In Spain and France, it is usual practice for parents wishing to gift assets to their children, to gift the underlying interest in the property (nuda propiedad & nue propriété) and retain an interest in it (usufructo usufruit) so the parents can continue to use and enjoy the property as well as retaining a series of rights over the property
The main issue for clients and their beneficiaries is that on their demise, the interest retained on the property may either be treated as a ‘Gift With Reservation of Benefit’ and so it may be a failed gift for Inheritance Tax purposes here in the UK, or (depending on HMRC’s view, which is not entirely clear), it may be treated as a settlement and give rise to immediate and possibly ongoing tax charges from the date of the gift. Either analysis totally defeats the purpose of the gift from a UK estate planning perspective.
If you are planning to gift your French property or Spanish property, please contact us so we can advise both from the French/ Spanish and UK angles. If you have already gifted property in Spain or France and are unsure whether or not you kept any rights over the property, we can assist you to clarify your position and advise you accordingly.
