthier and unrelated to the deceased, giving them a base rate of 2.4, they would pay €9,600.
Where the person who earns a coefficient of 1 inherits €2,000,000, the percentage of tax in the top tier means a full bill of €680,000, or if they were placed in the least-lucrative coefficient, of 2.4, the tax bill could be up to €1,632,000.
However, discounts then apply for degrees of family separation where applicable, ranging from 95% down to 0%, differing by regional government. This might mean that, whilst the full tax bill appears to swallow up the bulk of the inheritance, the actual sum due may make only a very minimal dent in it.
How soon do you have to pay inheritance or gift tax?
If you inherit assets from someone who has died, you are required to declare it within six months of the person's death being confirmed. You will then receive a formal bill from the tax authority with a specified deadline, normally a matter of weeks, to hand over the amount due.
The declaration deadline reduces to 30 days when you receive a donation in vivo.
If you cannot pay the sum in full, you may be able to apply for staggered payments; typically, you will suggest a specific number of payments and the Treasury will write back to you to confirm or deny.
Once the tax is paid in full, the inheritance or donation passes into your name.
If you miss the deadline, this does not necessarily mean you have missed out on the inheritance – but interest charges will begin to apply, maybe with penalty fees on top.
Where you are named in a will or are an automatic beneficiary due to being the nearest blood relative, the inheritance will not necessarily be 'lost' due to delays in making the tax declaration. You will usually have to formally renounce, or refuse to accept, the inheritance for this to happen.
Why would anyone refuse an inheritance?
The usual reason for renouncing, or refusing, an inheritance is because the beneficiary cannot afford to pay the tax out of their own funds in advance of receiving it, cannot obtain a loan to do so, or the benefactor has outstanding debts that the beneficiary does not want to have to be saddled with. Other reasons might involve a property or piece of land being left to someone who considers them to be financially worthless, or too much hassle – perhaps if they would be difficult to sell, are based too far away, and would involve considerable expense, time and work in their upkeep.
For the majority, though, it is the amount of the inheritance tax and the impossibility of paying it that leads to beneficiaries renouncing the assets, especially where the deceased has no family or spouse and has left their estate to friends.
Pandemic sparks spike in inheritance refusals
The Covid-19 pandemic in 2020 led to rising numbers of deaths and, with these, a rising number of inheritance refusals – over 44,000 beneficiaries signed formal refusals that year.
By 2021, the second year of the pandemic and before the vaccine roll-out was completed – and taking into account the time taken to process inheritances, meaning the increased mortality of 2020 continued to influence the situation – the number of wills executed multiplied yet again, and the number of inheritances renounced more than doubled from 2020.
This means the State has ended up being left with more buildings and land than ever before, and some of it difficult or impossible to sell, but needing to be maintained and the usual bills and taxes on them still paid.
As a result, the State has not necessarily gained financially from the spike in inheritances being refused.
Changing demographic affects inheritances
Also, increasing numbers of benefactors have no family to leave their assets to. Spain's birth rate has been in free-fall for over 30 years, with three-quarters of women aged 35 and over not having had children, even if they want to, and as is the case in most of the western world, divorces and people choosing to remain single constantly rising in number.
Meanwhile, life expectancy in Spain is among the highest on earth, and consistently more so for women, who are now more likely to be living alone, especially after middle age. Shrinking families, more single people, more transient and shorter-term romantic partnerships, and more unmarried couples living together, along with rocketing property values since the turn of this century, mean those relatives who automatically benefit from a will are likely to receive much higher inheritances, resulting in higher taxes that are far harder to pay, and are gradually becoming more distant along the family line from the deceased, which reduces the discounts they are able to claim.
This changing world, particularly post-pandemic, is what has led several regional governments to rethink their stance on inheritance tax.
Related Topics
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