Leaving Property As Inheritance Or Donating Inter Vivos: Which Is Better

1 Aug 2022 | Blog

Nearly 200,000 dwellings were left as part of inheritances during 2021, a historically high number given the rise in mortality due to coronavirus. Donations inter vivos also recorded unusually high figures as an upward trend was experienced with a year-on-year recovery of 25% in comparison with 2020. During the previous year, over 25,000 residential properties were donated inter vivos in Spain. Many of Tecnotramit’s clients may want to solve the following question given property is steadily changing hands. Which is better: donation inter vivos or inheritance?

Time is one of the main differences when distinguishing between the two. While property donations can be carried out at any given time, inheritances require the person who transfers property to pass away and then the will to be read.

Moreover, both transactions demand corresponding taxes be paid, regulated in the Inheritance and Donation Tax Act. Given this duty is managed by the Autonomous Communities and is found under autonomous regulations that standardise exemptions and allowances, it can be considerably more expensive to inherit or receive a donation in some regions compared to others. The regulation for each region must be taken into account before deciding which to opt for. Other factors such as the value of the inheritance, degree of relationship, or heirs’ age may be crucial when property or assets are inherited or donated inter vivos.

In summary, inheritance costs will differ according to the city of residence and the heir’s particulars, and taxes on inter vivos donations -on the donee’s part- also depend on the Autonomous Community of residence. In addition, the real difference lies in tax disadvantages concerning donations inter vivos since immovable property must be declared as capital gain as part of the donor’s personal income tax.