CLR

Hi

Can anybody direct me to a thread on this.

Or does anybody know what the tax situation is if for example:- a husband owns a property - dies and leaves it to his wife. Is there inheritance tax to pay?

Mitzyboy

Well I know what the situation is in Valencia prov. I thought it was a national law but people tell me its different in other places.

Here, if the house is in joint resident names and one dies leaving the spouse the property then there is very little, if any IHT to pay. I know this works in practice as a near neighbour was in that situation and paid nothing. Iirc though, the spouse has to keep the house for 10 years.

If however you die and leave the property / funds to a non resident then the IHT can be terrible. I have heard people say you can get around it by starting a UK Ltd company to take ownership, but I dont know if it actually works

CLR

My OH subscribes to a spanish newsletter and this UK Ltd company thing came up today. We are not residents (yet, and probably won't be for another few years). When we purchased our spanish home, I couldn't get out to Spain so the house went in Hubby's name. He was planning on making a spanish will when we are over next leaving it to me. Its ironic I paid for the house and if he dies, I will pay tax on my own money

I know this sounds a bit mercenary, but its something we need to address.

Mitzyboy

Its very important that you get a Spanish will drawn up to reflect your UK one, and get it notarised as well

snikpoh

Don't forget that as well as being liable for Spanish SUCCESSION tax (not IHT), you may also be liable for UK IHT! This can come as quite a shock to some, especially if you are non (Spanish) resident.

As Mitzy said, in Valencia the tax reduces to 1% between related residents (spouse, children etc.) and with allowances probably goes down to 0.

Fred James

http://britishexpats.com/forum/showt...&highlight=iht

CLR

Thanks Fred

A bit of bed time reading

Fred James

Be careful - the subject of IHT has been known to cause nightmares!

SueG

We discussed this in the office recently about purchasing property in a UK Company´s name and the general cconsensus of opinion is that unless you have mega bucks it is not a cost effective way of purchasing a property and certainly not if you have already bought in joint names and some bright spark is trying to persuade you to go down that route, because by the time you purchase the Company, been to the Notary to do the change and pay the relevant taxes it can cost more than the Inheritance Tax between resident spouses anyway.

erisaman

It is so easy to become complacent when looking at IHT or rather, the tax known in Spain as ISD. Yes, some folk are able to become resident and thus gain certain benefits, others are 'holiday home' owners and, for a variety of reasons, cannot commit to becoming residents.

It is those folk who will be hardest hit by the ISD, in my case, or rather that of my wife, it would have amounted to several thousands of pounds, with the added disadvantage that she would not be able to dispose of the property until the tax was paid.

Okay, the situation was/is made worse in our case as we own two properties, exacerbated by the fact that one is shared 50/50 in joint names, but the other (the more valuable property) is 100% in my name.

Having had a heart attack - I am thankful I have been spared and am endeavouring to counteract the situation, seemingly becoming a Philadelphian Lawyer, or rather - an Andulcian Lawyer.

I've not yet settled on a solution, my legal advisor did not give me the advice I was seeking, so I will have to look elsewhere. If the OP wishes to PM me then I will bring her up to date with my discoveries thus far.

Fred James

One solution proposed by both a lawyer and a bank manager is just forget to tell the authorities that someone has died. That's much easier for a non resident to do than a resident.

If they don't find out within 4 years and six months they cannot ask for the tax!

Mitzyboy

We're going to live to 125 years of age, we are!

erisaman

THAT was the advice given by my legal advisor but not acceptable to me. In this day and age, with the close relationship between Tax Authorities, can we really expect to get away with such concealment for one year? Even though for 4 years and six months ?

Fred James

Well apparently a lot of Spanish people do it.

I would agree that it is decidedly risky as Spain is beginning to get joined up computer systems.

If you get caught then there are fines and interest to pay but I guess some people just take the risk.

SueG

As you say this can be done. We have a client going to the Notary this Thursday whose wife died in 1997 and there is no tax payable. Before anyone flies into a rage it was not intentional but a very elderly gentleman who came to us for advice and a Spanish Will and did not realise that anything needed to be done - joint house so it must be his!! No Spanish Will either - had to go through all his wife's papers to see if I could obtain Probate in England and luckily we found some old shares so I was able to get Probate but then of course it had to be apostilled, translated and then to the Notary - costly exercise even if no tax payable.