Distribution of assets in inheritance

One of the issues faced by individuals with significant wealth is the taxation of future inheritance in favor of their descendants. Although there are mechanisms to reduce it –for example, there are reductions in the transfer of the deceased's home, or in the transfer of family businesses or companies–, in some cases this taxation can be high.

Well, one alternative to reduce the cost of Inheritance Tax is to include more people in the will (provided that the legitimate rights of the children are respected). For example, if the children already have a stable economic situation, grandchildren can be included, leaving them specific properties or the bare ownership of some of them –so that the use and enjoyment will still belong to the children–.

This alternative allows for a reduction in Inheritance Tax for the following reasons:

• Firstly, because this tax is progressive (that is, the higher the value of the inheritance, the higher the applicable tax rate). Therefore, by distributing the inheritance among several beneficiaries, they will receive less wealth and the applicable tax rate for each will be lower.
• Secondly, because reductions for kinship apply to each of the beneficiaries. Therefore, if there are more beneficiaries –whether as heirs or legatees– and all of them are descendants –children and grandchildren–, the total reductions applied will be greater and, consequently, there will be a larger portion of the inheritance that will not be taxed.