Do step children have any bonus or reductions for the purposes of Inheritance Tax ?. Or, Are they considered as non relatives or third party?

CONSULTATION:
Dear Sirs,

My husband has three children from a previous marriage, who are like my own children although they are in fact step children, as I have no children of my own. I was told that since they are not my descendants, if my stepchildren inherit from me, they will pay a huge Inheritance Tax bill, twice the normal, because they are not considered my relatives. Is that true?

Dear reader,

Thank you for your consultation.

I believe that what you have been told should be clarified.

The Law 29/1987 of the Inheritance and Gift Tax (IHT), in its Article 20 recognizes certain reductions to ascendants and descendents by affinity, ie, stepchildren, parents in law, etc.. This reduction, according to Inheritance National Tax rules is of € 7,993.46. Also we can roughly say that the stepchildren pay approximately 59% more in the inheritance tax bill than if they were your own children. Please notice that normally non relatives or strangers pay more than double.

Either way it is true that the concept of relative by affinity and its tax regulation is quite problematic. For example, it has been understood by the Tax Authority, that the reduction stated above, will only apply while your link with the parent remains, that means that, in your case, if the father dies or you get divorced, your step children will not keep their affinity relation with you. Therefore according to the administration, if your husband dies before you or you get divorced, and your stepchildren inherit from you, they will not be eligible for the reductions stated, as they will only apply if, when they inherit from you, their father is still alive and married to you.

Despite the above theory, there is some debate, since the Spanish Civil Code does not indicate that the affinity relationship terminates with death. The High Court of Justice of Murcia and Asturias have followed this line of reasoning and have ruled understanding the theory to be erroneous.

Therefore, we can say that your stepchildren will be able to enjoy the said tax reduction if they inherit from you whilst you are still married to their father. However, in the event that their father dies before you, and they inherit from you, the taxman may understand that the tax reduction is not applicable, although there are legal arguments to fight that decision.

If you need help on any matter relating to an inheritance, will or in relation to inheritance taxes, our firm can assist you.
The information provided in this article is not intended to be legal advice, but merely conveys general information related to legal issues.

White & Baos
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