When a relative dies, the legal and tax side tends to take a back seat. That is understandable, but it is costly. In Spain, a badly handled inheritance can mean losses of tens of thousands of euros that, with the right advice, would have been avoided.
These are the mistakes we see most often, and how to avoid them.
In this article
The six most costly mistakes
Inheritance and Gift Tax has a filing deadline of six months from the death, extendable by a further six if you request it within the first five months. If you file late, before the tax office contacts you, the surcharge is 1% of the tax due plus another 1% for each full month late, and after twelve months it reaches 15% plus late-payment interest. On a sizeable estate, that surcharge is a lot of money. And the worst part: many heirs do not realise the deadline has passed until the tax office writes to them.
The additional six-month extension must be requested within the first five months, not up to the last day of the deadline. It is a simple step, but if it is not done properly and on time, the chance is gone. Many families assume the gestoría or the lawyer will request it as a matter of course, and that is not always so. If you have any doubt about whether it has been requested, check.
Each autonomous community has its own regulation of Inheritance Tax, and many of them offer very significant reliefs for direct heirs (spouse, children, parents). In the Valencian Community, for example, there is a 99% relief for Group II relatives. Failing to apply it correctly through ignorance or an error in the settlement can mean paying taxes that are not due.
Valuing the inherited assets, especially property, is one of the most delicate points. If they are valued below the Cadastre reference value used by the tax authorities, the Administration can issue a supplementary assessment with interest. If they are valued above it, you pay more tax than necessary. You need to know the minimum values the regional administration accepts and set the valuation sensibly.
It is more common than it seems: someone dies without having dealt with the inheritance of a relative who died earlier. The result is a chained inheritance: the earlier estate has to be settled first before the assets of the current one can be reached. Ignoring this leads to hold-ups at the notary, problems at the registry and extra costs. The longer it is left, the more complicated the case becomes.
When the heirs cannot agree, whether over the split, the valuation of the assets or personal matters, the temptation is to go straight to court. It is the longest and most expensive route, and the one that does most damage to family relationships. Before going to court, there is always the negotiating table. Mediation led by a professional with sound legal judgment can settle in weeks what litigation drags out for years.
"Before going to court, there is always the negotiating table. A well-structured agreement is worth more than years of proceedings, and it preserves something litigation destroys: the family."
The deadline: the mistake that hurts the most
The six months go by faster than you would think. Between grief, the first administrative steps and gathering the documents, many families reach the fifth month without having got far enough. If there is any doubt about whether you are in time, the first thing to do is request the extension. It is free and simple, and it gives you six more months, although late-payment interest accrues for the extra time.
What a complete inheritance service includes
Handling an inheritance properly is much more than filing the tax. The full process includes: obtaining the certificate of last wills and the death certificate, locating and valuing all the deceased's assets, checking for earlier inheritances still pending, drafting and signing the deed of acceptance and award before a notary, settling and filing all the resulting taxes (Inheritance Tax, the municipal plusvalía tax, income tax where applicable), registering the property at the Land Registry and updating the cadastre.
Each step has its own deadlines, paperwork and risks if it is done badly. When a single specialist legal team handles everything, those risks are kept under control and, in most cases, the final tax bill is considerably lower.
When to turn to a specialist
The honest answer is: always. But especially in these cases: when there is property in the inheritance, when there is conflict between heirs, when there are earlier inheritances that were never settled, when the deadline is about to run out, when the deceased had debts or charges on the assets, and when there are heirs in different autonomous communities or countries.
A mistake in an inheritance nearly always costs more than asking in time would have. And in many cases a properly prepared return saves tax that would otherwise be paid without being owed.
At Equus Capital, the legal team specialising in succession law handles the whole process, from opening the inheritance to the final award and registration, and on every case you deal directly with the person handling it. When there is conflict between heirs, we always try for an agreement first: it is quicker and cheaper, and it leaves fewer scars.