Of all the issues that we discuss and provide information about on this site, inheritance law in Spain, is one of the most complex and we strongly advise anyone concerned about their affairs relating to this area to seek professional advice.
In the European Union alone, every member state has different laws in relation to death, inheritance and inheritance tax. They are usually in constant change and are complex. To have to encounter and work with them at the moment of loss of a family member or friend is extremely stressful and you may get lost in a quagmire if you try to do it on your own.
Similarly in making a Will for your self, if you have assets in the Spain as well as your country of your nationality, matters can get very complicated.
Some basic information –
Before 2012, inheritance law in Spain stipulated that, in the case of a foreigner deceased, the law to regulate her or his inheritance would be the law of their nationality.
So, in theory, the position was relatively simple: UK inheritance law was used to regulate the inheritance from UK nationals who die owning property in Spain. In the same way, Swiss law is called to regulate the inheritance from a Swiss national who dies owning property in Spain etc.
However there were contradictions in this system, which created confusion and conflicts. For example, UK inheritance law provides that the disposal of immovable assets (land and buildings, household and personal goods) abroad is governed by the law of the country where the property is situated and the disposal in inheritance of movable assets (bank accounts, life insurances, cars, boats/yachts, shares, bonds and other investments), is governed by the law from country of the last domicile.
French law confirms the inheritance law of the country where the deceased had the last domicile or residence. Similarly, Denmark Belgium, Switzerland, Finland, Germany, Sweden, Norway.
Why is it important to identify which inheritance law is applied to the estate?
Because there are critical differences between the Spanish and laws from other countries regarding wills and inheritance. The most important difference is that the Spanish have the figure of the “Compulsory” or “Obligatory Heirs” (Herederos Forzosos), which means that the testator cannot dispose from the full inheritance freely, and in whatever circumstances, he must leave the 66% of his inheritance for determinate persons called Obligatory Heirs (mainly descendants and spouses).
This system of “Obligatory Heirs” is common in countries like France, Belgium, Switzerland, Germany, Norway, Denmark, Sweden, Iceland, Norway, and Russia, in which the testator has the obligation to leave a percentage of his/her assets to determinate inheritors (usually surviving spouses and children). But, this system is different in the UK and USA.
In this way, for example, UK Inheritance law allows the free disposal of assets, transferring with total freedom the inheritance at the entire wish of the person. So, the testator has total freedom to leave whatever he/she wishes, to whomever he/she wishes.
With this system, it could happen that a UK citizen, with two sons, and with a property in Spain, can make a Spanish Will leaving his/her property to his/her friend, and that this last Will cannot be executed because, if Spanish laws are applied, then the 66 % of that property should be transferred to his sons, and only the remaining 33 % to be inherited by the testator’s friend.
This issue has moved towards clarity, with the reviewing of the legal situation in 2012 and passing of a new law, which will come into effect in August 2015. Although the UK has not signed up to it will be applied in Spain.
This law offers 2 options:
Option 1: You decide the law which will to govern your inheritance. So, if you are French, British, German, Norwegian, etc., you can decide on your Will or Probate, which is the law you want to be applied after your decease.
Option 2: Inheritance by country of permanent residence. If you have not stipulated on your Will anything in relation to the law that you wished to regulate your inheritance, then, Option 2 will be applied and defined as country in which you had you residence during the last 5 years.
In cases in which you have been living in different places, and/or the permanent residence is not clear, then, the law will be the one from the country in which you had the strongest connection during all your life – open to subjective interpretation of course.