If you are a foreign national living in Spain, or simply with assets in Spain and wish to ensure you have everything in order, by drafting a Will in Spain you will no doubt wish to know whether Spanish or English law would be applied to the distribution of your estate.
As a result of new inheritance laws in Spain, the legal framework has changed considerably, and in a good way.
Indeed, many are reviewing the preparations they have made for estate planning in the light of changes to European law that will affect those who are resident in Spain.
According to Article 9 of the Spanish Civil Code, the applicable law, regarding inheritance issues, is determined by the nationality of the deceased. The 8th subsection of the mentioned article specifies that, regarding the applicable law, there is no distinction made as a result of the nature or the location of the assets.
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1. EU Regulation 650/2012
That said, the law was changed as a consequence of the Regulation (EU) no 650/2012 of the European Parliament and of the Council of 4 July 2012, on “jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of Succession”.
Article 21 of that Regulation establishes, as a general rule, that “the law applicable to the succession as a whole shall be the law of the State in which the deceased maintained habitual residence at the time of death”.
Where, by way of exception, it is clear from all the circumstances of the case that, at the time of death, the deceased was manifestly more closely connected with a State other than the State whose law would be applicable under the previous paragraph, the law applicable to the succession shall be the law of that other State.
According to Article 22, a person may choose as the law that governs the succession of their assets as a whole, the law of that State whose nationality they possessed at the time of making the choice, or at the time of death.
These regulations entered into force on the 17th of August 2015.
If a person drafted a Last Will and Testament before this date, the law applicable to the succession can be chosen by the testator, as long as it complies with the rules stated in the European Regulation.
2. New Laws relating to Regional Inheritance Tax Allowances
Not unlike the UK, Spain has devolved the legal regulation of Spanish inheritance tax and allowances to the autonomous communities. Therefore, for those resident in any particular region, they can benefit from more - or less - generous allowances depending upon the autonomous community in which they live.
In particular Madrid, and now Andalucía stand-out as having dramatically reduced the burden of inheritance taxes.
However, an anomaly arose when the estates of non-residents or indeed those with beneficiaries who were non-resident in Spain. Up until a few years ago, these would have been deemed to fall under the regulations of the much less generous State level allowances rather than the regional allowances in which the estate was located.
However, following a judgment by the European Court, the Spanish parliament enacted Ley 26/2014, which came into force on January 1st, 2015.
The new legislation was enacted to ensure that EU citizens, though ordinarily resident in another European State, were able to apply any inheritance tax allowances available to residents of the region in Spain in which the assets of the inherited estate were located.
Furthermore, and particularly good news to British citizens following Brexit, the ambit of this new law was further extended by the Spanish Supreme Court in a ruling in 2019, to ensure that not just EU residents, but non-EU residents too could benefit from the more generous regional allowances.
3. Conclusion
The application of these new inheritance laws in Spain will have a direct impact requiring individuals to consider how any existing Wills have been drafted.
In summary, if you are planning to become resident in a European country other than the country of your nationality, such as say Spain, and you wish the rules of succession of your country of origin, for example England, to apply, then you must state this explicitly when you make a last Will and Testament in Spain. Otherwise, Spanish law will apply and the system of forced heirs that pre-determines the beneficiaries rather than permitting you to elect them, will apply.
