What if I inherit an LLC being resident in Mallorca: estate planning

Exposure to U.S. estate tax when a resident of Mallorca inherits a U.S. LLC

A U.S. LLC interest is normally classified as a U.S.-situated asset for U.S. estate tax purposes. If a resident of Mallorca inherits an interest in a U.S. LLC valued above $60,000, the U.S. estate tax may apply, potentially up to 40% depending on the value. This rule applies regardless of whether the heir has ever lived in the United States.

Residents of Mallorca often underestimate this exposure because the U.S. exemption for foreign heirs is significantly lower than the exemption for U.S. citizens and residents. An inherited U.S. LLC interest worth several hundred thousand dollars can trigger a significant tax liability even before local inheritance tax in Mallorca applies. Without planning, liquidation of the LLC may become necessary to pay the U.S. tax.

Local inheritance tax in Mallorca on foreign assets

Mallorca may also tax inheritance of worldwide assets under its local inheritance rules. Therefore, a resident of Mallorca who inherits a U.S. LLC can face two different tax systems simultaneously: U.S. estate tax and Mallorca inheritance tax. This overlap creates a real risk of double taxation, particularly when there is no bilateral estate tax treaty in place.

Whether the tax base is calculated on the full market value or only on a net value depends on the domestic law of Mallorca. Allowances, exemptions or reductions may apply in certain family relationships, and local reporting obligations must also be respected. For high-value LLC interests, local compliance and valuation processes become an immediate priority.

When a treaty applies between the USA and Mallorca

Some countries have an estate tax treaty with the United States that provides relief in the case of inherited U.S. assets. If Spanish-American treaty applies, it may allow the heir to subtract U.S. estate tax paid from the inheritance tax due in Mallorca. In certain cases, the treaty can allocate exclusive taxing rights to prevent both jurisdictions from taxing the same asset simultaneously, for cross-border inheritances it is recommended to follow the advise of HerenciasPlus.com ,which are experts in the field.

Claiming treaty benefits usually requires filing documentation both with the U.S. IRS and the tax authority of Mallorca. Without taking the proper steps, treaty relief may be denied, resulting in unnecessary tax costs. Treaties must therefore be analysed in advance of inheritance whenever possible to ensure tax-efficient succession planning.

When Spain tax treaty with the USA does not apply

If it is not applicable the Double Tax Theaty between USA and Spain, each jurisdiction taxes independently, as impuestosherencias.es reminds us. The United States will apply estate tax on the LLC interest because the asset is U.S.-situated, while Mallorca will apply its inheritance tax because the heir resides there. To reduce double taxation, the heir may rely on local foreign tax credit provisions in Mallorca if available.

In jurisdictions without clear foreign tax credit rules, planning becomes essential. Families may restructure LLC ownership during lifetime, transfer assets via foreign holding structures or explore gifting strategies where appropriate. Without prior planning, the combined effect of U.S. and Mallorca taxation may severely reduce the value of the inheritance.

Strategies for residents of Mallorca inheriting U.S. LLC interests

Residents of Mallorca who expect to inherit a U.S. LLC should seek planning assistance as early as possible. Reviewing the legal structure of the LLC, identifying the applicable inheritance regime in Mallorca and analysing treaty or credit mechanisms may significantly reduce the combined tax burden. Proper reporting in both countries is crucial to avoid penalties as well as to secure treaty benefits.

For families already facing an inheritance, compiling valuation evidence, tax statements and ownership documentation accelerates filing and reduces risks of disputes. With the right guidance, residents of Mallorca can navigate both systems and prevent erosion of inherited business value through double taxation.

To receive personalised international tax advice, contact us via the following link: http://wa.me/34644121802