Inheritance agreements: how does living heritage work in Ibiza?

If you have doubts about inheritance agreements, in this article we explain what they are and what possibilities they offer in Ibiza.

Joan Torres, president of the Spanish Federation of Professional Associations of Tax Technicians and Tax Advisors explains it in a simple way. "A succession agreement is simply a living succession", he states in an interview with Diario de Ibiza.

Normally, a "succession" should imply a death. However, "the agreements have the added advantage that death is not necessary," explains the also president of the Association of Tax Technicians of the Balearic Islands. Hence it is popularly known as living inheritance.

What do we have to keep in mind when these situations occur? To begin with, we must be very clear that an inheritance agreement involves three points of view: the civil and legal, the economic and the fiscal.

When an asset is transferred from one person to another (whether or not it is a family member) as if the first person were dead, this "has very important fiscal repercussions, since the person who establishes it transfers possessions by paying taxes as if it were a succession," explains Torres.

DIFFERENCES BETWEEN INHERITANCE AGREEMENTS AND WILLS OR DONATIONS

Let's take a look at the differences between living estates and wills or gifts.

• A will can be changed at any time, while a succession agreement is irrevocable. Since it is effectively a contract between two parties, it should be amended by a notary.
• In a donation, as it is not a contract, no clauses can be established (there are no conditions) and personal income tax is paid, not as in inheritance agreements.
• A succession agreement is not cumulative, that is, the amounts received are not added together regardless of the number of agreements made, while one receiving two or more donations accumulates the amounts to be taxed (and, consequently, the scale).

Now that we know the main differences between living wills, inheritances and donations, let's look at the different types of inheritance agreements that can be made on our island.

TYPES OF INHERITANCE AGREEMENTS

Ibiza (and Formentera) has three types of succession agreements. These are the singular inheritance pact, the universal inheritance pact and the end of legitimacy.

In the words of Joan Torres: "in the singular you leave a legacy to anyone, whether they are family members or not, and you can make as many as you want. In the universal title you are already giving all the goods and a degree of kinship is necessary. And in the end of the legitimate, all the legitimate, not just the heirs, are paid what they are entitled to".

It is also important to know that in inheritance agreements, if they stipulate the delivery of goods, this can be during life or can be postponed until death (as a general rule in Spain, successions during life are prohibited).

"MORE AND MORE SUCCESSION AGREEMENTS"

In Joan Torres' experience, the number of inheritance agreements signed has increased in recent years. But that does not mean that they are always beneficial to the interested parties.

And that's taking into account that "the residents of the Pitiusas have some of the best [succesion] agreements there are".

The recommendation of the tax technician (and also the one we make from Ibiza Country Villas) is that, in case of doubt, you should go to an expert for advice. Our real estate agency can provide you with this, do not hesitate to get in touch with us!

You can read the full interview with Joan Torres from this link.