On 14 October 2024, the High Court of Justice of Madrid (TSJM) issued a key ruling on inheritance tax. It analysed whether a person who initially rejected an inheritance should be considered an heir for tax purposes due to certain acts that could be interpreted as tacit acceptance of the inheritance.
The case: a repudiated inheritance and tax controversy
The case involved a taxpayer, Mrs Elvira, who formally rejected the inheritance from her sister who died in 2017. However, the Community of Madrid considered that she had carried out acts that showed tacit acceptance of the inheritance, such as the use of funds from the deceased’s bank account and the omission of the inheritance tax.
Initially, the Regional Economic-Administrative Tribunal (TEAR) of Madrid had ruled in favour of the taxpayer and revoked the tax assessment imposed. However, the Community of Madrid challenged this decision before the TSJM, arguing that the facts showed that the taxpayer had implicitly accepted the inheritance.
The decision of the TSJM
The court analysed the facts and concluded that there was sufficient evidence to consider that the taxpayer had tacitly accepted the inheritance. Among the reasons given in the judgement, the following stand out:
- The taxpayer was listed as authorised on the deceased’s bank accounts.
- The funds in the accounts were withdrawn in full in the same year as the death.
- Certain payments were made with the deceased’s money, which could be interpreted as asset management typical of an heir.
Based on the Inheritance and Gift Tax Act, the court determined that these acts implied a tacit acceptance of the inheritance and, therefore, the taxpayer was obliged to pay the corresponding tax.
Consequences and recommendations
Although the court upheld the tax assessment, it decided to revoke the penalty imposed, as the Community of Madrid did not adequately justify the taxpayer’s guilt.
This case highlights the importance of properly managing the renunciation of an inheritance. To avoid tax problems, it is essential to:
- Formalise the renunciation before a notary as soon as possible.
- Avoid any management or disposal of the deceased’s assets, as this can be interpreted as tacit acceptance.
- Consult a tax advisor to determine the tax impact and the best legal options in each case.
Our firm recommends that anyone in a similar situation seek specialised advice to avoid adverse tax interpretations. If in doubt, we are at your disposal to guide you through the process and ensure compliance with your tax obligations.
Sara Gámez Córdoba.