At the moment in which one of the two spouses dies, it is normal for both the right to use and enjoy the inheritance while living. Thus, this is a way of protecting the widower or widow, assuring him that he can continue using the house, the accounts or the rest of the goods, even if they are not of their complete property.
Now, everything is as simple as it seems and this solution can become a problem with the Tax Agency or what is the same with the Treasury. In this sense, María Cristina Clemente, notary, explains it clearly. “If the widower decides with the children to replace that usufruct with the award in full property of a property as a floor, the Supreme Court understands that this is a exchange and the Treasury will require the property transmissions tax.”
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Two liquidations, two inheritance taxes
The notary explains that according to the sentences of the Supreme Court of July 22 and 23, 2020, I explained that when the widower changes its right to usufruct (that is, to be able to use all the assets of the inheritance) for keeping a floor in property, the Treasury treats it as if they were two different operations.
On the one hand, the inheritance, with its corresponding payment of the Inheritance and Donations Tax, which taxes the acquisition of goods for death, as regulated by article 1 of the Regulation of the Inheritance and Donations Tax (under Royal Decree 1629/1991 and that can be consulted in this Official State Gazette).
On the other hand, the exchange, since the widower delivers its right of usufruct in exchange for a property. In this case, the children pay for the consolidation of the domain within the Inheritance Tax, while the widower must liquidate the tax of burntly for the exchange (arts. 153 et se. Of the Civil Code, which regulate the partition and switch of hereditary rights).
In other words that the family does not face a single tax, but two, which increases the succession and donations tax for the family.
How to avoid double taxation
Now, there is an exception or rather, a practical solution. According to Clemente, the General Directorate of Taxes, in a binding consultation of February 18, 2021, clarified that the payment of the transmissions tax can be avoided if in the will it is expressly written that the widower can change its right of usufruct for a specific good (for example, a floor), the Treasury can no longer consider it a separate exchange. In that case, everything remains within the inheritance and you would only have to pay the inheritance tax.
The Civil Code, in its articles on the rights of the widowed spouse and partition of inheritance, recognizes the possibility of agreeing formulas that facilitate the distribution of goods respecting the legitimate nevertheless, if it is not allowed to be provided in the will, any switching carried out later can derive in an unexpected fiscal problem.
“Choosing the notary well, one who listens and advises you, is fundamental,” concludes Clemente. Planning the will not only avoids family tensions, but also economically protects the widower or widow against a double taxation that, in many cases, can be difficult to assume.