When someone inherits one or more immovable property, either as heir, or as legatee, in the deed of acceptance of the inheritance or legacy we must record its value. This is an important aspect to bear in mind when accepting an inheritance, as the value we assign will have important tax implications.
What does the legal norm say?
In accordance with Law 29/1987 on Inheritance and Gift Tax (ISD), the value to be set is the market value. But an individual who inherits an asset does not always know the real estate market. Well, in any case, there is something that we must consider. If we do not want our inheritance tax settlement to be subject to priority verification by the competent tax administration, the minimum value to be fixed is equal to the cadastral value multiplied by a coefficient that depends on the municipality where the property is located. This coefficient can be consulted on the websites of each Autonomous Community and it is modified every year, so we must consult the one for the year in which the deceased’s death occurred. Finally, to the given result, we apply a coefficient 0.80 and we will have the minimum value to set. The market value will almost always be higher than the minimum value that we have calculated in the manner outlined. But if the market value is still lower, we can indicate this as the value of the property, always knowing that our valuation will probably be subject to review, so in a subsequent verification procedure initiated by the Tax Administration we must provide evidence that motivate the value we have assigned to the property.
Well, we already have the minimum value of the property for priority verification by the tax administration. Is this the value we should reflect in writing? Not necessarily. We insist, the law demands that the value to be recorded be that of the market. This minimum value serves us to know that the tax administration will not consider its verification as a priority.
On the value that we set, the instalment to pay of the inheritance tax will be calculated, together with the other assets that we may have inherited. From
this perspective, one may think that the less value we give to the property, the better, since less inheritance tax we will pay.
Certainly, this is so, but we must think a little about the future use we want to give the property, because if our intention is to sell the inherited property as soon as possible, it may happen that we end up paying much more for the capital gain generated with the saleof the property than for the saved amount by the inheritance tax. On the other hand, depending on what property you are inheriting and from whom you are inheriting it, a higher value of the property does not imply a higher cost of inheritance tax, or at least, not a significant higher cost.
We see, therefore, that the valuation of an inherited property is complicated and, above all, that it may have future tax implications that entail a higher cost than expected. If you have doubts about it, it is best to put it in the hands of a professional.
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