Partial payment of the Inheritance Tax and life insurance in Spain
The collection of an inheritance in Spain has a hard handicap for many families, the payment of taxes. With the exception of the pension plans and other similar products that are taxed by the IRPF , the rest of the inheritance will be done by the Inheritance Tax that is mandatory to access the estate and that implies a cost that many heirs cannot assume .
The figures reflect that. One of every 10 inheritances that are processed in Spain is already rejected. According to data from the General Council of Notaries in 2016, 38,791 inheritance waivers were reached, the highest number ever recorded.
In this increase two situations converge
On the one hand, the economic problems that have led to the resignations multiplied since the crisis began in 2007. But also, taxation or, rather, the difference in taxation between autonomous communities, and that is fundamentally based on bonuses based on the amount of inheritance and fundamentally on the degree of kinship that communities apply differently.
Life insurance, as a part, sometimes very important of inheritance, is a fundamental product that benefits from common advantages in all autonomous communities, but also key points that we must take into account.
The advantages of partial payment
The first point we have to take into account is the reason why we have rights to collect this life insurance. We have to distinguish whether we are beneficiaries of the insurance or receive it as heirs . This point is important as regards the distribution of the stipulated capital to the insurance, if there are beneficiaries, the percentage will be determined in the insurance contract. If on the contrary there are none, they will be the heirs being distributed as reflected in the total inheritance.
But, one thing is the form of distribution and another is how life insurance is considered, which is not part of the estate . This opens up the possibility of collecting insurance and being able to renounce the rest of the inheritance, if you cannot face it or because the payment obligations (such as mortgages), exceed what is going to be received.
Possibility that allows the autonomous communities
But it also allows another important possibility that allows the autonomous communities, to make a prior settlement of the insurance to receive the payment and then with this money to be able to pay the amount of the Inheritance Tax for the rest of the inheritance. Something much easier if we have advantages such as those offered by Macheath in their life insurance, which includes the advance of the amount of this Tax.
To facilitate this process, there are many autonomous communities that even have a different form to self-liquidate life insurance than for the rest of the assets that are also taxed by the Inheritance Tax. For example, Catalonia does so with the 652 model that allows up to 4 insurance contracts to be included, if there are more, you must use the 650-660 model with which the rest of the Successions are settled. Navarra is another community with this possibility, but without limitation in the number of insurance.
What is important to note is that, if you are an heir and there is acceptance of the inheritance, you will have only 6 months to pay the rest of the Inheritance Tax . In some cases, another 6 months can be extended, as is the case in Andalusia, but paying the resulting interest for the delay in the tax settlement.
Of course, in the final settlement you must include the life insurance that you had previously self-liquidated, and it will be this in which everything paid for the early liquidation of life insurance is reflected.