Inheritance & Estate Planning for Costa Blanca Retirees

The basics: Spanish inheritance tax (ISD)

In Spain, inheritance tax is called Impuesto sobre Sucesiones y Donaciones (ISD). It is paid by the beneficiary, not the estate, and the amount depends on three things: the value of what is inherited, the relationship to the deceased, and the wealth the beneficiary already holds. There is no blanket spousal exemption as in the UK or the Netherlands — but the Valencian Community has introduced large allowances that make most spousal transfers effectively tax-free.

Valencian Community allowances — 2026

Forced heirship: what your will can and can't do

Spanish law reserves two-thirds of your estate for your children (the legitima). One-third must be split equally among all children; another third can be distributed unequally but must still go to children. The final third (the tercio de libre disposición) is yours to leave to anyone. If you have no children, parents and spouses have reserved shares.

This clashes with common-law systems where testamentary freedom is absolute. The good news: EU Regulation 650/2012 (Brussels IV) allows expats to elect the law of their nationality to govern their whole estate. British, Dutch, German, Belgian and Irish retirees can elect UK, Dutch, German, Belgian or Irish law in their Spanish will, bypassing forced heirship. You must state the election explicitly — a Spanish notary will help.

Practical steps for retirees

• ✦Write a Spanish will (testamento) covering your Spanish assets. Keep it simple, in Spanish, and stored with a notary.
• ✦Include a Brussels IV election of your home-country law if you want to avoid forced heirship.
• ✦Name an executor (albacea) who is resident in Spain or has a Spanish tax representative — otherwise the process stalls.
• ✦Review property ownership: 'tenancy in common' (pro indiviso) makes the inheritance process cleaner than joint tenancy.
• ✦Consider a Spanish family holding company (sociedad patrimonial) if you own multiple properties — it simplifies succession.
• ✦Keep beneficiary documents for life insurance and pensions up to date; these often fall outside the will entirely.

ISD tax rates after allowances

Once allowances are exhausted, ISD is progressive. For a child or spouse inheriting €100,000 above allowances, the effective rate is typically 5–10% in the Valencian Community after the 99% reduction. For a sibling inheriting the same amount, the national scale applies and the rate can be 15–25%.

Cross-border traps to avoid

The UK-Spain double-taxation treaty does not cover inheritance tax — there is no credit mechanism. If your estate has assets in both countries, both may claim tax. The Netherlands and Belgium have limited treaties with Spain that sometimes reduce the sting, but never eliminate it entirely. Professional advice from a cross-border tax lawyer is essential for complex estates.