How to Avoid Inheritance Tax (Donation)

Posted in: Family Law

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Early Inheritance or Donation?

How to avoid inheritance tax (or in some cases reduce it). We have had a number of people approach us in the last year to deal with donating their properties to their adult children. The tax allowances in this Valencia region are currently very generous at 100,000€ tax free per adult child. (As long as they are not step children and blood relatives). They also are very generous in the Murcia region if your property is there. The timing is much better for donation or early inheritance now rather than leaving it until someone dies.

How to Avoid Inheritance Tax Or Reduce It

If the tax value of the property in the Valencia region (not market value) is 200,000€ or less. And if you have say two children jointly, then there would be no donation tax to pay currently, only costs. Or even sometimes for one child no tax. Of course, no tax is as good as it gets.

Which is why it is a good time to transfer a Spanish property in this area to your children to avoid inheritance tax, or save a great deal. Especially as the local Valencian government have said they are intending to erase or reduce tax free allowances. Thus the possibility to avoid inheritance tax or save some of it will not be possible much longer.

Costs of Donation Or Early Inheritance?

There will still be Notary fees, Land Registry costs, Solicitor fees, a town hall tax called plusvalía which is small. And a few other minor things. We can calculate these for you from a copy of your deeds and your last SUMA (IBI) bill. This shows the cadastral value (from which we can calculate the tax value). We can give you the costs for free.

Your children would need NIE numbers. We would need to know if the clients would all come to Spain for completion. Alternatively, we would need to do powers of attorney at home if we send you the drafts, which is better.

How long does it take to arrange a Donation Or Early Inheritance?

Timewise, once someone decides to go ahead, we need to make sure everyone has NIES. The clients pay a small deposit to start work and the balance a week before completion. The only thing that generally delays it is getting the powers of attorney executed. As if done in another country they need sending away for a Hague Apostille for international use. Whereas if done in Spain they are in the format already for Spanish use. Also if it is a rural area where a Military Authorisation is needed.

Please let us know if you are interested in donations as soon as possible, as it is urgent to get these transactions completed. This is a very effective way of to avoid inheritance tax in the future or drastically reduce it. We can start work now and have the ball rolling ready to complete as soon as lockdown is over. As it is clear the government will be pressing forward with their plans, to raise much needed income.