Inheritance vs Home Donation: What is best?

Many of our clients wonder: What is better, leave the home as an inheritance or make a donation while you are still alive? These doubts are common among parents who want to ensure the future of their children when they are no longer here.. Although these two alternatives exist, the majority of Spaniards continue to choose to inherit their home. We show you the advantages and disadvantages of inheritance and donation.

In this post we are going to explain which of the two options is more recommended and why..

Differences between an inheritance and a home donation:

The most obvious difference is that an inheritance is made due to death, while the donation is made during life. In addition, In a donation, an agreement between the parties is required, in which the owner gives up his property free of charge. In these cases, the donated person receives the property immediately, although the donor may reserve the right of lifelong usufruct to continue living in the home until his death..

A relevant aspect is that if we receive a home by donation, we will pay more taxes than in an inheritance.

Taxes in each case:

If we receive a home by inheritance, the taxes to pay are:

– Inheritance and donation tax; It is paid after the award of an inheritance, being a tribute that is paid in the Autonomous Community of the deceased. In the case of Catalonia, has a bonus of 99%, if it is the spouse or children of the deceased.

– Municipal capital gains; Taxes the cadastral value of the land from the moment of its first acquisition until it is inherited. If it is the habitual residence, will have certain bonuses.

In the case of donation of a home, We must pay the following taxes:

– Inheritance and Donation Tax; It is an inter vivos donation, the recipient being the one who pays the tax. The calculation of this tax is similar to that of inheritance, taking as reference the real value of the assets and rights transmitted. It is paid in the Autonomous Community where the recipient resides.

– Municipal capital gains: We must pay the capital gain the same as in inheritances, but in donations there are no bonuses and the person who pays taxes is the donee.

– IRPF: The payment of this tax corresponds to the party that has received the donation, since you have experienced an increase in assets that you must include in your Income Tax Return.

Now that we know what taxes we must pay in each case, We consider that the most profitable option is to leave the home as an inheritance, since in the donation the donee must pay a higher tax rate and will not be able to enjoy bonuses.

In Araico Assesseors, We take care of all the necessary procedures to award you the home in the most advantageous way for you.. Ask us about your specific case and we will be happy to help you..

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