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If you have moved to Mallorca it is important to review your estate planning to take the Spanish succession tax and succession law regime into account. You want to ensure that the right assets pass to the right people, at the right time and with as little tax as possible.

We all sleep better when we feel confident that our affairs are in order, and as we get older we think more about the legacy we will leave to future generations; specifically, how and to whom our assets will pass on our death.

Increasingly, estate planning is a major concern for our clients. You have worked hard to build up your wealth and want to pass it on to your children and grandchildren to help them as they make their way through life. However you want to ensure the money is used wisely, and at the time your heirs need it most. But how can you have control over what happens after you are gone? You may also have many years left in retirement yourself, and so need to continue to receive income or take capital in the meantime.

Here are some situations we often come across, which may resonate with you.

You want to leave money to your children but are concerned about how they will handle it at this stage in their life. Perhaps you also have concerns about whether their marriage will last. You would prefer it if they received their inheritance as they reach the end of their working life, and so can use the funds to ensure they have a comfortable retirement and do not have to worry about medical costs as they get older.

You want your grandchildren to receive a good education, without being saddled with debt, and would like to contribute to their university (or other course) fees. You would like them to have access to a certain amount of capital while they are at university, then receive the balance of their inheritance around the time they would be looking to buy their first property.

You may be able to set capital aside now to plan for the above situations, but need to leave other funds available for your and your spouse’s use through your retirement years – however long that may end up being. So you need to have full ownership of these funds now, with full withdrawal and income rights, but set up in such a way that they can easily pass to your chosen beneficiaries when you die. Ideally you want certainty of succession without the need for probate.

And then there is the significant issue of tax. As much as possible you would like all of your hard earned wealth to pass to your chosen heirs, rather than a large part of it going to the taxman. British expatriates living in Mallorca have both UK inheritance tax (which is based on domicile, not residence), and Spanish succession tax to contend with. The two tax regimes work very differently, and you also need to understand how the Spain/UK double tax treaty works in this case.

The solutions you use for your estate planning should therefore be tax favoured ones. And not just for inheritance tax purposes, but also during your lifetime, so that you can enjoy a tax efficient income today.

Wills are an essential part of estate planning, but are limited as to what they can achieve. If you want control and certainty, as outlined above, you need careful planning and tailor made solutions.

In our experience it is possible to structure your affairs, for both Spain and the UK, so that the right money passes to the right hands at the right time, at the same time as reducing tax during your lifetime and after it. And this does not need to involve complicated administration either.

It is however very important to use robust arrangements which are compliant in Spain and the UK. As an expatriate you are likely to live in one country, have heirs in another and possibly assets in other countries. Cross-border tax and estate planning has become more complex over recent years, and you need to ensure your arrangements would stand up to scrutiny by the taxman.

Creating and maintaining a good ‘estate plan’ is primarily about ensuring your wishes are carried out in the way you wish, but taking account of relevant legal and tax considerations. The plan needs to be flexible to accommodate events like more grandchildren, divorce, re-marriage within the family etc. It is vital that you review it on a regular basis, so if you set up your plan years ago it will be time for a review.

Estate planning is a very specialist area and professional advice from an experienced wealth manager is essential.

The Blevins Franks Estate Planning Review Service

Blevins Franks has established an Estate Planning Review Service to meet the demand from families who live in Spain (or are planning to move here) for an impartial, objective review of their Estate Plan.

While the overriding objective of your estate plan is to ensure that your wishes are fulfilled, it is equally important to plan to avoid your legacy being decimated by tax.

We can provide a detailed written report analysing the tax and other implications of your existing estate planning arrangements and recommend any changes to ensure that your succession objectives are achieved and/or succession taxes are mitigated.

Our personal, local service in Mallorca ensures that our advice is tailored to meet your specific requirements and that you enjoy an ongoing service for as long as you live here, or should you return to the UK. Please contact us for further details.

We have also produced a “My Legacy” document, which we designed to enable you to record relevant information so that your family can easily access relevant contact information and documents, together with your personal wishes, at the most difficult of times. It is not designed to act as a Will (which you should have in place and review regularly), simply a single point of reference for you to leave for your family so they readily know your immediate wishes and where to find important information.

 

Give us a call on 971 719 181 if you like a copy, or if you have any questions on estate planning in Mallorca, or use our online contact form.


Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.