A few hours ago, the president of the Andalusian Government, Juan Manuel Moreno, announced the abolition of the Wealth Tax as of 2023. His intention: “to encourage certain incomes to establish their residence in Andalusia, thus contributing with their taxes”. It must be remembered that when his legislature began, the PP also reduced the Inheritance Tax. In Moreno’s opinion, these taxes were “a brake on investment” in the community.
However, far from the great fortunes, recent years have been represented by a record in the renunciation of inheritances in Spain, and it is not because of the Inheritance Tax.
Inheritance waivers increase. An unprecedented record both in the number of inheritances processed by the Spanish and in the number of resignations on them is what is recorded. In 2021 there were 65,897 adjudications by succession title, 22% more than in 2020. And 55,574 people who appeared as beneficiaries decided to reject the succession, 25% more than the previous year. According to data from the General Council of Notaries (CGN), it seems that 2022 follows the same path.
Why? Notaries explain that these rejections are not given by taxes. And they point out two main reasons: First, the excessive mortality experienced during the pandemic. And second, the debts that accompany many of these inheritances. That is, properties that accumulate debts or with unpaid mortgages are some of the reasons why many refuse to receive the inheritance. In summary: the majority are children under 40 years of age who are left with more debt than equity.
The tendency. Giving up the inheritance is increasingly common when having to deal with the debts of the deceased, especially in times of crisis like the one we are experiencing. As many as 15 out of 100 people give up inheritance because they come with more burdens than ever. When an inheritance is accepted, it is accepted in its entirety, including the debts that the deceased had. In many cases, these are even higher than the value of the assets that are inherited. In addition, the opposite also happens: that the heir has a large number of debts and does not accept the inheritance so that the assets do not become the creditors and end up losing them.
How does it work? When it comes to renouncing an inheritance, there are two options. One is the pure and simple renunciation: the heir renounces the inheritance but does not do so in favor of anyone. Thus, the estate will pass to the co-heirs and the renouncer will not have to pay taxes. Another is for the benefit of a third person: the hereditary rights are transferred to whoever is designated. In this case, taxes must be paid for inheriting and for transferring the inheritance to another.
But there is another alternative, as discussed in this article in La Información, such as accepting the inheritance for the benefit of inventory. In this way, the heir is not obliged to pay the debts, since these would be paid with the estate of the deceased until they reach his assets. In this case, if there is something left over from the inheritance, it would pass to the beneficiary, without putting his personal assets at risk.
The cost of the procedures. Debts are not the only concern that leads an heir to say “no” to his inheritance. Another cause is the processing costs themselves. For example, taxes such as Inheritance or municipal capital gains on real estate. This casuistry usually occurs in cases of very low inheritances, in which, for example, a house is received but not money. If the heir has little liquidity, he is forced to reject it because he cannot afford the paperwork.
As we mentioned before, although there are communities that do not have an Inheritance Tax, they continue to show the highest rate of resignations, as is the case of Andalusia. Moreno was critical of the tax and eliminated it, but the percentage of inheritance waiver in this community continues to rise, up to 21%.
Image: Pexels