If you own property in Spain, you often ask yourself which is the most sensible way to transfer the property to the next generation. Should they give away, sell or bequeath the property during their lifetime?

There is no general answer to this question, as many factors play a role and, depending on the property owner's objective, a gift or sale may be a better solution for one person than an inheritance for another.

In each individual case, it is important to determine exactly what the reasons are for transferring the property. If it is for tax reasons, it is important to consider whether tax allowances can be utilized during your lifetime and whether a gift or sale should be made or whether a testamentary provision can be made. Spouses could, for example, arrange the transfer of the property in Spain in such a way that the property passes to the next generation in the event of the death of one spouse. If a married couple who have joint property in Spain initially appoint each other as heirs (Berlin will), costs for the transfer of the property in Spain will be incurred in the event of death and inheritance tax may also have to be paid. If one's own child becomes the final heir, he or she will inherit the entire property with the consequence that costs for the transfer of the property will be incurred again, as well as possibly inheritance tax on the entire value of the property. This can be avoided, for example, by drafting the will in such a way that the real estate share of the Spanish property of the first deceased is bequeathed directly to the child, even if the surviving spouse is to be the sole heir.

However, it may also be the case that, despite the potential double costs and tax burden, the spouses wish to inherit from each other. This would be the case, for example, if the property is used for retirement provision or if the surviving spouse is to dispose of the property as they wish during their lifetime.

A transfer for consideration during one's lifetime may be the only possible means if the property owner is prevented from bequeathing the property to the person to whom he or she would like to bequeath the property, e.g. by a binding will or binding inheritance contract. It is important to note that there is often a joint will in which the spouses bind themselves. This means that if one spouse dies, the surviving spouse can no longer change the will.

In the case of a gift, it must again be checked whether there are any claims by other persons and how this affects the gift. This must be examined on a case-by-case basis.

A sale of the property to the next generation may be considered if, for example, claims to a supplementary compulsory portion are to be avoided from an inheritance law perspective.

Otherwise, many decide to sell to a third party if the property is no longer used, for example because the owner is in a nursing home or can no longer travel to Spain for health reasons and the next generation shows no interest in keeping the property.

It should be noted that any type of transfer in Spain may be subject to taxes and additional costs, such as notary and property registry fees. It is therefore important that a tailor-made concept is developed that takes individual requirements into account.

Although there is no one-size-fits-all solution, forward planning can save costs and taxes and ultimately provide a clear arrangement for the transfer of the property, which can avoid disputes within the next generation.