This formula allows you to solve inheritance problems and save money on taxes compared to a conventional sale transaction.
Have you and your siblings inherited a property from your parents or another relative? Would you like to get 100% of the property before putting it up for sale? Don't worry, your case is much more common than you might imagine. You are facing a typical conflict that occurs in many families when real estate with mortgage encumbrances is included in the will and in which the heirs do not want to maintain shared ownership.
If your intention is to keep the property, you can propose to the rest of the heirs to carry out a joint ownership agreement between siblings.
What is the extinction of condominium?
This is a more economical formula when one of the heirs keeps the part or parts of the other beneficiaries of the inheritance. Compared to the sale, this is an option that allows us to save money and pay less taxes for the transfer of the property.
Although this formula has many advantages from a tax point of view, it also has other disadvantages. Therefore, when you sign the termination of the joint ownership with your relatives, you must formalize a new mortgage loan deed in which you appear as the sole owner of the property.
You should bear in mind that after the dissolution of the condominium, the holders of the mortgage loan become debtors in the eyes of the financial institution. So, to avoid conflicts with your siblings and unnecessary problems, it is best to complete all the corresponding procedures at the bank so that they recognise you as the sole holder and debtor of the mortgage loan.
Ask for advice from an expert
From a tax point of view, the termination of the joint ownership can be somewhat complex, so it is worth consulting and seeking advice from a professional beforehand. Above all, to avoid misunderstandings between the beneficiaries of the will.
In principle, and according to the latest resolutions of the General Directorate of Taxes, when one of the parties involved in an inheritance receives financial compensation in exchange for their share of the property, they will be exempt from paying the City Council the Urban Land Value Tax, known as the municipal capital gains tax.
However, the heir who sells his share and receives compensation in exchange must reflect this in his personal income tax return, provided that the termination of the joint ownership generates a gain or loss in his assets.