Is inheritance tax payable on life insurance or a pension plan?
Life insurance, yes, unless it was the beneficiary who took out the policy. It is not part of the estate, but it is subject to the “impuesto de sucesiones”, the Spanish inheritance tax. In Catalonia, the spouse, the stable partner (in a “pareja estable”, the Catalan stable partnership), the children, grandchildren, parents and grandparents pay nothing on the first 25.000 euros. A pension plan, on the other hand, is not subject to inheritance tax. The beneficiary declares it on his or her income tax return as if it were a salary.
Alburquerque Abogados
José Manuel AlburquerqueLife insurance
- It is paid to the person named as beneficiary, even if that person is not an heir or renounces the inheritance. If there is none, it becomes part of the estate.
- It is added to what that beneficiary inherits and inheritance tax is paid on it in the same return.
- The spouse, the stable partner, descendants and ascendants pay nothing on the first 25.000 euros, only once even if they have several policies.
- If the person who took out and paid for the policy is the beneficiary, it is subject not to inheritance tax but to income tax.
- To find out whether there were any policies, you apply to the “Ministerio de Justicia”, Spain's Ministry of Justice, for the certificate of insurance policies with death cover, once fifteen working days have passed since the death. It shows the insurance company, not who is to be paid.
The pension plan
- It is not part of the estate either. It is paid to the designated beneficiaries or, if there are none, normally to the heirs.
- It is not subject to inheritance tax. Each beneficiary declares it on his or her income tax return for the year in which it is received.
- It is worth thinking about how to take it, as a lump sum or gradually, because it changes how much tax is paid. Of the contributions made before 2007, only 60 % has to be declared if it is taken as a lump sum in the year of death or in either of the following two years.
The allowance of 25.000 euros is specific to Catalonia. It applies if the deceased spent more days in Catalonia than in any other autonomous community over the last five years.
This answer is provided for educational purposes and offers initial guidance on the question raised. Every matter has its own circumstances and nuances that require individual assessment. For that reason, before taking decisions with significant consequences, it is advisable to consult a professional and not to rely solely on this information. Personalised advice makes it possible to apply these explanations to the specific case and to assess the options available with greater certainty.