We are going to know different important aspects inherit a property, taxes to pay and how to proceed in cases such as the mortgage is pending or the property is rented.
Taxes to pay when inheriting a property
In our country, when inheriting a property, it is necessary to pay a series of taxes, such as:
Inheritance and Gift Tax (ISD): It is a tax that taxes the inheritances and donations received by a person. The amount of the tax will vary depending on the value of the inheritance and the degree of kinship between the deceased and the heir. Each Autonomous Community has its own regulations and tax rate for the ISD.
Tax on the Increase in Value of Urban Land (IIVTNU). Also called «Municipal Capital Gain«: This tax is levied on the increase in the value of urban land at the time of transfer of ownership. The amount to be paid is calculated based on a series of parameters:
- Catastral value of the property.
- Length of time the deceased has been the owner.
- Percentage increase in land value that has occurred.
We must emphasize that the obligation to pay these taxes falls on the heirs. These have a period of six months from the death of the deceased to present the necessary documentation and settle the corresponding taxes. In case of not complying with this obligation within the established period, interest and surcharges are generated for late payment.
Inherit a home with a mortgage pending settlement
If a home with an outstanding mortgage is inherited, the heirs have the obligation to take charge of its payment. In this sense, the mortgage must continue to be paid under the conditions agreed with the financial institution.
We must take into account that the mortgage debt is not extinguished with the death of the holder of the mortgage loan, so the heirs must assume the payment of the remaining installments and, where appropriate, the payment of the interest that has been generated.
In the event that the heirs cannot assume the payment of the mortgage, it would be possible to request the financial institution to novate the mortgage, to modify the conditions of the loan and adapt them to their payment possibilities. They can also request dation in payment, which implies the delivery of the house to the bank in exchange for canceling the mortgage debt.
Finally, note that any modification of the mortgage loan must be agreed between the heirs and the financial institution. Fact that implies the negotiation of new conditions and the signing of new documents.
Inheriting a home with a current lease
If a home with a current rental agreement is inherited, the rental agreement is maintained and must be respected until its expiration. The rights and obligations of the lessor and the lessee remain intact, and the new owner becomes the new lessor, assuming the same obligations and rights as the previous owner.
That is, the heir must respect the conditions of the rental contract. For example, the term, the price of the rent and the obligations and responsibilities of the parties, until its completion. The conditions of the rental contract cannot be unilaterally modified while it is in force.
In the event that the new owner decides not to renew the rental contract, they must communicate it sufficiently in advance and respect the rights of the tenant established by law. For example, the right of first refusal and withdrawal in certain circumstances.
It is important to bear in mind that the inheritance of a home with a rental contract could generate income that must be declared in Personal Income Tax (IRPF) and taxed based on the personal situation and circumstances of the heir.
