Complex Inheritances: Family Businesses and Special Estates in Spain 2025
Inheritances involving family businesses and special estates represent some of the most complex challenges in Spanish Succession Law. When the deceased has spent decades building a family business or has accumulated assets distributed across multiple jurisdictions, the inheritance transmission transcends the simple distribution of assets to become a first-order legal, tax and strategic operation. In 2025, with the recent Supreme Court judgments on family businesses dedicated to real estate leasing (STS 956/2025 and 969/2025) and the consolidation of European Succession Regulation 650/2012, succession planning for these special estates requires current and profound knowledge of the available legal tools.
The family business constitutes 89% of the Spanish business fabric and generates approximately 60% of the national GDP. However, only 30% of these businesses manage to be successfully transmitted to the second generation, and barely 15% reach the third generation. This high failure rate is largely due to deficient succession planning that does not adequately contemplate the legal, tax and governance aspects necessary to guarantee business continuity. When the family business represents the principal or only asset of the inheritance, the situation becomes even more complicated: how to reconcile the right of forced heirs to receive their share with the need to maintain the business undivided and operational?
Transmission of Family Businesses: Legal Framework and Available Tools
Article 1056.2 of the Civil Code: conservation of the family business
Article 1056.2 of the Civil Code, introduced by Law 7/2003 of April 1, constitutes the most important legal instrument for the generational conservation of the family business in Spanish common civil law. This provision allows the testator who, in consideration of the conservation of the business or in the interest of his family, wishes to preserve an economic operation undivided or maintain control of a capital company or group thereof, to use the power to dispose that the forced share be paid in cash to the other interested parties.
The great advantage of this mechanism lies in the fact that it is not necessary for sufficient cash to exist in the inheritance for payment, it being possible to make payment with extra-hereditary cash and to establish deferral (by the testator or the designated partition accountant) provided it does not exceed five years from the death of the testator. Furthermore, any other means of extinction of obligations may be applied. If the form of payment has not been established, any forced heir may demand his forced share in property from the inheritance.
Key aspects of article 1056.2 interpreted by jurisprudence:
Doctrine and jurisprudence have clarified various practical aspects of this provision. Firstly, the testator may attribute the business to one or several heirs or legatees, it being especially useful to adjudicate it to several when this facilitates cash compensation by making payment more affordable. Secondly, the adjudicatee may even be a grandchild although his parent (child of the deceased) is living, thus expanding the possibilities of generational planning. Thirdly, article 843 CC (collation) nor the first paragraph of article 844 CC (forced share supplement) do not apply, which confers greater flexibility to the partition.
Family protocol: governance and succession instrument
The family protocol is a set of agreements entered into by partners among themselves or with third parties with whom they have family ties, whose objective is to regulate the relationships among family, ownership and business. Although it is not a tax instrument per se, it is fundamental to establish continuity mechanisms in the business through different generations in an advantageous and efficient manner.
Essential content of the family protocol:
A complete family protocol must address the values and vision of the family and business, establishing the guiding principles that will direct strategic decisions. It must regulate family and corporate governance, defining roles and responsibilities of family members both in the Family Council and in corporate governance bodies (Board of Directors, Management Board, Shareholders’ Meeting). The protocol must include employment policies for family members, establishing education and experience requirements to work in the business, as well as remuneration and evaluation policies.
Succession planning constitutes the core of the protocol, identifying potential successors, establishing development and preparation processes, and defining clear succession criteria in managerial and governance roles. Ownership rules regulate the acquisition, transfer or sale of family shares, voting rights and participation in strategic decisions, and policies to prevent conflicts of interest. Finally, the protocol must designate conflict resolution mechanisms to prevent emotional or personal decisions from affecting the business in the long term.
Succession agreements in regional law territories
While the common Civil Code prohibits agreements concerning future inheritance (art. 1271 CC), various autonomous communities with their own civil law permit succession agreements: Catalonia, Aragon, Galicia, Navarre, the Basque Country and the Balearic Islands. These succession agreements are arrangements whereby two or more persons agree upon the succession by reason of death of any of them, through the institution of heirs and particular attributions.
In Catalonia, the Catalan Civil Code regulates succession agreements in articles 431-1 and following, admitting the figure of heredamiento (cumulative or preventive). The grantors must be of legal age and may only grant them with the spouse or future spouse, the person with whom one cohabits in a stable partnership, relatives in direct line without limitation of degree, relatives in collateral line within the fourth degree, or relatives by consanguinity within the second degree of the other spouse or cohabitant.
In Aragon, the Compilation of Aragonese Civil Law recognizes fiduciary succession, renunciation or separation agreement, and hereditary attribution agreements, among others. The most important characteristic of the Aragonese succession agreement compared to a will is its irrevocability once agreed upon, the deceased being deprived of disposing by reason of death establishing something different from what was provided in said agreement.
In Galicia, Law 2/2006 on Civil Law of Galicia regulates succession agreements in articles 209 to 227, highlighting the betterment agreement that allows improving certain heirs. In Navarre and the Basque Country, the historic fueros legitimize succession agreements even of total content concerning the inheritance, keeping alive forms of agreed succession transmission of great social roots.
Advantages of succession agreements for family businesses:
Succession agreements offer multiple advantages for the family business. Firstly, they provide legal certainty through their irrevocability (except for agreed cause or mutual consent), which gives certainty to designated successors. Secondly, they allow advance planning of business succession, facilitating orderly generational transition. Thirdly, grantors may receive assets during life without waiting for death, improving taxation through Inheritance Tax instead of Personal Income Tax. Fourthly, they must be granted in public deed before a notary, which guarantees their validity and allows their registration in corresponding registries (Property, Commercial).
Tax Advantages in the Transmission of Family Businesses
95% reduction in Inheritance and Gift Tax
Spanish legislation establishes a 95% reduction on the taxable base of Inheritance and Gift Tax when a family business is transmitted, whether by inheritance or gift. This relief, regulated in article 20.2.c) of the ISD Law (mortis causa acquisitions) and 20.6 (gifts), constitutes one of the most powerful tax incentives to facilitate generational succession.
Requirements to access the 95% reduction:
To benefit from this reduction, several cumulative requirements must be met. Firstly, the participation must be at least 5% individually or 20% jointly with the spouse, ascendants, descendants or collaterals up to the third degree (second degree for Wealth Tax). Secondly, the transferor or some member of the family group must exercise management functions in the entity, receiving for this reason remuneration that represents more than 50% of the totality of business, professional and employment income.
Thirdly, the entity must carry out a real economic activity, its main activity not being able to be the management of movable or immovable assets. For real estate leasing, following the recent Supreme Court judgments (STS 956/2025 and 969/2025 of July 14, 2025), it is sufficient to have at least one employee with an employment contract and full-time to consider that economic activity exists, without the need to justify the hiring from an economic point of view.
Fourthly, the heirs or donees must maintain the participations received and comply with the previous requirements for a period of 10 years from the transmission. In the case of gifts, the donor must be 65 years of age or older or be in a situation of permanent disability, and must cease in the exercise of management functions and in the receipt of remuneration.
Exemption in Wealth Tax
Participations in family businesses that meet the mentioned requirements are 100% exempt from Wealth Tax. This exemption allows business partners not to have to declare the value of those participations as part of their taxed assets, avoiding an excessive tax burden on business assets and facilitating generational continuity.
The General Directorate of Taxes, in binding consultation V2390-23 of September 5, 2023, has introduced significant changes in the criteria to apply the exemption, requiring that participations be held jointly (not only individually) and that joint management control exists. This new criterion requires joint participation to access the exemption, which may affect those families where a family executive does not hold participation in the business but performs executive functions.
Capital gain exemption in the donor’s Personal Income Tax
When a family business is donated meeting the requirements of article 20.6 of the ISD Law, the donor does not pay Personal Income Tax on the capital gain derived from the donation (art. 33.3.c) Personal Income Tax Law). This exemption is essential to avoid taxation in Personal Income Tax, even in autonomous communities where there is a 99% reduction of the ISD tax liability.
The Supreme Court, in judgments of October 31 and November 13, 2024, has clarified that the exercise of management functions must be fulfilled at the time of donation, which is when the replacement in the family business takes shape. This temporal criterion is crucial for transmission planning, since compliance with the requirements provided in the Wealth Tax Law must be verified at the exact moment of donation, not during the calendar year in which it took place.
Special regional reliefs
Various autonomous communities have established additional reliefs that improve the state reduction of 95%. Andalusia, for example, applies a 99% relief on the ISD tax liability, reducing the tax almost to zero and shortening the maintenance period to 3 years in donations (compared to the state’s 10 years). Aragon published in July 2025 Law 3/2025 on tax support for family businesses, which makes the requirements more flexible for applying the reduction in ISD, establishing that the right to the reduction is not lost if, within the five-year period following death, the assets are transmitted to another successor who has benefited or could have benefited from the reduction.
Inheritances with International Assets: European Regulation 650/2012
Regulatory framework: European Succession Regulation
Regulation (EU) 650/2012 of the European Parliament and of the Council of July 4, 2012, on jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of Succession, entered into force on August 17, 2015. This regulation establishes a unified criterion to determine the law applicable to cross-border successions within the European Union, significantly simplifying the management of international inheritances.
General principle: law of habitual residence
By default, the law applicable to the succession is that of the country in which the deceased had his habitual residence at the time of his death. This criterion replaces the traditional rule of Spanish law according to which succession was governed by the personal law of the deceased (nationality) on the date of his death. If a Polish, German or Belgian citizen dies residing in Spain, the inheritance will be governed by Spanish law, unless in his will he has expressly indicated that he wishes to apply the law of his country of origin.
Professio iuris: choice of applicable law
The Regulation allows the deceased to expressly choose in his will the law of his nationality to govern the succession, although he resides in another country. This choice must be made expressly in a disposition mortis causa or result from the terms of said disposition. The professio iuris is limited to the law of the State whose nationality is possessed at the time of making the choice or at the time of death, thus guaranteeing that a connection exists between the deceased and the chosen law.
It is advisable that foreigners with property in Spain grant a Spanish will in which they expressly indicate whether they wish their national law to apply, avoiding uncertainty and accelerating inheritance adjudication procedures. In Spain, there exists the figure of the forced share that reserves part of the inheritance for children or descendants. However, if the deceased opts for the law of his country, the succession rules of that nationality will apply (some legislations, such as English law, allow greater freedom to dispose of assets).
European Certificate of Succession: single document for cross-border inheritances
The European Certificate of Succession (ECS) is an official document that certifies the status of heir, legatee or administrator of an inheritance, being valid in all Member States of the European Union without the need for additional recognition procedures. The ECS is issued by the competent authority (judge or notary) of the Member State whose law is applicable to the succession, and produces automatic effects in any Member State.
Information contained in the ECS:
The certificate includes data on the deceased and beneficiaries, the capacity and rights of each heir or legatee (including hereditary shares), the adjudication of specific assets of the inheritance, the powers of testamentary executors or administrators, the law applicable to the succession and the matrimonial economic regime if applicable. The ECS has a liberatory character, allowing the executor or testamentary executor who delivers assets of the inheritance to the heir or legatee designated in the certificate to be released from liability.
Advantages of the European Certificate of Succession:
The ECS enormously simplifies the management of international inheritances by avoiding lengthy procedures in each country where the deceased had assets. It allows an heir, legatee or administrator to be accredited as such throughout the EU, avoiding the need to obtain additional documents in each country. The certificate has a validity of six months from its issuance, extendable if necessary. It is important to note that the ECS is not mandatory, but rather a voluntary document that coexists with national succession documents.
Taxation of international inheritances in Spain
When a tax resident in Spain receives an inheritance from abroad, he must comply with important tax obligations. Inheritance and Gift Tax applies with two modalities: personal obligation for tax residents in Spain (they pay tax on all assets and rights received, whether located in Spain or abroad) and real obligation for non-residents (they pay tax only on assets or rights located in Spanish territory).
Double Taxation Conventions:
Spain has signed succession conventions only with France, Greece and Sweden. These Double Taxation Conventions (DTC) aim to prevent the same asset or right from being taxed twice. Some assets (such as real estate) will be taxed only in the country where they are located, while other assets (such as life insurance or financial assets) may be taxed in Spain according to what the Convention indicates.
When no DTC exists with the country of origin of the inheritance, article 23 of the ISD Law allows the tax resident in Spain to deduct from Spanish ISD the tax paid abroad, applying the lesser of these amounts: the amount actually paid abroad for a similar tax or the result of applying the effective average rate of Spanish ISD on assets or rights located abroad that have already been taxed in another country.
Form 720: informative declaration of assets abroad
Tax residents in Spain who receive an inheritance from abroad must file 720 Form if the inherited assets exceed 50,000 euros. This informative form must be filed between January 1 and March 31 of the year following that in which the inheritance was acquired. Failure to comply with this obligation may incur fines of up to 30,000 euros.
Special Situations in Complex Inheritances
Valuation of non-listed companies in inheritances
The valuation of companies that do not trade on the stock exchange constitutes one of the most contentious aspects in family business inheritances. The taxable base of Inheritance Tax is the net value of the assets and rights acquired, this net value being the real value once deductible charges and debts have been deducted. For participations in companies that do not trade on the stock exchange, what is established by article 16 of the Wealth Tax Law must be followed.
Valuation methods:
If the balance sheet has been audited with a favorable report, valuation will be carried out by the theoretical value resulting from the last approved balance sheet. If the balance sheet has not been audited or the report is not favorable, valuation will be carried out by the greater value of the following three: the nominal value, the theoretical value resulting from the last approved balance sheet, or that resulting from capitalizing at the rate of 20% the average of the profits of the three financial years closed prior to the date of accrual of the Tax.
Among the specific valuation methods for family businesses stand out: the net equity method (difference between assets and liabilities, simple but does not reflect complete economic value), the earnings capitalization method (considers future earnings using discount rate), the discounted cash flow method (focused on future cash flows, reflects real economic value) and the market multiples method (looks for similar companies and identifies key financial indicators).
Frequent conflicts and resolution mechanisms
Litigation over family business inheritances not only affects assets, but also personal relationships and the emotional stability of heirs. The main causes of conflicts include: lack of will or poorly drafted will, inequality in the distribution of assets (especially when the business goes to one heir and others receive less), challenge of the will due to incapacity or undue influence, conflicts with third parties (partners, business associates), problems in the administration of the inheritance and associated debts.
Figure of the partition accountant:
The partition accountant is a person charged with carrying out the partition of the inheritance in accordance with the testator’s will, respecting the forced shares of heirs. He may be appointed directly in the will (testamentary partition accountant), by the judge when there is disagreement among heirs (judicial partition accountant) or by unanimous agreement of heirs (dative partition accountant). His functions include the liquidation of the community property regime if applicable, defining what assets form part of the inheritance and establishing their value, and distributing the assets among heirs respecting the will and forced shares.
The partition accountant is especially useful in complex inheritances with many assets, when some heir wants to keep a specific property, or when adjudications of different nature (real estate, money, vehicles, shares, company participations) must be balanced. In fact, his mere appointment can cause disagreements to be resolved due to the heirs’ fear that he will act unilaterally.
Mediation in inheritance conflicts:
Mediation is presented as an effective alternative to family conflicts in inheritances, where a winner is not sought but rather a point of agreement. Through mediation, the family resorts to an impartial third party who seeks alternatives to achieve an agreement accepted by the parties in conflict, preserving family relationships, reducing costs and accelerating the solution. Mediation offers advantages such as: speed and lower cost than a trial, private and confidential character, informality that allows maximum flexibility, and greater probability of resolving both the business problem and problematic relationships.
Protection of the surviving spouse in family businesses
One of the most frequent conflicts in family businesses arises when it is necessary to reconcile the economic protection of the surviving spouse with the objective of maintaining ownership of the business in the family line, preventing outsiders (spouses or relatives by marriage) from accessing ownership. The widow’s usufruct is a right granted to the surviving spouse to enjoy the assets of the deceased, maintaining ownership in the hands of heirs.
Marriage settlements as a preventive tool:
Marriage settlements constitute a prenuptial agreement (or subsequent to marriage) in which spouses establish the economic regime that will govern their union. In the context of family businesses, marriage settlements allow keeping the business within the bloodline, avoiding complications derived from marital dissolution. It is highly advisable to agree to the separation of property regime for family businesses, protecting the asset structure of the business.
Marriage settlements may incorporate specific clauses on adjudication of business assets, waiver of economic compensation for unreimbursed contributions to the household, and inclusion of succession agreements (in territories where they are permitted). In situations of second marriages, marriage settlements and the will are essential to provide coverage for the needs of the second spouse and protect the rights of children from the first marriage.
Succession Planning: Keys to Success
Anticipation and coordination of legal instruments
Effective succession planning for family businesses requires anticipation and coordination of multiple legal instruments: will, family protocol, articles of association, marriage settlements and, where applicable, succession agreements. It is fundamental that all these documents be aligned and complement each other, avoiding contradictions that may generate subsequent conflicts.
The will must be coordinated with the articles of association of the company, which may contain restrictive clauses on mortis causa transmission of participations. The family protocol must be updated periodically (review every 3-5 years is recommended) to adapt to changes in family structure, the business or legislation. Marriage settlements must be reviewed after births, divorces or significant asset changes.
Tax optimization: taking advantage of all available benefits
Adequate tax planning can significantly reduce the tax burden of business succession. The main strategies include: structuring the business as a limited or public limited company (not as an individual entrepreneur) to access tax exemptions, adequately documenting the exercise of management functions and the receipt of remuneration exceeding 50% of income, maintaining records that accredit real economic activity (especially important after STS 956/2025 for leases), and planning the timing of donation or succession to optimize compliance with temporal requirements.
In donations, it is advisable that the donor be 65 years of age and effectively cease management functions to access the 95% exemption. It is advisable to make staggered donations (respecting legal limits) to distribute the tax burden and facilitate gradual generational transition, although recent doctrine on accumulation of transmissions from the same donor to the same donee in a period of less than three years must be taken into account.
Training of successors and family communication
The successful succession of a family business requires not only legal and tax tools, but also preparation of successors and effective communication among family members. The family protocol must establish training programs for the next generation, both in business management aspects and in their role as owners, board members and potential executives.
It is essential to establish clear and periodic communication channels among the business family, promoting transparency about the situation of the business, succession expectations and future challenges. The holding of structured family meetings (Family Council) allows keeping all members informed and facilitating consensual decision-making.
Conclusions
Complex inheritances involving family businesses and special estates require comprehensive planning that contemplates legal, tax, governance and family communication aspects. The Spanish legal system, both common and regional, offers specific tools to facilitate the conservation and transmission of family businesses: article 1056.2 of the Civil Code allows keeping the business undivided by paying the forced share in cash, succession agreements (in regional law territories) grant security through their irrevocability, and the family protocol regulates governance and prevents conflicts.
Tax incentives are determinant for the viability of succession: the 95% reduction in ISD, the exemption in Wealth Tax and the capital gain exemption in the donor’s Personal Income Tax may represent tax savings of millions of euros. The recent Supreme Court judgments (STS 956/2025 and 969/2025) have clarified the requirements for leasing activities, simplifying access to these benefits.
In the international sphere, European Regulation 650/2012 and the European Certificate of Succession have significantly simplified the management of cross-border inheritances, although tax complexities persist that require specialized advice. The taxation of international inheritances in Spain, the application of Model 720 and the correct use of double taxation conventions are critical aspects that must not be neglected.
Anticipation constitutes the key to success: the sooner succession planning begins, the greater the available options and the lower the risk of conflicts. Coordination among all legal instruments (will, family protocol, articles of association, marriage settlements) is essential to avoid contradictions. The training of successors, transparent family communication and the establishment of conflict resolution mechanisms (partition accountant, mediation) complete the necessary framework for successful succession.
In short, the complexity of business inheritances and special estates should not intimidate, but rather motivate proactive and professional planning that guarantees both the continuity of the business legacy and family harmony for generations to come.
Frequently Asked Questions about Complex Inheritances
What is article 1056.2 of the Civil Code and how does it help conserve the family business?
Article 1056.2 of the Civil Code allows the testator who wishes to preserve a family business undivided to dispose that the forced share be paid in cash to the other heirs, without the need to divide the business. The most important thing is that it is not necessary for sufficient cash to exist in the inheritance for this payment, extra-hereditary cash being able to be used and deferral of up to five years from death being able to be established. This mechanism avoids the fragmentation of the business that could compromise its viability, allowing it to be adjudicated entirely to one or several heirs while forced heirs receive their share in money.
What requirements must I meet to access the 95% reduction in Inheritance Tax when inheriting a family business?
To benefit from the 95% reduction in ISD, several cumulative requirements must be met: having a minimum participation of 5% individually or 20% jointly with direct family members, exercising management functions in the business (the transferor or some family member) receiving more than 50% of total income for this reason, that the business carries out a real economic activity (not mere asset management), and maintaining the inherited participations for 10 years complying with these same requirements. Following the Supreme Court judgments of July 2025, for leasing companies it is sufficient to have one employee with a full-time employment contract without the need to economically justify the hiring.
What is a family protocol and why is it important for business succession?
The family protocol is a set of agreements among partners and their families to regulate relationships among family, ownership and business, establishing clear rules on governance, succession, employment of family members, ownership of shares and conflict resolution. Although it is not a tax instrument, it is fundamental to guarantee the continuity of the family business by preventing conflicts, professionalizing management, facilitating generational succession and aligning the interests of different generations. A well-designed protocol defines shared values and vision, establishes family governance bodies, regulates family members’ access to the business and provides mechanisms to resolve disputes without affecting the business.
How do international inheritances work in Europe and what is the European Certificate of Succession?
International inheritances in the European Union are governed by Regulation 650/2012, which establishes that by default the law of the country where the deceased had his habitual residence at death applies, although the law of his nationality may be expressly chosen in the will. The European Certificate of Succession (ECS) is a single document issued by competent authority (judge or notary) that certifies the status of heir or legatee and is valid in all Member States without the need for additional procedures. This certificate enormously simplifies the management of inheritances with assets in several European countries, avoiding duplicate procedures and accelerating the succession process.
What options do I have if I foresee conflicts among heirs in a family business?
If you anticipate conflicts, several preventive and resolution tools exist. Preventively, you can appoint in your will a partition accountant who will carry out the partition impartially without the need for agreement among heirs, prepare a family protocol that establishes clear rules and conflict resolution mechanisms, and grant marriage settlements to protect the business from marital disputes. If conflicts have already arisen, family mediation offers a fast, economical and private way to reach agreements that preserve relationships and the business. The mediator (impartial professional) helps parties communicate and find mutually acceptable solutions, with a higher success rate than judicial proceedings in preserving both assets and family ties.
Legal Disclaimer: This article has a merely informative and educational character. The information contained does not constitute personalized legal advice nor can it replace consultation with a lawyer specialized in Succession Law and family businesses. Each inheritance situation presents specific circumstances that require individualized analysis. Tax and civil regulations in succession matters are subject to legislative changes and jurisprudential evolution. It is recommended to consult with specialized professionals before making decisions about succession planning or transmission of family businesses. The information contained in this article is current as of October 2025.