If we sign our house over to our children now, does that mean they will avoid paying inheritance tax?
Not sure about Spanish law, but in the UK if you sign over a property you need to survive 7 years before IHT is avoided, this is to stop people from signing over properties to exempt themselves from IHT. If its a Spanish property you are signing over think you need a Spanish lawyer to get the correct information.
As with most things, tax and property related, there are different rules depending on where you are resident, where you have assets and how old your children are.
I tried doing a bit of research about this recently and when you look on the internet there are so many different opinions and scenario's.
I would strongly recommend you find a competent tax adviser who can give the correct advice regarding your particular needs.
So the question is.........does anyone have any recommendations for a good tax advisor regarding Spanish/UK taxation? :D
PS You have also reminded me that we need to get wills sorted on our next visit. :D
Intestacy rules in UK also changed on 01Oct. If you have a partner/wife even more important to have a simple Will to avoid any potential hardship. A Spanish property written into a UK Will over-rides Spanish rules, I'm told.
Your children would have to pay Donation tax. This is a tax on gifts and is the same amount as the Inheritance tax that they would have had to pay acording to Maria del Castro (Spanish Lawyer).
What is the threshold for inheritance tax? It's £325,000 in England?
I don't know about Spain, but in the UK you can't just sign over your property to your children and avoid IHT after seven years. You really have to give it to them and stop using it yourself, or pay a market rent if you do, to have the desired effect. This would apply to property in Spain if you are liable for UK tax. You would also be liable to Capital Gains Tax on the transfer unless the property is your main home and in the UK. Don't do anything without specialist advice on both tax regimes.
Hi Salbag I found this on the net. It may give you some idea. If you check the Agencia Tributarias website you should find the exact figures.http://www.mamsolicitors.com/skills-and-services/wills/inheritance-tax/
There is some non residents information here.... http://www.agenciatributaria.es/AEAT.internet/en_gb/Inicio_en_GB/La_Agencia_Tributaria/Campanas/No_residentes/Y_tambien_le_puede_interesar/Nota_informativa_sobre_impuesto_sobre_sucesiones_de_no_residentes/Nota_informativa_sobre_impuesto_sobre_sucesiones_de_no_residentes.shtml
and another article here....http://decottalaw.com/marriage-effect-inheritance-tax-spain/
It might be an idea to ask for professional advice .
Hi Salbag, I looked into this and took advise and 'sold' my property to my grand-daughter in order to avoid her paying IT. This obviously involves some payment of the taxes for buying and selling but I decided that it was a lot less than the IT. The selling price was calculated by the solicitor using a formuar based on the Valor Catastral and it is written into the Escritura that I have residentual rights to the property.
I think this would only work if you are exclusively resident in Spain for tax purposes, and have no UK property. You need to take UK tax advice as well if you are subject to UK tax in any way. The residence rights in the escritura will mean that the transaction is not effective in avoiding UK Inheritance Tax if you are liable for it.