When planning your inheritance and reducing the taxation of the Inheritance and Donations Tax (ISD) that your heirs will face, a good option is to donate assets while alive. Since the ISD is a progressive tax, donating assets during your lifetime allows you to declare a lower value for the inheritance in the future and pay less tax when inheriting. Additionally, many communities establish significant incentives in the ISD for donations from parents to children.

On the other hand, if you make the donation in real estate or other assets that have increased in value since you acquired them, you will also be required to declare that increase in value as a capital gain in your IRPF. . Because of this, in many cases, making donations of real estate while alive is not the best option, as it may result in a higher total taxation than passing them on through inheritance (remember that in inheritances, you do not have to pay IRPF for the increase in value of the inherited assets).

However, be aware that this obligation to pay IRPF has an exception: if you have already turned 65 and donate your primary residence . The transfers of the primary residence made by individuals over 65 years old are exempt from IRPF, and this applies whether it is a sale or a donation.

According to this, if after turning 65 and retiring you wish to change your primary residence and move to your hometown or a second home, take advantage of the indicated exemption. Consider donating your primary residence to your children at no cost in IRPF and reduce, in turn, their taxation when they inherit your assets in the future. However, once you change your primary residence, you must donate your home before two years have passed (this is because, for the purposes of applying the exemption, the primary residence only retains that status and entitles you to the exemption during the two years following the change of residence).

Finally, keep in mind that this incentive is also applicable if you are in a situation of severe dependency or great dependency, without needing to have already turned 65.

 

If you are thinking of donating any asset to your children, come see us. We will advise you on the best way to act to optimize your taxation.