From time to time, we are approached by clients saying about buying a property in my children’s names? Or partly in their names. But they are minors.
Yes, it is. However, there are complications that you need to be aware of.
The first thing we will ask you is why? Why do you want to buy the property in the names of your children? Not yours. Very often the answer is I was thinking to save inheritance tax. Of course, this is a valid consideration, however there are matters you need to be aware of.
The disadvantages are that firstly it will be very difficult to then sell that property until they are all of age. This is because you will not be the full legal owners and even though you are their legal representatives, the law in Spain is very protective of minors, so it is not possible to sell something intended for their benefit without the permission of a Judge.
A Judge will need a very good reason for approving a sale, preferring to wait until they are of age, so if it is because the parents want (or need) to sell, this will probably not be sufficient for approval to be given. Plus any Court process takes time and is expensive.
The next disadvantage is that, if there was a necessity, you could not obtain a mortgage on the property. Finance could not be raised by a minor, nor if a minor was a part-owner.
However, the biggest disadvantage is the risk in respect of taxes. When the transaction goes from the Notary, when the property is purchased, it goes to the Tax Office in Spain and the Land Registry to be registered. The Tax Office will see there are minor children and consider how can these children have gained the money to purchase a property? They are not working.
Of course, the likely answer or assumption by the Tax Office is that the children have been given the money or lent it by their parents. This is an early inheritance or a donation. They do not and cannot ask the question
so the Tax Office tends to assume and treats it has a hidden donation, probably sending a letter asking for payment of additional taxes.
And as such, the tax liability for a donation or early inheritance needs to be considered. A purchase should be prepared carefully to avoid any unexpected tax bills, so that as well as paying purchase tax, the parents do not incur additional donation tax as well.
Of course, children may have received money from an inheritance from grandparents or from elsewhere. But buying a property in children’s names, when they are minors, is something that needs careful consideration and advice from a Spanish lawyer.
All of the above is, of course, based on children being minors. If they are over the age of 18 then they are adults in the eyes of the law.
We can assist with property purchases, even with children involved (giving the appropriate advice) as long as based relatively nearby within our region or in a neighbouring region.
We can also deal with donations of property all over Spain. If a property is already owned by you and you have adult children, it may be advantageous for taxes to actually consider a donation. If you would like our advice on buying a property or donation, then please let us know and we will guide you according to your particular circumstances.