thestens

Hi. My mum, who is 88, owns a small house in Spain. She has made a Spanish will, leaving the house to me, her only child. The house is worth about 90 000 euros. Would she be better to give it to me now while she is alive or to leave it to me? At present she pays bills, etc but I worry what may happen if she is no longer able to do that - would it be easier and / or finacially advantageous fro us to own it? If so do we just go to a solicitor?
Thanks.

snikpoh

Firstly, I think there are some basic questions;

• are you Spanish resident?
• do you have an NIE?
• do you live in Spain?

If you've answered no to those then it may be prudent to get an NIE now.

If the house is transferred now, then I think you will incur a 7% transfer tax but may well then not have to pay succession tax.

I think the best course of action (in my opinion) would be to seek legal advice in Spain.

You may also find that you may have to pay IHT in UK as well as succession tax here. [I think I'm leaning towards transferring it now.]

Fred James

It could be worse than that!

It may be treated as a gift and also taxed immediately at the same rate as if it was an inheritance. In this case, a non resident would have to pay up to about €8000. In the UK you can make a gift tax free so long as the donor lives for another 7 years - not so in Spain.


As Snikpoh said - get some good advice from a Spanish lawyer as there are some regional differences in the law.

bil

If you are in the UK, and pay tax in the UK, and if the Spanish inheritance was taxed under UK law, then transferring it is a good idea.

HOWEVER. It is important that you get professional advice. If your mother gives it to you, then she must have absolutely no 'interest' in it, ie can't live in it, and, in addition there might be problems if she used it as a holiday home.

There are other methods, such as becoming a tenant in common, which is what we did with my mother's house when we lived with her prior to her death. Both my wife and I had a third value in the house, so that only one third of it was liable to death duty, and that at a reduced value, because who would buy a third of a property?

You don't have to solve all of the problem, just enough to get it under the limit.

owever, my advice is a decade out of date, so it really is important to get up to date pro advice.

Deal with this asap, as sometimes it needs to be done 7 years before death.

Fred James

Where you live or pay tax is more or less irrelevant. Gift tax and inheritance tax (it's the same tax) is always paid in Spain on Spanish assets.

If the inheritance or gift is also liable to tax in the UK then any tax paid in Spain may be offset against any UK tax but the Spanish taxman has first call on the tax and he will want the money before the property can be sold.

The options of shared ownership where the old person retains the right to live in the house don't apply if it is not a permanent residence.

For non resident property owners there are very few avoidance options apart from setting up trusts etc which can be expensive and complicated.

angiescarr

Agreed, However,
One word of advice. Don't, Whatever you do, ever give power of attorney to your Spanish lawyer, or allow mum to do so. I have heard very nasty stories about this!

EsuriJohn

In Spain the old person would retain a usufruct which means they could live there unencumbered. This does not happen in the UK. On first death the new owners would own the property outright and the usufruct would disappear. Can't comment on immediate transfer costs but there are bound to be some and taxes on top.

Fred James

The problem is that the OP hasn't said whether her Mum lives in the house or just owns it. It makes a huge difference to the options available.

Chiclanagir

What about inheritance tax if you are over 65 and a Spanish resident?

thestens

Thank you all for your replies. We are not Spanish residents and my mum does not live in the house. As you suggest, we need to see a Spanish lawyer. We don't want to get into a situation where we have to give money to the Spanish gov straight away if it is gifted as we aren't planning on selling the house at present. We just want to avoid difficulties if my mum is still the owner but unable to visit any more as everything is her name - bank, water, electric, etc.
Just to add to the complications, I have just found out that she hasn't paid any local taxes since 2001 - what do we do about that????

cricketman

Prepare yourself for a large bill!

Any debts belonging to a house gets transfered to the new owners when it is transferred/sold.

If you havent paid the taxes for nearly 10 years then I'd be worried whether the property is actually recognised as legal. A trip to your town hall will sort it out.

thestens

Any idea how much the taxes are each year??

Fred James

I think you are confusing this with capital gains tax which you do not have to pay if you are over 65, a resident and have lived in the house for 3 years.

There are no age exemptions for over 65 for Inheritance Tax but residents do get some extra allowances etc in certain regions in Spain but not all.

angiescarr

There is another option which may be the least complicated. If Your mum isn't terribly attached to the house. She should consider selling the house now. Paying all the debts including the sales tax and back rates. Mum can then decide what she wants to do with what's left. You may then have a choice in the future whether to have a house in Spain or not.
Of course if she is very attached to the house. You may well have to 'deal with the consequences' of the gift or inheritance.

SueG

If you wish and no obligation give my firm a ring and we will go through your options with you at no cost and work out figures for you to decide what is best for your Mother.