A place in the sun

The administration of an estate in Spain is characterised by either one or two fundamental steps, depending on whether or not the deceased had a valid will. In the case of intestacy, a ‘declaration of heirs’ is required, whereby those entitled to represent all of the beneficiaries (often the children) sign a document that details the assets and liabilities of the estate, the names of those who are entitled to inherit the estate, and the nature and relative size of the various interests to be inherited.

The second step is for those entitled to inherit the estate in part or in whole, whether under the intestacy rules or by will, to ‘accept the inheritance’.

Specialist role

Documentation relating to the inheritance is signed before a notary, who must agree the content of each document. Where a valid will exists, only the acceptance of inheritance is required, as the will determines the distribution of the assets.

Hence, in order to complete the administration of an estate, the notary must agree with the beneficiaries, or their legal advisers, the legal basis on which the estate assets situated in Spain are deemed to pass.

The ease and speed with which a matter is handled will depend in great measure on the notary’s experience and understanding of cross-border succession matters. Choosing the right notary for the job is an important skill, best delegated to a specialist lawyer with experience in this field of law.

In the event of intestacy (where spouse, parents or issue survive) no real choice is possible, as often one notary, located in the municipality in which the property is situated, is uniquely competent to deal with the matter.

The starkest distinction between Spanish and English succession law may be the freedom of testamentary disposition in England as compared with the rules of forced heirship applicable in Spain, where heirs are entitled by operation of law to a proportion of the estate assets.

The valid will of a British national, wherever it is executed, will apply to any estate assets situated in Spain, subject to Spanish assets being expressly excluded. Whether or not forced heirship rules apply to estate assets situated in Spain will depend on whether English or Spanish law applies to those assets.

The default position according to Spanish law is that the deceased’s national law is applicable to his estate, so that the estate in Spain of a British national from England will be administered according to English law.

Notwithstanding that, the effect of the doctrine of renvoi as applied by the English courts is that moveable estate assets pass according to the law of the deceased’s domicile and immovable assets pass according to the law of the country in which they are situated.

The potentially uncertain effect of the doctrine of renvoi in this context has been considered by the Spanish Supreme Court on numerous occasions, which has sought to facilitate the matter by holding that only one body of law can apply to any one succession, as any other approach would ‘fragment the universality of the inheritance’. The vital question, therefore, is which body of law applies to the entire estate?

Narrowing down

The three most common scenarios that give rise to uncertainty in this area of law are: (a) where the deceased lived in his own home in the UK and had assets in Spain as well as in England; (b) where the deceased lived in Spain and had assets in Spain and a home in England; and (c) where the deceased lived in Spain in his own home, but had no assets in England or elsewhere.

Assets situated in Spain in scenarios (a) and (b) will pass according to English law, as either the deceased lived in England and so his moveable assets situated in Spain pass according to the law of his domicile, or immovable assets were situated in Spain and pass according to English law, because of the Spanish Supreme Court’s requirement that only one body of law may apply to one succession.

In both scenarios a grant ?of representation extracted in England will be accepted by a notary as ?sufficient evidence of the application ?of English law.

In scenario (c) any moveable assets situated in the UK will pass according to Spanish law as that is the law of domicile, as will real property situated in Spain due to its location. The effect of intestacy in this scenario is that the beneficiaries of the intestate estate will be determined according to Spanish rules of intestacy. The applicable rules are found either in the Spanish Civil Code, or in one of the six other regional succession laws that operate in Spain.

In many areas where British ?nationals tend to own holiday or retirement homes, such as the Costa Blanca and the Costa del Sol, the Spanish Civil Code applies. According to the code, where the testator does not leave any children or parents, the surviving spouse is entitled to inherit a life interest in two thirds of the estate and the other third absolutely.

Where the testator leaves children, they will inherit two thirds ?of the estate subject to the spouse’s ?life interest in 50 per cent of the children’s share, in which case the testator may leave one third of his ?estate without restriction.

The effect of intestacy is that children inherit in equal shares subject to a one-third life interest in favour of the spouse. If there are no children then parents inherit, subject to the spouse’s life interest in 50 per cent of the estate. Clearly, it is essential to avoid one’s ?assets being subject to these rules if ?at all possible.

Drawn out

Increasingly common is the scenario in which the retired couple sells their property in the UK and buys a home in the sun. Their pension continues to be paid from the UK into a Spanish bank account. There may be shares and other deposits in the UK. Upon the death of the husband the question is whether the wife inherits her late husband’s interest in the Spanish property, notwithstanding a will (English or Spanish) naming her ?as the sole beneficiary.

A potential difficulty arises, for example, where the husband leaves children from a previous marriage who claim rights of forced heirship. If a claim is made to enforce rights of forced heirship and a caution is placed on the property register by the children to restrict dealing with the property in question, it can take between three and five years to conclude proceedings, effectively freezing the asset that a spouse may have been hoping to sell and use for her retirement.

The effect of a successful claim could be that the spouse owns one third of her late husband’s interest outright and a life interest in half of the remaining two-thirds share, the children taking a bare interest in a one-third share of the property and the other third absolutely.

Litigation in Spain is a famously slow and cumbersome process. Taking into consideration the likely cost of litigation, best advice will almost always be to agree a formula to accept the inheritance, sell the property and divide the proceeds of sale between all those entitled, rather than risk the various interests being registered and the almost certain stalemate that such a scenario will produce.

 

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