Inheritance between spouses: Protecting the surviving spouse with a will
Protecting the spouse after the partner's death is one of the most common issues in the field of inheritances and wills. At JLA Notarios, Notaries in Barcelona, we are experts in inheritances in Catalonia. Today we will talk about inheritances between spouses, the will, and the ways to protect the surviving spouse.
Most common cases to protect the spouse or partner with a will
The main advantage of making a will is the possibility of resolving multiple issues and problems and adapting the testator's wishes to what is really needed. Unlike the declaration of heirs before a Notary, where it is determined who the heir is, but without considering the reality of the heirs' own needs, nor the testator's wishes; through the open will it is possible to take into account all circumstances and repercussions, including tax ones, thanks to good advice.
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One of the most important issues raised in wills is the protection of the spouse or partner, in case they survive the testator. What can be done to protect the spouse or partner in the event of death?
The answer is complex, and will depend on each specific case, but we will discuss the three most common cases in practice:
Spouse with universal and lifelong usufruct
We will first explain, in a simple way, what each of these terms means. Usufruct is nothing more than the right granted to a person to use one or several assets and rights, enjoy them, exploit them and receive the income. When we refer to universal, what we mean is that the entire estate of the testator is left in usufruct, although the usufruct can be limited to several assets and not all. By life interest, it is understood that the usufruct will be valid throughout the life of the spouse or partner.
Through universal usufruct, therefore, the spouse or partner is granted the right to use and receive the income from the deceased's various assets. In this way, the quality of life of the spouse is ensured and they are protected. For example, the spouse may continue living in the family home and receive the rental income from a second property, in order to cover their needs.
Money can also be left in usufruct. In this case, the value of the usufruct right is calculated taking into account the age of the beneficiary, and the amount of money representing that right is delivered to them. However, we usually advise that the will states that not the usufruct, but the full ownership of the money is delivered, since generally both have contributed to obtaining that capital; furthermore, in this way the spouse or partner can be better protected.
What are the advantages and disadvantages of universal usufruct?
The main advantage is that the spouse is protected in a simple way, leaving the bare ownership to other people, usually the children. Upon the death of the spouse or partner, the usufruct is "transferred" to the bare owners (children, grandchildren, or third parties) to form full ownership. That is, the right is not lost, but attributed to the person the testator has designated for it.
A second advantage is fiscal. The usufruct has a lower value (depending on the age of the person receiving the usufruct) than full ownership, so the taxation will be less burdensome for the spouse or partner. Furthermore, when the beneficiary dies and the usufruct is received by the final holders, the taxes will be lower compared to the case of transferring full ownership (as happens in the previous case).
The main disadvantage is the limitation when selling or mortgaging the assets. The usufructuary cannot sell the assets as if they were the owner, since the usufructuary and the bare owner must sell jointly. For this reason, the usufruct in favour of the widower can limit their ability to obtain liquid money necessary to cover needs at a given time. This disadvantage can be resolved either by assigning all the available money, as we have indicated above, or by granting the power to sell in the will (although this has important fiscal consequences, losing the advantage we have seen in the previous paragraph), or by assigning some asset in full ownership.
Naming the spouse as universal heir: will of one for the other
Another possibility is to name the spouse or partner as universal heir, that is, once the testator has passed away, the spouse or partner will receive all their estate, except for what they have expressly given to other people.
It is very common for spouses or partners to designate each other as heirs jointly and then name the children and descendants as substitutes. This is called a will from one spouse to the other or “will from one to the other”.
For example, two spouses, Ana and Braulio, have a son called Carlos, and decide to make a will. She names him as heir, and if her husband does not want or cannot accept the inheritance, she names her son Carlos as heir. He does the same; he names Ana as heir, substituted by their son Carlos. With this will, if Ana were to die before her husband, he would be the heir and when Braulio dies, since Ana cannot accept the inheritance because she died earlier, the son will inherit, provided the will has not been modified. In this way, the chain of transmissions is covered and the spouse or partner is protected.
What advantages and disadvantages does the will of one have for the other?
The advantage offered by this system is the possibility for the spouse to sell and better meet their needs, if necessary. The main disadvantages are two; first the taxation, since there would be two property transfers, in our example, from Ana to Braulio would be taxed, and then from Braulio to Carlos. The second is the possibility that the first heir, being the full owner, modifies the will and leaves it to someone different from what the spouses originally intended.
Due to the taxation, it is a more advantageous possibility for spouses or couples.
The substitution fideicommissary in inheritances
The fiduciary substitution is a legal figure in which the testator appoints a first person (the fiduciary) to use, manage and preserve an asset or set of assets, with the obligation to transfer them to another person (the beneficiary). In the context we are dealing with, the testamentary protection of the spouse or partner, the testator would name the spouse or partner as the first heir, and after their death, would designate the children and descendants (the most common) or third parties as the second and final heirs.
The spouse or partner, as the first successor, can make use of the assets and obtain their income, as if they were the owner, with the obligation to preserve the assets and properly manage them to deliver them to the second heirs. In this way, the testator determines the path that their assets will follow, first one person and then another or others, with complete certainty. Thus, the first called cannot leave these assets to another person in a will, but when they die, they will pass to whom the testator designated.
Some key points of fiduciary substitution:
- The testator establishes that, after their death, the fiduciary receives the assets and must maintain and manage them for a certain period or until a condition is met.
- Subsequently, the fiduciary must transfer those assets to the beneficiary, who will be the person who finally receives them and becomes their owner.
- Fiduciary substitution allows the testator to ensure that the assets are preserved and pass to the person they designate, even if not immediately after their death.
- It is a complex figure that requires careful drafting in the will to avoid interpretation problems.
Forms of trust substitution
Furthermore, the trust substitution can be configured in three different ways:
1. Pure and simple fiduciary substitution
The fideicommissary substitution as such, if no special power is added, prevents the first called to the succession from selling or transferring it, unless the trustee and the fideicommissary heirs agree. They may use them, in a manner similar to a usufructuary, and when they die, all the assets will pass to the second heirs.
With this formula, as we have pointed out, the testator ensures that upon their death the assets will pass to the spouse or partner, and when the latter dies, those assets will pass to the children or to the persons the testator wishes.
Example: The Testator, Andrés, appoints his wife, Belén, as fiduciary heir, and his two children, Carla and Daniel, as fideicommissary heirs. When Andrés dies, the assets will pass to Belén, who will make use of them, and when she dies, they will become the property of the two children, without Belén being able to sell them during her lifetime, nor make a will changing the beneficiaries. Therefore, the assets will always end up with Carla and Daniel. If Belén needs to sell a property, this can be done, but only if the two children agree to it and, therefore, the usufructuary Belén and the two children would have to sign the sale.
2. Trust substitution with freedom to sell
Through this testamentary formula, the spouse or partner can be authorised to sell all or part of the assets, out of necessity or to improve their personal and economic situation at a given time, declaring in the will that the second heirs will be so in respect of the assets that remain or have not been sold.
Example: If Andrés authorised Belén in his will to sell assets and Belén inherits two properties as trustee, she can sell one to cover her daily needs and those that arise over time, without the need for consent from her two children, Carla and Daniel. Upon death, having sold one of the properties, only the second property will remain to pass to the children, as the other has left the estate.
3. Trust substitution with subrogation
This third possibility, the most common in practice, is similar to the previous one; the trustee is allowed to sell one, several or all of the trust assets, but the trust extends to the assets that replace them or to the money obtained as a result of the assets that form the fideicommissary inheritance. Basically, it would be possible to sell, but if another asset is purchased or money is obtained, upon the trustee's death these amounts or assets will pass to the fideicommissaries. In other words, it can be sold, but the new assets or money replace the previous ones.
Example: continuing with the previous case, if Belén can sell the assets but they are subject to a real subrogation clause, and Belén sells one of the two properties for €100,000, allocates €50,000 to buy another house and the remaining €50,000 to her own expenses, upon her death, Carla and Daniel will receive this new property, along with the one that was not sold, as well as the remaining amount of €50,000.
How does the normal and residual trust substitution affect taxation?
In the ordinary trust, the fideicommissary substitution involves two settlements in the inheritance tax. The first heir (fiduciary heir) settles the tax on the value of the usufruct of the assets that make up the estate on which the fideicommissary substitution has been established. In this case, for tax purposes it is configured as a usufruct, since they will receive the right to use and collect the fruits of the assets, in a way very similar to the right of usufruct itself. The second heir (fideicommissary heir) settles the tax on the total value of the assets, as they receive full ownership of them without obligation to preserve them and with the power to dispose of them.
But the taxation is different if we are dealing with a residue trust. In this case, the first heir, the fiduciary, will be taxed as full owner, not as usufructuary, which implies a higher tax burden. This is because they can sell and transfer the assets as owner, and this tax fiction is created. At this first moment, the fideicommissaries or second heirs do not pay any tax, with the taxation suspended until the fiduciary dies, since they do not know the final amount they will receive. Once the first dies, and the seconds receive the assets and the value is determined, they will be taxed as full owners and will pay the corresponding inheritance tax.
Furthermore, it should be taken into account that the heirs of the fiduciary (the first heir) can claim the refund of the inheritance tax on the assets that the fiduciary did not sell, for the difference between the taxation of the full ownership value (value they have paid) and the value of the usufruct (theoretical value that should have been paid if it were an ordinary trust).
In conclusion, the fideicommissary substitution, especially with the power to dispose, is a good formula to protect the rights of the spouse or partner, as it gives the testator certainty of fulfilling this purpose, as well as ensuring that the assets will end up with specific persons when the spouse or partner passes away, especially the children and descendants. With the power to dispose, greater protective strength is conferred on the trust, with the tax aggravation, although partly compensated by the possibility of requesting the refund of excess inheritance tax by the children and descendants when the fiduciary dies.
Other ways to protect the spouse or partner in the will and frequently asked questions
There are other ways to protect the surviving spouse with a will and we will discuss them below. But if you need more details, do not hesitate to contact us, we will be happy to advise and assist you.
Another way to protect the spouse or partner in a will is to grant legacies, that is, to give a series of specific assets and rights. It is true that there are many types of legacies, ranging from the delivery of assets to the granting of income or a pension.
The most common is to make legacies of usufruct of some asset, but it is also possible to grant full ownership of some property. The most usual is to bequeath the property that is the habitual residence of the couple or marriage, so that they can continue living in the house and be able to sell it if necessary.
The main advantage of the legacy is that it is a figure that offers a lot of flexibility when arranging a will, protecting the spouse or partner and the children. In this way, it can be easily combined with any of the figures previously mentioned. For example, one option is to bequeath the universal usufruct to the spouse except for the habitual residence, which is bequeathed in full ownership, and another option is to grant the children the designation of universal heirs, bequeathing the spouse or partner a life annuity.
The Socini Caution is a testamentary provision that allows the testator to grant the surviving spouse the universal and lifelong usufruct of the inheritance, instead of limiting it to the usufruct of the portion that would correspond to them by law (the improvement third in common law). This is achieved by imposing conditions on the forced heirs (generally the children), who must accept the universal and lifelong usufruct of the surviving spouse in order to receive a portion of the inheritance greater than what would correspond to them by legitimate right.
Through the Socini caution, the testator grants the surviving spouse or partner the universal and lifelong usufruct of the inheritance, instead of the usufruct that would correspond to them by law when they inherit alongside children or descendants of the deceased. In turn, the forced heirs must accept the universal and lifelong usufruct of the surviving spouse to receive a portion of the inheritance greater than what would correspond to them by law. If an heir does not accept this condition, their portion of the hereditary estate will be reduced exclusively to the strict legitimate portion.
To compensate the heirs who accept the condition, the testator attributes to them in their will more than what would correspond to them as legitimate right. This ensures that the heirs respect the universal and lifelong usufruct of the surviving spouse. This is expressed in article 451-9.2 of the Civil Code of Catalonia, which establishes that if a provision imposes any limitation on the legitimate portion but has a value greater than that corresponding to the legatee, they may choose between accepting it under the terms attributed to them or claiming only what corresponds to them by legitimate right.
If you want to read more, you can consult this topic on the General Council of Notaries portal:
Validity and processing of the will
Is the provision in the will still valid in the event of separation, annulment, or divorce?
In the event of annulment, separation or divorce, testamentary provisions may become ineffective. This is established by article 422-13 of the Civil Code of Catalonia, which states that "specifically, this provision establishes that, if a disposition imposes any limitation on the legitimate portion, but has a value greater than that which corresponds to the legatee, they may choose between accepting it on the terms attributed to them or claiming only what corresponds to them by legitimate portion." A similar provision is established for de facto couples, if, after being granted, the cohabitants separate de facto, unless they resume their cohabitation, or the stable partnership is extinguished for a reason other than the death of one of the members of the couple or the marriage between both.
However, nothing is said in the common law civil code in this regard. Our advice is that the will expressly states that the provisions made in favour of the spouse or partner shall be without effect if, at the time of death, an action for annulment, separation or divorce had been filed.
Making a will in Barcelona with JLA Notarios
If you wish to make a notarial will to protect your partner in case of death or if you have doubts about how to process it and want to be advised, we can help you. Do not hesitate to contact us. You can reach us by email at bcn@jlanotarios.com, by filling in the contact form on our website or by calling 93 159 17 62.
We are a notary office for inheritances located on Avenida Diagonal in Barcelona (Eixample of Barcelona). We will be delighted to assist and help you. We hope this blog has been helpful and valuable to you.
