One for Fillipos and Warwick probably,

Although not a full time resident I am aware that it is common practice amongst Cretan families to pass the title of their property on, well in advance of their death to avoid inheritance taxes. Does this mean that the beneficiaries (in this case my nephews) of the property, ie, my home in Crete, need to sign a contract or deeds for the property being passed on to them prior to my death, and thus be aware of the situation. Under these circumstances it seems to negate the principal of a 'secret will'.

Would I therefore, need to lodge a will with the notary to cover the situation, and will it be possible for my nephews to remain unaware of my intentions?

I appreciate that the UK tax side is a separate issue, and have no doubt they will get clobbered with that on my estate anyway, but any advice you may be able to offer from a Cretan point of view would be appreciated.

Kathleen

The notary in Chania were so helpful with us..our lawyer drew up a will and then we all went & had a natter with the notary ..she is lovely !!!!!

I think you would be advised to talk to an accountant.

In the past the threshold for inheritance tax was very low, e.g. around €10,000 I think.  To get round this it was common for parents to actually transfer ownership of the property to their children before they died.  This is done in exactly the same way as someone buying the house, i.e. there is a transfer of ownership contract signed at a Notary with the parents signing as the sellers and the children as the buyers.  It is a special form of contract which gives the parents the right to live there until they die.  Obviously the children don’t actually pay the parents for the property but the transfer tax has to be paid when the contract is signed based on the objective value of the property.  This would be a lot less than the potential inheritance tax, i.e. they are swapping paying a small tax now to avoid paying a bigger tax later.  Obviously this technique cannot be secret.

I think the threshold for inheritance tax has been raised recently so the need to do this is not so acute.  The amount does depend on the relationship so I think that children inheriting from parents get a bigger allowance than a nephew/niece inheriting from an uncle/aunty.  An important point, I believe, is that the allowance belongs to the person inheriting not to the estate.  Thus if you are leaving your property to several relatives each one has their own allowance.  The inheritance tax is also based on the objective value of the property so it may be a lot less than the market value.

You can see from the above discussion that your best course of action depends quite critically on the exact numbers attached to all these things.  An accountant should be able to tell you what allowance each relative has, what the objective value of your property would be and what the rates of tax would be if any relative went over their allowance.  With that information and knowing how many people you intend to divide your estate between you can calculate the potential tax burden.  You can then decide whether that is an acceptable tax burden and you can simply leave your property in a will or if you think it is excessive in which case you can go down the transfer of ownership route.  I can see a major downside with the transfer of ownership route.  If, in the future, you decide you want to sell the property and buy another for some reason, you couldn’t.  It is not yours to sell.  For a typical Greek family this is not a problem.  An elderly Greek parent would never dream of moving.  It might be a problem for somebody from the UK.  My aim is to spend the rest of my life on Crete but who knows what the future holds.

Hope this helps.

Warwick

Thats great Warwick, seems like the information I was after. I shall speak to my accountant about it when I see her.

Many thanks

Kathleen

latsida wrote on 01. Feb 2007 at 22:05:


Would this happen even if the property is in joint names? Ken.

yes think so. we are considering transferring our property into my name only to simplify things.not long ago on another forum there was a lady here whose husband had died and in spite of english and greek wills all drawn up by lawyers she found herself in a position where she could not sell her home and move to a smaller apartment because the children would not agree!she said in hindsight they would never have bought just rented.she was going to post the outcome but I have never seen anything on the forum.Its probably still going through the courts.