The changing landscape of Spanish inheritance law and what it means for charities

Inheritance, as we know, can be a very divisive business.

For many living in Spain or with assets in the country, the most compelling reason to make a will is to ensure that friends and family are relieved of the stresses associated with losing a loved one. But making a will also serves to eliminate any doubts as to how the deceased’s assets are to be distributed – as charities well know.

Little wonder then that concerns have been raised within the third sector in respect of Spain’s inheritance laws, and in particular in respect of the concept of forced heirship.  But is all this worry for nothing?

As it stands, Spain operates a system of forced heirship. What this means is that where Spanish law applies to the estate a certain percentage of a deceased’s assets vests in his spouse, or children if he has any.

Currently, in most of Spain’s autonomous communities, children are entitled to two-thirds of their deceased parent’s estate, one third of which must be distributed equally to all children and a further third of which must be left to one or more of the children, the testator being free to dispose of the remainder to whomsoever he wishes.

A recent Spanish ruling in the case of Esteban Marchena García[1] went so far as confirming the obligations of a deceased person’s estate to his or her biological children.

The interesting development in the García[2] case was that it established that the ‘illegitimate’ son of a wealthy Spanish aristocrat was entitled to a €2million slice of his biological father’s estate. In real terms what this meant was that even if a parent refused to acknowledge the existence of his biological child, and despite that child being adopted into another family (as was the case with García), that parent would not be able to escape the obligations of forced heirship.

So what does this mean for charitable beneficiaries of estates where there are assets in Spain and children are involved? Essentially, charities need to be sure that their rights to receive legacies do not conflict with the rules of forced heirship in the country.

This won’t necessarily mean that charities will have to relinquish any claim to an estate where children are concerned. There are steps that charities can take to avoid losing out.

The law of forced heirship is not applicable to those estates where English law applies.  As such, it will be imperative for charities to inform potential donors, who have made a new life for themselves in Spain and have assets in the country, that they may be caught out by a legal obligation to distribute their estate among their offspring even if they do not want to. Avoiding this pitfall is currently relatively straightforward, although the effect of the new European Succession Regulation 650/2012 (coming fully into force on 17 August 2015) is yet to be fully understood.

Broadly speaking, the current position is that English succession law will apply to the Spanish estate of a deceased person from England who dies a British national provided the deceased owned real estate in the UK at the time of his or her death.  In such cases the Spanish laws of forced heirship will not apply to the Spanish estate, whether or not the deceased was resident in Spain, and the provisions of the deceased’s last will will apply, subject to any claim that may be made in England against the estate.

Conversely, if the deceased owned no real estate in the UK and lived almost permanently in Spain, then currently it is likely that the Spanish laws of forced heirship will apply to the deceased’s estate.  In such cases the provisions of the deceased’s will are subject to any claim made in Spain against the beneficiaries by the children of the deceased. A charity that does not take steps to inform potential donors of this may well find that their beneficial interest is reduced.

What is certain is that if you are a charity and have a potential legacy donor who is thinking of moving to Spain with its law of forced heirship, it will be imperative to advise your donor to seek independent legal advice. Failure to do so could leave your charity with a legacy of a very different kind.