A lot of clients come back to us with the question what the possibilities are to put the property in their childrens name. There are basically 3 ways to do that on the Costa del Sol.
First of all you need to have a look at your title deed of the property and see in who's name the property was put in the first place. Suppose that you are married in separation of goods than the name on the title deed is the actual owner of the property. In case you are married in community property than you are actually both property owners for 50% unless otherwise specified in the notarial deed.
For example: married in community property. The title deed of the property is in your husbands name and no specific arrangements are mentioned in the title deed, than 50% is owned by the husband and 50% is owned by the wife.
1) The property goes into inheritance after the passing of both parents. Because if bought in community property , by passing of 1 parent, only that part would go into inheritance.
If resident into EU/EEA you would benefit from the andalusian legislation:
- entitled to an exemption for levying inheritance tax of no less than 1 million euros per heir
- over 1,000,000 euro will benefit from a 99% exemption (per inheritor), meaning you only pay 1% over what exceeds the 1 million threshold.
That is if the the pre-existing wealth of the heir in not over a million at the time of inheritance.
Please note that after BREXIT , UK citizens will not be considered any longer EU/EEA residents and will NOT benefit from Andalusian legislation but will need to follow Spanish state legislation for inheritance.
This exemption of 1 million euro is applicable for:
- Group I: natural and adopted children under 21.
- Group II: natural and adopted children over 21, grand-children, great-grand children, spouses, registered civil partnerships, parents, adoptive parents, grandparents and great-grandparents.
2) Sell the property to your children
- Disadvantages
- you will need to pay transfer tax over the property
- plusvalia and capital gains will also be applicable
- the money needs to come from the childrens banking accounts. If comes from the parents it will be considered as a fraudulent sale
3) Donation
Since the middle of April 2019, new legislation came into force. Before donation tax was progressive and went from 7.65% to 36.5%. Now with the new legislation only 1% of the before calculated donation fee will actually need to be paid.
- 99% of the quota of the tax for acquisitions “inter vivos” is bonus. Meaning you would only pay a 1% of the resulting tax bill.
For example: the donation of € 990,000 valued property that before this reform had a tax cost of € 277,500 would now be reduced to € 2,775. An inheritance of € 990,000 for a single heir the tax would remain zero euros.
This regulation is only valid for:
- If resident into EU/EEA
- Group I: natural and adopted children under 21.
- Group II: natural and adopted children over 21, grand-children, great-grand children, spouses, registered civil partnerships, parents, adoptive parents, grandparents and great-grandparents.
You could also donate already the naked property to your children and keep the usufruct to yourselves. That way you can enjoy the property and the attached rights and income while the naked property is in your children's name. That way you avoid an inheritance tax over the full amount of the property.
Please note that after BREXIT , UK citizens will not be considered any longer EU/EEA residents and will NOT benefit from Andalusian legislation but will need to follow Spanish state legislation for donations.