Inheritance Between the USA and Spain: Applicable Law, Taxation, and Procedures for Cross-Border Estates

The Legal Framework for Cross-Border Succession: United States and Spain

When an individual with significant connections to both the United States and Spain passes away, the initial and most pressing legal inquiry is which nation’s inheritance laws will govern the distribution of their estate. The European Union’s legal framework, specifically Regulation (EU) No. 650/2012, more commonly known as the Brussels IV Succession Regulation, provides a clear default directive. This regulation stipulates that the laws of the country where the deceased had their last habitual residence will generally apply to the succession. This represented a fundamental shift from prior international private law norms, which often prioritized the decedent's nationality as the primary determinant. This is a critical point to understand as it forms the basis for legal proceedings. A comprehensive understanding of this legal landscape is key, and we often discuss these nuanced scenarios on our specialized websites, ImpuestosHerencias.es and HerenciasPlus.com.

If the decedent resided primarily in Spain, even if they held U.S. citizenship, the legal principles of Spanish succession law will, in most cases, govern the administration of their estate. Spanish inheritance law incorporates "legítima" or forced-heirship provisions, which mandate that a specific portion of the estate must be reserved for certain close family members. For instance, children are entitled to a substantial reserved share. According to Spanish law, only the remaining portion of the estate—after these mandatory shares have been allocated—can be freely distributed through a will. This stands in stark contrast to the legal traditions of many U.S. states.

Conversely, if the deceased was a resident of the United States, the legal situation becomes considerably more intricate because the U.S. is not a signatory to the EU Succession Regulation. However, Spanish authorities, when managing an estate that includes assets located within Spain, will still employ their conflict-of-law principles (which are now largely harmonized with the EU Regulation's tenets) to determine the applicable law. In practical terms, this often means that U.S. law will be recognized as the governing legal framework for the succession if the deceased's final place of residence was in the USA. It is important to remember, though, that U.S. inheritance law is not uniform; it varies significantly from one state to another. Generally, in the U.S., there is a much greater degree of freedom of testation, meaning there are no forced heirship rules for children in the vast majority of states. U.S. law typically allows an individual to leave their assets to whomever they choose, with only limited statutory protections (such as a surviving spouse’s right to claim a portion of the estate).

An individual has the option to choose which country’s laws will apply to their estate by including a specific provision in their will. The EU Regulation permits an individual to elect the law of their nationality to govern their succession. For example, a U.S. citizen living in Spain can explicitly choose for U.S. law to apply to their estate. This is a common and effective strategy for American and other non-Spanish expatriates in Spain to circumvent the more restrictive forced-heirship rules of Spanish law. By choosing U.S. law in a Spanish will, the person ensures that their assets can be distributed according to the more flexible U.S. rules, rather than the mandatory Spanish shares. Without such a choice, a long-term U.S. resident in Spain would have their estate governed by Spanish law by default, which could conflict with their carefully laid out estate planning intentions.

In summary, the specific law that applies hinges on the unique circumstances of each case. If the case falls under Spanish jurisdiction, the deceased's habitual residence is the primary determining factor. However, a valid choice of U.S. law by a U.S. national will be respected in Spain. Conversely, a U.S. court, handling assets or probate in the U.S., will apply the relevant U.S. state law but might defer to Spanish law for real property located in Spain, as common law jurisdictions often adhere to the lex situs rule (meaning the law of the location of the property). This can lead to a fragmented process, with Spanish real estate governed by Spanish law and U.S. assets handled under U.S. law. Given that every situation is unique, it is always a wise decision to seek expert counsel to clarify which laws will apply in a given USA-Spain inheritance case. For more details, consult specialized websites like ImpuestosHerencias.es and HerenciasPlus.com.

Tax Obligations for Inheritances Between the USA and Spain

Spain’s inheritance tax system, known as the Impuesto sobre Sucesiones y Donaciones (ISD), levies a tax on beneficiaries. The tax liability in Spain is determined by the heir's identity and their residency status. If the heir is a Spanish tax resident, Spain taxes their inheritance on a worldwide basis (a personal obligation), meaning even assets located in the U.S. or any other country are subject to Spanish inheritance tax. The tax is calculated according to Spanish law, but Spain provides substantial exemptions and deductions, particularly through its Autonomous Communities. Numerous regions, such as Andalusia, Madrid, and the Valencian Community, offer very generous allowances or reductions (often 95% to 99%) for close relatives like spouses and children. This can result in little to no tax being due for immediate family members, depending on the region and the value of the assets. However, a Spanish resident heir must still file an inheritance tax return in Spain, even if no tax is ultimately owed.

If the heir is not a Spanish resident (for example, an American heir living in the USA) but the estate includes assets in Spain (such as Spanish real estate or bank accounts), Spain will tax the inheritance of those Spanish-situs assets. In other words, Spain taxes non-resident heirs exclusively on assets located within its borders. Following recent EU court decisions, non-EU residents (like Americans) are now entitled to the same regional tax benefits as EU residents. This means an American inheriting property in, for example, Andalusia or Madrid, can benefit from the same near-100% exemption for spouses and children that a local resident would. This is a significant change, as it prevents non-EU foreigners from paying the higher national tax rates that previously applied to them.

The United States, at the federal level, does not impose an inheritance tax on heirs. Instead, the U.S. levies an estate tax on the overall estate of the deceased (if the deceased was a U.S. citizen or domiciliary) or on U.S.-situated assets of a foreign decedent. The U.S. estate tax only affects very large estates. As of 2024, the exemption is approximately $13.6 million, and only the value above that amount is subject to the 40% tax rate. Additionally, a handful of U.S. states have their own estate or inheritance taxes, which typically begin at lower thresholds and are governed by state law (e.g., an estate tax in New York or an inheritance tax in Pennsylvania). For most cross-border inheritances, the practical result is that if the estate falls below the U.S. taxable threshold, no U.S. estate tax is due. Furthermore, the heir in the U.S. does not pay income tax on inheritances received, as inheritances are not considered income under U.S. tax law. Consequently, an American inheriting from Spain or a Spaniard inheriting from a U.S. person often faces taxation from only one country (Spain), not both.

Spain and the USA do not have a specific bilateral inheritance tax treaty (Spain only has such treaties with a few countries, like France, Sweden, and Greece). However, both nations have domestic provisions to mitigate the risk of double taxation. On the Spanish side, if a Spanish-resident heir has paid a similar tax abroad on an inherited asset (for example, if they paid U.S. estate tax on U.S. property from a U.S. estate), Spanish law allows for a unilateral credit for the foreign tax against the Spanish tax due on the same asset. In practice, Article 23 of Spain’s inheritance tax law permits the heir to deduct the lesser of (a) the actual tax paid in the U.S. on that asset, or (b) the Spanish tax attributable to that asset. This effectively prevents the heir from being taxed on the same value twice.

On the U.S. side, if a U.S. citizen or resident dies and leaves assets in Spain that are taxed by Spain, the U.S. estate (if it is subject to estate tax) can typically claim a foreign death tax credit on the U.S. estate tax return for the Spanish inheritance tax paid on those assets. U.S. tax law allows for a credit for foreign estate taxes on property that is included in the U.S. taxable estate, even without a formal treaty. For example, if a U.S. citizen dies owning a villa in Spain, and that villa is taxed in Spain when it passes to the heirs, the U.S. IRS would allow the estate to credit the Spanish tax against the U.S. estate tax due on the villa. This mechanism ensures the same asset value is not taxed twice.

Due to these credit systems, true double taxation is usually avoided, even without a treaty. Typically, the heir or estate ends up paying the higher of the two countries’ taxes on a specific asset, not both in full. In many cases, because of the high U.S. exemptions and generous Spanish regional reductions, only one country’s tax actually applies. For instance, an American heir receiving an inheritance from Spain would pay Spanish inheritance tax (if any) and nothing to the U.S. because there is no U.S. inheritance tax on beneficiaries. Conversely, a Spanish resident inheriting from a wealthy U.S. estate might pay Spanish tax on the inheritance, and the U.S. estate might owe estate tax, but credits should offset one against the other. It is always essential to consult a tax professional in both countries to structure the inheritance optimally and claim all available credits. For more information, visit ImpuestosHerencias.es.

The Process for Spanish Heirs of a U.S. Decedent

Let's consider a scenario where you are a resident of Spain (either a Spanish citizen or an expatriate living in Spain) and you inherit from a parent or a relative who lived and passed away in the United States. What are the necessary steps you must take, and what are your legal obligations?

1. The U.S. Estate Administration Process: First, the U.S. estate will need to be settled in accordance with U.S. law. This typically involves a probate proceeding in the state where your parent was domiciled or where their property is located. If your parent left a will, the document is submitted to the local probate court. If there was no will (intestate), the state’s intestacy laws will determine who the legal heirs are and what share each receives. As the heir, you will likely work with a U.S. attorney (and potentially an executor of the estate) to navigate this process. This may involve providing documents to the U.S. court and signing affidavits. If you are unable to travel to the U.S. for the probate proceedings, you can often manage affairs by granting a power of attorney to someone in the U.S. (e.g., authorizing an attorney or a trusted person to represent you) and by signing documents in Spain that are later certified with an apostille for U.S. use.

2. Determining the Applicable Law for Distribution: If your late parent was a U.S. resident, U.S. (state) law will generally govern how the estate is distributed. This means that if they had a will, assets will be distributed as the will directs, with very few restrictions. In the U.S., it is possible to disinherit even close family members in many cases. If they did not have a will, state intestacy law will grant you and any co-heirs a share (for example, in many states, if someone dies with a surviving spouse and children, the estate is divided among them in a specific proportion). Spanish forced heirship rules do not automatically apply to a U.S. estate. However, if there are assets in Spain (e.g., a holiday home on the Costa del Sol), Spanish law may need to be considered for that property. Spanish authorities, under EU rules, might view the deceased as being habitually in the U.S., so U.S. law would apply to the entire estate. However, U.S. law itself might defer to Spanish law for the real estate. In practice, you might need a separate Spanish acceptance of inheritance deed for the Spanish property, which follows the outcome of the U.S. will or intestacy, but conforms to Spanish legal formalities. It's highly recommended to involve a Spanish lawyer early if any Spanish assets are part of the estate, to ensure coordination with the U.S. side.

3. Spanish Tax Declaration Requirements: As a Spanish tax resident heir, you are required to declare and pay Spanish inheritance tax on the assets you inherit, regardless of their location. In other words, even if you inherit an American bank account or a house in the U.S., Spain considers that part of your taxable inheritance. The obligation is to file Form 650 (the inheritance tax self-assessment) within six months from the date of death. If six months is too short, which is common in international cases, you can request an extension for an additional six months, as long as you do so within the first five months after the death. This can extend your deadline up to one year. It is crucial to meet this deadline, as a failure to file on time can result in surcharges and interest, even if no tax is ultimately due. When filing the Spanish tax return, you will list the inherited properties, their values, and calculate the tax based on the relevant Spanish rules. Because you (the heir) live in Spain, you benefit from the regional allowances of the Autonomous Community where you reside. This often drastically reduces the tax owed. For instance, if you inherit €500,000 from a parent and live in a region that offers a 99% exemption for children, the actual tax might be negligible. You must still file a return even if the result is zero tax due, as Spanish law makes filing mandatory in all cases.

If your U.S. inheritance included any assets that were subject to U.S. estate tax (which is uncommon unless it was a very large estate), you should inform your Spanish tax advisor. Spain will allow a credit for the U.S. tax paid on those assets, preventing double taxation. For example, if you inherited a U.S. house valued at $5 million and the U.S. estate had to pay some estate tax on it, when you declare that house in Spain, you can deduct the U.S. tax (up to the amount of Spanish tax on that value). Coordination between a U.S. CPA and a Spanish tax expert may be necessary to get the numbers correct.

4. Receiving the Assets: Once the U.S. probate is complete and the executor is ready to distribute the assets, you, as an overseas heir, will receive your share. This could be in the form of bank transfers, or the transfer of ownership of stocks or real estate. Be mindful of practicalities: transferring a large sum of money from the U.S. to Spain might require compliance with both U.S. and Spanish banking regulations. There is usually no issue, but your bank in Spain might request documentation showing the origin of the funds (to satisfy anti-money laundering rules). Typically, the will or an inheritance certificate can serve as proof that the funds were inherited. Also, if you decide to keep inherited assets in the U.S. (e.g., a brokerage account or a co-owned property), Spanish law requires you to declare overseas assets if their value exceeds €50,000. This is done via Modelo 720, an informative form that must be filed by March 31 of the year following the inheritance. The Modelo 720 is purely for informational purposes but is extremely important, as failing to report foreign assets properly can lead to very severe penalties in Spain. In short, after inheriting, consult your tax advisor about Modelo 720 and ensure compliance if applicable.

5. A Case Example: HerenciasPlus.com provides a great example. María is a Spanish resident whose father died in California, leaving $200,000 in bank accounts and a house in California. María is the sole heir. She navigates the probate process with a U.S. lawyer who handles everything. There is no U.S. estate tax because the estate is below the threshold. María then files Spanish inheritance tax on the approximately €180,000 she inherited. Because she lives in Andalusia and is the child of the deceased, the regional rules grant her a 99% tax reduction, making her Spanish tax almost nonexistent. She files within six months to be safe. She also files Modelo 720 the following spring because, as of December 31, she had over €50,000 in a U.S. bank before transferring it. By following the rules in both countries, María successfully inherits without any penalties or double taxation.

The Process for U.S. Heirs of a Spanish Decedent

Now, let's flip the situation. Imagine you are a resident of the United States, and your parent or relative passed away in Spain (perhaps they were a Spanish citizen or an American expatriate who lived in Spain). What should you expect as an heir in the USA receiving an inheritance from Spain?

1. The Spanish Succession Process: If the death occurred in Spain and the deceased was habitually a resident there, the Spanish legal process will govern the inheritance. The process is typically managed by a notary rather than a court. The first step is to obtain a Spanish Death Certificate and a Certificate of Last Wills (Certificado de Últimas Voluntades) from the Spanish authorities. The Certificate of Last Wills confirms whether the person made a Spanish will and with which notary. With this document, the will can be retrieved. If the deceased left a Spanish will, the estate execution is much simpler: the notary will draft an Acceptance of Inheritance (Escritura de Aceptación y Adjudicación de Herencia), which formally assigns the assets to the heirs as per the will. This document, once signed by the heirs or their representatives, allows for the transfer of property titles (e.g., changing land registry entries, releasing bank funds).

If no will exists, a process called declaración de herederos abintestato is required. For a foreign heir, this usually involves a notary (or a court in some cases) formally declaring who the legal heirs are under Spanish intestacy law. Spanish intestacy rules prioritize children and spouses. This declaration process can take time and requires proof of kinship (birth certificates, marriage certificates, often with apostilles and translations if foreign). Once the heirs are officially recognized, the inheritance can be distributed. As a U.S.-based heir, you do not need to travel to Spain to handle these steps. Spanish law allows heirs to act through a power of attorney (POA). You can grant a POA to a Spanish lawyer or a trusted person in Spain to represent you in the inheritance proceedings. This POA can be prepared at a Spanish consulate in the U.S. or via a U.S. notary plus apostille. It will specify the powers, such as the authority to accept the inheritance, sign deeds, and pay taxes on your behalf. With a valid POA, your appointed representative can sign the acceptance of inheritance deed for you, eliminating the need for you to be there in person. Many heirs abroad find this to be a very convenient option.

2. Applicable Law and Rights as an Heir: If the deceased was a Spanish citizen or habitually resident in Spain, Spanish law likely applies to the succession by default. This means that forced heirship could come into play. If you are a child of the deceased, Spanish law reserves a large portion of the estate for you and any siblings. If the deceased was a foreigner living in Spain (e.g., a U.S. expatriate), they might have opted for their national law (U.S. law) in a will, which could alter the distribution. You should clarify this with the local attorney: was there a choice-of-law or any special clause in a will? Generally, however, as a direct heir, you will be entitled to your share either way—Spanish law would almost never exclude a child unless there was a very specific cause for disinheritance.

3. Spanish and U.S. Tax Obligations: Spain will impose inheritance tax on the assets located in Spain that you inherit. As a non-resident heir living in the U.S., you are only taxed on assets situated in Spain, not your worldwide assets. So, if your parent had a bank account in Spain, Spanish tax applies to that; if they also had a bank account in the USA, Spain would not tax the U.S. account for a non-resident heir. (Any Spanish resident heirs would declare worldwide assets, but you as a U.S. resident only declare Spanish-situs assets.) The good news is that, as of recent years, non-Spanish residents now receive the same tax benefits as residents for inheritances. This was established after court rulings found it was discriminatory to deny those breaks to non-EU heirs. Now, when you file the Spanish tax return (yes, you still have to file a Spanish tax form even as a foreigner inheriting Spanish assets), you can typically choose the most favorable regional tax regime. The applicable region is usually where the asset is located or where the decedent was a resident. For example, if your parent lived in Madrid or the asset (like real estate) is in Madrid, you can apply Madrid’s generous tax exemptions, which for children and spouses is effectively a 99% tax reduction. Many regions have a near-zero tax for direct descendants, meaning you might owe little to nothing in Spain. However, you must file the return within six months (extendable to 12) after the death, just like residents. A Spanish fiscal representative might be needed to deal with Spanish tax authorities from abroad.

What about U.S. taxes? The United States does not tax you for inheriting assets from abroad. Inheritance is not considered income, so you do not report the value as income on your U.S. tax return. If you receive cash and it earns interest later, that interest would be taxable, but the act of receiving the inheritance is tax-free in the U.S. (There is one exception: if the inheritance includes certain U.S. retirement accounts or U.S. trusts, there could be some income tax implications, but this is beyond the scope of this general guidance.) By and large, you will not owe the IRS anything on a straightforward inheritance from Spain. If the deceased was a U.S. citizen, their estate above the threshold might have to file a U.S. estate tax return. However, this does not impose a tax on you, and if any U.S. estate tax was paid, it can usually be credited against the Spanish tax (and vice versa) as previously explained.

4. Receiving the Inheritance: Once the inheritance deed is signed in Spain and taxes are settled, the assets can be transferred to you. If it's money in a Spanish bank, you can instruct the bank to wire it to your U.S. account (after providing proof of tax payment). If it’s real estate, you will become the owner and you might decide to sell it or keep it. If you sell Spanish property as a non-resident, be aware that Spain has a capital gains tax for non-residents (19% for EU citizens, and 24% for others). This is separate from the inheritance tax but is something to plan for if you intend to liquidate the property. You should also ensure you get multiple official copies of the inheritance deed and any court documents with an apostille, as you might need them in the U.S. to prove your entitlement. For example, a U.S. bank might want evidence of where a large deposit came from, so having the inheritance documents translated could be helpful for your records.

5. A Case Example: John, living in Florida, inherits an apartment in Barcelona from his uncle, who was a resident of Spain. John is the only heir and he is a non-resident. The Spanish notary, using the uncle’s will, prepares the acceptance of inheritance deed. John grants a power of attorney to a lawyer in Barcelona to act for him. The lawyer signs everything and pays the Spanish inheritance tax, which, thanks to Catalonia’s allowances, turns out to be minimal on the €200,000 property. John owes nothing in U.S. tax. John now owns the apartment. He decides to sell it; upon sale, 3% of the sale price will be withheld as an advance payment of capital gains tax for non-residents, and he will file a Spanish non-resident tax return to calculate the exact gain tax. But the inheritance itself was straightforward: just Spanish paperwork and tax, with John never having to leave the U.S. For more information, please visit ImpuestosHerencias.es.

Critical Timelines, Costs, and Recommendations for USA-Spain Inheritances

Important Deadlines: The most critical deadline to remember in these international cases is the Spanish inheritance tax deadline. It is six months from the date of death, with a possible extension to 12 months upon request. As soon as the death occurs, mark this date. If the estate is complicated, make sure an extension request is filed within five months of the death. Missing the deadline can result in penalties, as Spain imposes a surcharge on late payments (5%, 10%, 15%, or 20% depending on how late, plus interest). Even if no tax is due, failing to file the informational tax form on time can lead to fines. In the U.S., there is no "inheritance tax deadline" for heirs, but if a U.S. estate tax return is required, the executor must file it within nine months of death (with a possible six-month extension). This is typically the estate's responsibility, not the heir's, but heirs should be aware of it in large estates. Another timeline to consider is the duration of probate. A U.S. probate can take anywhere from a few months to over a year, depending on complexity. A Spanish inheritance process can also take several months, especially with international elements. It is often beneficial to start both processes simultaneously. Coordination is key if assets in one country depend on documents from the other.

Associated Costs: Handling an international inheritance involves several types of costs: Legal Fees: It is highly recommended to hire a lawyer in Spain and likely one in the U.S. if there is a probate proceeding there. Spanish lawyer fees might be a percentage of the estate value or a fixed fee. U.S. probate attorneys might charge an hourly or statutory fee. Discuss fees upfront. While it may be tempting to handle some steps without a lawyer, cross-border cases are complex, and professional guidance usually pays off by preventing costly mistakes. Notary and Court Fees: In Spain, notary fees for the inheritance deed are regulated and are usually based on the estate's value. There may also be minor fees for obtaining official certificates. If a court declaration of heirs is needed, court fees may apply. In the U.S., court filing fees for probate vary by county. Translations and Apostilles: You will likely need official translations of key documents. For instance, a U.S. death certificate and will might need to be translated into Spanish for the notary. Likewise, Spanish inheritance documents might need to be translated into English. Each document that crosses borders may require an apostille, a form of international certification, to be recognized by the other country's authorities. Obtaining apostilles is an additional cost. Taxes: The inheritance tax itself can be a cost, though as discussed, it may be minimal or zero in many cases. If tax is due in Spain, it must be paid when filing the return. In the U.S., if estate tax is due, the estate typically pays it before distribution. It is rare for an heir to have to personally pay for U.S. estate tax; it is usually handled by the estate's executor from estate funds. So, focus on the Spanish tax as the one you might need liquid funds for. Spain does allow an heir to pay the tax using inherited assets in some circumstances, but it is a bureaucratic process. Miscellaneous Costs: These can include travel costs if you choose to go to Spain and real estate agent fees if you sell property.

Next Steps / Call to Action: Navigating a cross-border inheritance between the USA and Spain requires navigating two distinct legal and tax regimes. To ensure a smooth and efficient process: Consult with Specialists: Engage a Spanish lawyer who specializes in international inheritance cases. Similarly, consult a U.S. estate attorney or tax advisor if the U.S. side has complexities. Professionals can clarify which documents you need, handle filings, and facilitate communication between jurisdictions. Gather Documents Early: Obtain multiple copies of the death certificate. If the death occurred in the U.S., get it certified with an apostille for use in Spain. Locate any wills (both U.S. and Spanish, if applicable) and asset information. The more information you have, the smoother the process will be. Plan for Funds: If you anticipate a Spanish tax bill, plan how to pay it. If you will receive a large sum in the U.S., consider consulting a financial advisor for handling those funds and reporting any required information, such as FinCEN Form 114 (FBAR) if you temporarily hold a foreign account over $10,000, or Spanish Modelo 720 as discussed for Spanish residents.

Navigating a cross-border inheritance can be challenging, but you don't have to do it alone. For expert guidance, you can visit specialized websites like ImpuestosHerencias.es and HerenciasPlus.com. Contact experts for a personalized consultation. With professional help, you can honor your loved one's legacy and secure your rightful inheritance with minimal stress and maximum protection. We are here to ensure that no legal detail is overlooked, so you can focus on moving forward. (This article is for general informational purposes only and does not constitute legal or tax advice. For advice tailored to your situation, please consult a qualified attorney or tax advisor licensed in the relevant jurisdictions.)

Applicable Law for Succession (USA–Spain)

When someone connected to both the United States and Spain passes away, the first issue to clarify is: which country’s succession law governs the estate? Under European Union law, particularly Regulation (EU) No. 650/2012 (known as the Brussels IV Regulation on Succession), the general rule is that the law of the deceased’s last habitual residence governs the inheritance. This represented a shift from earlier principles that focused mainly on nationality.
If the decedent was living in Spain (even if still a U.S. citizen), Spanish succession rules would normally apply to the estate. Spanish inheritance law enforces “legítima” or compulsory heirship, which reserves part of the estate for certain relatives. For instance, children must receive a significant protected share. Only the remaining portion can be freely allocated by will.

U.S. Residence and Succession Rules

If the deceased was resident in the United States, the matter becomes more complicated because the U.S. is not bound by the EU Succession Regulation. Spanish authorities, when considering an estate with assets in Spain, will still rely on their private international law rules (harmonized with the EU Regulation) to identify which law applies. In practice, this usually results in U.S. law being recognized if the deceased’s last residence was in the U.S. However, inheritance rules in the U.S. vary widely by state. Generally, American law offers much broader testamentary freedom, as most states do not impose forced heirship for children. Typically, the deceased may distribute property to whomever they wish, although in some states the surviving spouse has a statutory right to claim a portion of the estate.

Choice of Law by the Testator

Crucially, an individual may select the law that governs their estate by including a choice-of-law clause in their will. Regulation 650/2012 authorizes a person to choose the law of their nationality. Thus, a U.S. citizen living in Spain may elect for U.S. law to apply to their succession. This is a frequent approach taken by American and other expatriates in Spain to avoid Spain’s strict forced-heirship provisions. By inserting such a clause into a Spanish will, they ensure that their estate follows U.S. principles of flexibility rather than Spain’s mandatory shares. Absent this clause, a long-term American resident in Spain would have Spanish law apply by default, potentially clashing with their intended estate plan.
In short, the governing law depends on specific factors: under Spanish jurisdiction, habitual residence is the default criterion, but a U.S. citizen can validly choose U.S. law, which Spain will respect. On the other hand, a U.S. probate court will apply the law of the relevant state, but for assets located in Spain—especially real estate—the court may defer to Spanish law under the lex situs doctrine. This can lead to a split system, where Spanish property follows Spanish rules while U.S. assets follow American rules. Each cross-border case is unique, making specialist legal guidance essential.

Applicable Tax Law (USA–Spain)

Spain levies an Inheritance and Gift Tax (Impuesto sobre Sucesiones y Donaciones, ISD) on heirs. Liability depends on the heir’s residence and relationship to the deceased:

• A Spanish tax resident heir is subject to inheritance tax on worldwide assets. Even property located in the U.S. must be declared in Spain. Spanish law provides deductions and reductions, with significant variations among Autonomous Communities. Some regions (like Andalusia or Madrid) grant reductions of 95%–99% for close relatives, which can effectively eliminate tax liability for spouses or children. However, residents must still file a return, even if the end result is no tax due.

• A non-resident heir (e.g., an American living in the U.S.) is taxed only on Spanish-situs assets, such as real estate or bank accounts in Spain. Following EU case law, Spain extended its regional tax benefits to non-EU heirs. This means an American inheriting in Madrid or Andalusia now enjoys the same allowances as locals, avoiding the punitive national rates that once applied to non-EU heirs.

U.S. Estate Tax Considerations

At the federal level, the U.S. does not impose inheritance tax on beneficiaries. Instead, it levies an estate tax on the decedent’s estate if the deceased was a U.S. citizen or domiciliary, or if the estate includes U.S.-situated property of a non-resident. The U.S. estate tax applies only to very large estates—around $13.6 million in 2024 is exempt, with amounts above that taxed at 40%. Some individual states impose their own estate or inheritance taxes, such as New York (estate tax) or Pennsylvania (inheritance tax).
For most cross-border estates, the effect is limited: if the estate falls below the federal exemption, no U.S. estate tax is due. Heirs also do not report inheritances as income, since under U.S. law inheritances are not taxable income. Thus, in many cases, taxation is only an issue in Spain, not both countries simultaneously.

Double Taxation Relief

Spain and the U.S. do not share a bilateral inheritance tax treaty, unlike Spain’s treaties with France, Sweden, or Greece. Nevertheless, both countries’ domestic laws contain relief mechanisms:

• Spain allows a unilateral tax credit where inheritance tax was paid abroad on the same asset (Article 23 ISD Law). The heir may offset either the foreign tax paid or the Spanish tax on that asset, whichever is lower.

• The U.S. permits its estates to claim a credit for foreign death taxes paid on property included in the taxable estate, even absent a treaty. Thus, if a U.S. citizen dies owning a villa in Spain that is taxed under Spanish ISD, the U.S. estate can credit that Spanish tax against U.S. estate tax.
  As a result, true double taxation is typically avoided. Generally, heirs end up paying whichever country imposes the higher effective tax, not both in full. Because of Spain’s exemptions and the U.S. high threshold, often only one country’s tax applies.

Heirs Residing in Spain Receiving from the USA

If you live in Spain and inherit from a relative who passed away in the U.S., several steps are required:

1. U.S. probate: The estate must go through probate in the relevant U.S. state. If there is a will, it is validated; if not, intestacy rules apply. Heirs may need a U.S. lawyer and may grant a power of attorney if unable to attend in person.

2. Applicable law: The governing law is generally U.S. state law. Spain may require separate procedures for Spanish assets, aligning with both jurisdictions.

3. Spanish inheritance tax: As a Spanish resident, you must declare worldwide inheritances. Filing Form 650 within six months of death is mandatory (extendable to twelve months). Even if no tax is due, the filing obligation stands. Spain also allows credit for U.S. estate tax if paid.

4. Receiving assets: Transferring funds to Spain may trigger banking compliance. Assets kept abroad must be reported on Modelo 720 if they exceed €50,000.

5. Example: María, a Spanish resident, inherits $200,000 from her father in California. No U.S. estate tax applies. She declares the inheritance in Andalusia, where her tax liability is negligible due to a 99% reduction. She also files Modelo 720 to declare the temporary U.S. account.

Heirs in the U.S. Receiving from Spain

If you are based in the U.S. and inherit from a parent or relative in Spain, the process is as follows:

1. Spanish inheritance procedure: This involves obtaining certificates of death and wills, followed by an acceptance deed before a notary. If no will exists, an intestacy declaration must be made. A power of attorney can be granted from the U.S. to avoid traveling.

2. Applicable law: If the deceased was Spanish or habitually resident in Spain, Spanish forced-heirship rules apply, unless the deceased chose their national law (e.g., U.S. law) in a will.

3. Spanish inheritance tax: As a U.S. resident heir, you are taxed only on Spanish assets. Non-residents benefit from the same regional deductions as residents. Filing must be completed within six months (extendable).

4. Receiving assets: Bank accounts can be transferred once taxes are paid. Real estate can be inherited, kept, or sold, but selling triggers Spanish non-resident capital gains tax (24% for Americans). Official deeds and translations may be needed in the U.S.

5. Example: John, in Florida, inherits a Barcelona apartment worth €200,000. Through a POA, his lawyer handles the acceptance deed and pays minimal Catalonian tax. John pays nothing in the U.S. on the inheritance. Later, when he sells, capital gains tax applies in Spain.

Deadlines, Costs, and Practical Steps

Deadlines: Spain requires inheritance tax filing within six months (extendable to twelve). Penalties apply for late filing, even if no tax is owed. In the U.S., if estate tax is due, the return is filed within nine months (extendable by six). Probate may take months to a year in both jurisdictions.
Costs:

• Legal fees: hiring counsel in both Spain and the U.S. is advisable.

• Notary/court fees: moderate in Spain, higher in U.S. probate depending on state.

• Translations and Apostilles: needed for cross-border recognition of documents.

• Taxes: usually manageable, often minimal due to exemptions.
  Next steps: Collect certificates and wills, appoint counsel, plan for Spanish tax payments, and comply with reporting duties (such as Modelo 720 or U.S. foreign account reporting).

Our firm specializes in cross-border estates between the USA and Spain. We coordinate both legal systems, ensure tax optimization, and handle the complex documentation. For tailored guidance, visit internationaltaxlegalspain.com.

(This article provides general information and should not be considered legal or tax advice. For personalized advice, consult a qualified attorney or tax advisor in the relevant jurisdictions.)