It is a statistically proven fact that the pandemic has shaken up Spain’s family inheritance. Even reaching record numbers – in March, 19,446 homes inherited, which is a historic figure, according to INE (National Statistical Institute). However, this is also due to foreclosures and resulting layoffs. There are a number of problems that have arisen with the increase in inherited properties. A trend that experts believe will continue to increase because of Covid-19. There is no doubt that this is causing movement in the real estate market: rapid real estate sales, new properties available for short-term rentals, turning establishments into homes, price changes among many other doubts that citizens are experiencing. We will clarify these doubts throughout this article.
WHY THE DEVELOPMENT OF REAL ESTATE REFUNDS
As usual, there is no single reason. Each family and each individual has their own reasons that compel them to waive their right as an heir, even more so when the inherited property includes a house. Almudena Velázquez, legal director of the claims platform reclamador.es, notes that in recent years they have discovered, among other things, the reasons that lead to the renunciation of inheritance. This is mainly due to the serious economic crisis that Spain has been experiencing for the last couple of years, and it seems that its effects will not stop, especially during this pandemic, when the vast majority of the population has been or continues to live. in a situation of dismissal.
It doesn’t help that the taxes that need to be paid to receive an inheritance represent a significant cost that not everyone can bear. These are 1) inheritance tax (Impuesto de Sucesiones) and 2) capital gains (Plusvalía). However, in some regions of Spain, important discounts and bonuses are granted to heirs with a close degree of consanguinity, but, for example, this is already lost when we talk about inheritance between uncles and nephews. And in any case, we must not forget about regions where these reductions are not carried out, receiving an inheritance can be devastating for the heir’s estate because of the financial consequences. After all, the amount will be the greater the period between the date the deceased acquired the property and the date of his death. That being said, heirs are burning holes in their pockets just because of taxes because debts, much like a mortgage, are also inherited. This is another reason why an heir may decide to disinherit.
Fatima Galisteo of Galisteo Abogados notes that deaths due to the pandemic we are experiencing are creating serious economic difficulties in some families over the acceptance of inheritance because the element of unpredictability intervenes. You don’t know when you will die, but when you reach a certain age, there is a need to say how you will dispose of your assets after your death.
COVID-19 was so disruptive that for many people it was impossible to make predictions, and heirs face a huge challenge in deciding whether to accept an inheritance. In the Madrid Community, this was hardly affected when the heirs were descendants (children, grandchildren) or ascendants (parents) because of the 99% tax cut. This is not the case when the heirs are brothers or nephews who do not benefit from this bonus.
“The real tax that we dare to classify as confiscatory and unjust is the incremental increase in the value of urban land, commonly known as” plusvalía “of the dead. It taxes the hypothetical benefit that the acquisition increases the value of the land from the moment its parents bought it “, says Galisteo. As an example, for a house that is not ordinary, which the parents acquired more than twenty years ago (sometimes more than fifty, although the limit for calculating the tax is twenty) with a cadastral value of 50,000 euros, the tax amounts to 8,700 euros. The discount is only available on the transfer of permanent residence if the purchasers are children or a widowed spouse..
A case in point: Doma Remedios (fictitious name) was forced to sell an apartment she inherited from her son to pay capital gains. Ms. Remedios has a pension that will henceforth be at risk based on the capital gains she receives from what she inherited from her son..
Other: Three nephews who were heirs to the apartment have renounced the inheritance due to inability to pay inheritance tax and capital gains.
Can I TAKE THE RIGHT TO LEAVE A LIQUIDITY TAX WITHOUT DISCHARGING THE INheritance?”
Almudena Velasquez notes that an estate sale is possible, but there are several things to consider:
- This sale must be made after the inheritance has been accepted and before it is distributed. This means that you will have to pay inheritance and capital gains tax in the form of income tax, and the buyer will have to pay transfer tax.
- The sale must be made after the inheritance has been accepted and before it is distributed.
- The specific assets of an inheritance are not sold by inheritance but by probate, which means that although the buyer does not gain the status of an heir, they put themselves in their shoes and therefore acquire both assets and debts.
- When it is sold to a third party, this must be disclosed to the remaining heirs, who will be entitled to purchase it at the same price.
Fatima Galisteo states that if there is money or financial products in the inheritance, the inheritance can be accepted and inheritance tax is paid with it. But in many cases there is no money among the inherited assets, only real estate that needs to be sold to pay the tax. But to be able to sell them, you must first accept the inheritance, and here arises a problem for heirs: 1.- Accept the inheritance with the risk that the property will not be sold within the time frame provided by the Treasury. us to pay the tax (1 year – actually 6 months, which can be extended to a year from the date of death – or, in special cases, up to 5 years) or 2. – Revoke the inheritance.
In these situations it is possible to transfer inherited assets, but it must be taken into account that the taxpayer is an heir and that they can sign a commitment to sell before acceptance, for tax purposes inheritance tax will be charged first. and then inheritance transfer tax, which means you must accept it before selling it..
It is not uncommon for investors to purchase real estate and, when taking an inheritance, also pay inheritance tax as part of the purchase price.
WHAT IT MEANS TO TAKE AN INheritance INTO RECOVERY
Almudena Velasquez of reclaimer.es reminds us that this is the only legal instrument by which we can inherit only assets, but not debts: by accepting an inheritance in favor of inventory, they will be paid by the inherited property. In this way, the beneficiary will not jeopardize his own assets.
This is a procedure that must be performed in the presence of a judge or a notary. In this way, it will be possible to settle the debts left by the deceased with the inherited property.
From Galisteo Abogados, they point out that accepting an inheritance implies acquiring the assets that a loved one leaves behind upon his death, as well as all his debts (or part of them if the inheritance is shared with other heirs). This will mean that they will become the property of the heirs and must be accepted along with their own assets, since the mere acceptance or rejection of an inheritance is final, it is impossible to accept an inheritance in part or with conditions.
For this reason, when it is known that the deceased has debts, it is very common practice to disclaim an inheritance, sometimes without calculating the debts and assets that could offset them. And there is an alternative to outright acceptance or rejection that many people are unaware of: accepting an inheritance in favor of stock. This formula is the only one that allows us to avoid inheriting debts because it separates the heir’s estate from the inheritance, allowing the heir to be liable for the deceased’s debts with the inherited assets and only to the extent of the amount he or she receives from the inheritance.
The first step is to take an inventory with an inheritance lawyer to assess the assets and debts of the deceased as well as derivative costs such as inheritance tax, municipal capital gains, notary public, property registry if there is an estate . In this first step, we find out whether the deceased had debts and, if so, whether the value of the assets covers them and what balance remains to the heirs after deducting the costs of processing the inheritance.
In addition, this procedure does not imply any obligation for the heir, since it aims solely at obtaining all the necessary information to know whether he can accept the inheritance without affecting his personal assets and the timeframe in which he must do so. And the fact is that, according to article 1023 of the Spanish Civil Code, the benefit of the inventory produces on the heir the effect of “not being obliged to pay the debts and other expenses of the inheritance, but since the assets of this estate reach . ” Thus, by accepting the inheritance in favor of the inventory, the heir is liable for debts and other payments only to the extent of the assets included in it.
After the preliminary inventory, the heir receives information and the necessary guidance to decide whether he wishes to accept the inheritance, renounce it or take advantage of the inventory. In the latter case, the declaration must be made in the presence of a notary, together with a statement of the inheritance within 30 days from the time you learned of your beneficial position, and although the presence of a lawyer in this part is not necessary, it is usual and most advisable to be responsible for preparing all the documentation and accompanying the heir throughout the process, because any action to prevent the inclusion of goods or rights in the inventory or the execution of acts of disposition of any property before the
What happens to the estate of one of the children
In reclaimer.es, they found that one of the most unknown assumptions in inheritance management is not knowing that donations affect inheritance.
According to the Civil Code, all heirs must contribute to the property, estate, or its value that they would have received during the lifetime of the deceased. This operation is what is legally called asset matching, and its practical application is that when dividing an inheritance, if there are more heirs, as in the case, the property gifted during life or its value will be computed as part of the portion of the inheritance of the one who received it..
When it comes to the administration of this inheritance, however, it is necessary to distinguish whether the donation was a matched or unmatched donation. If it is an uncontrolled donation, then in the distribution of the inheritance, the heir who received this donation without an estate pledge will not have to contribute to the inheritance unless it is an ineffective donation. This is excessive because it clearly harms the legal portion of the other heirs. It is important for this to be expressed in the deed of gift or in the will.
Fatima Galisteo points out that what was donated during life to a forced heir must be counted as inheritance for the calculation of the legal inheritance, unless the donor has agreed otherwise to make the donation. The inclusion of an apartment or money donated as an inheritance is called “colación” in the Spanish Civil Code.
So, if the parents said nothing when making the donation, the apartment will be counted as an inheritance, everyone inherits the same amount, and the donated apartment must be counted as the portion that is matched by the donee, which in case the value of the apartment was more than its fair share, you must pay the remainder of the excess. If it is not to be matched, the donation surplus will be allocated to one-third improvement and one-third free removal, so that you will not have to pay anything except what may be lacking to cover the legal other heirs.
What happens to an heir born of a lineage predating the father’s current family upon death and leaving nothing in the will
Almudena Velasquez, of reclamador.es, notes that this person is a forced heir and therefore the law passes a portion of the inheritance to him. The inheritance is divided into three parts, one of which is necessarily retained by the forced heir, which is known as strictly legal inheritance. Within this one-third, it is necessary to know how many other forced heirs are called to inherit and divide the inheritance among all the heirs. For example: the inheritance is valued at 300,000 euros and there are three children, one of whom qualifies. Strictly legitimate will be worth 100,000 euros and therefore it will correspond to 33,333 euros..
Fatima Galisteo emphasizes that children are forced heirs in relation to their parents and relatives in the ascending line and are entitled to a part of the inheritance called legal, which the deceased cannot dispose of. Its amount is two-thirds of the hereditary estate, although one of the said thirds may be used by the deceased for the betterment of the forced heirs whom he desires, and the other third is called strictly legal. The appropriate part of this last third (divided among all siblings) necessarily corresponds to him, even if his father entered into a new marriage and did not even name him in his will, although, if there is no agreement between the heirs, he will Have to go through the procedure of invoking the will..