Can I sell a flat to one of my children? Do I need the others' permission? And what if it is for less than it is worth?

Question

José Manuel Alburquerque · Accepted Answer

Yes, you can sell it to them and you do not need your other children's permission. In Catalonia the forced share (“legítima”) gives children the right to receive a value from the estate, not specific assets, so the others cannot prevent the sale. If you sell at market price and your child genuinely pays, there is no problem. If you sell for less than it is worth, the difference is a gift that may count towards the others' forced share when you die. In addition, for tax purposes it is the value of the flat that counts and the difference may be taxed as a gift, so selling cheaply does not usually save tax. Your other children No law requires the other children's permission to sell to one of them. In Catalonia the forced share does not make children owners of part of the assets. It gives them the right to receive a value when their father or mother dies. That is why they cannot prevent the sale or have it set aside because they are forced heirs (“legitimarios”). What may affect them is the price: If your child pays the market price, the money takes the place of the flat in your assets and the others' forced share does not change. If they pay less, the difference is a gratuitous benefit, in other words a gift. To calculate the forced share, gifts made in the ten years before the death are added in, so that difference may count. If, as a result, the others do not receive their full forced share, they can ask for the gift to be reduced. If your child does not genuinely pay the price, what you have is a gift disguised as a sale. Its validity can be challenged, so if you want to help your child it is safer to make an open, declared gift. Under the Spanish Civil Code, which applies in most of the rest of Spain, the children's forced share is two thirds of the estate and anything given to a child is taken into account when the estate is divided, but the others' permission is not needed to sell either. Some autonomous communities, such as Aragon, Navarre, the Basque Country, Galicia or the Balearic Islands, have their own rules. Taxes Your child pays property transfer tax (ITP) on the price or on the “valor de referencia”, the reference value that the Spanish land survey office, the “Catastro”, sets for each property on the basis of sales in the area, if that is higher. You declare any capital gain in your income tax return. If the price is below market value, the tax authorities use the market value, so selling cheaply does not save you tax. The difference between the value of the flat and the price may be treated as a gift, on which your child would also pay the “impuesto de donaciones”, the Spanish gift tax. You pay the “plusvalía municipal”, the municipal capital gains tax, like any seller. How to do it safely Set a market price, preferably backed by an independent valuation. Your child should pay it with their own money and by bank transfer, so that there is a record of the payment. If what you want is to help them, first compare what a declared gift of the flat or of the money would cost, as between parents and children in Catalonia it is taxed at a reduced rate if it is made by public deed.