What “inheriting while alive” really means and why it causes so much confusion​

The expression “inheriting while alive” is often used in family conversations, but it does not exist as a legal concept. In law, an inheritance can only be opened once a person has passed away; until that moment, their estate belongs exclusively to them, and there can be no heirs.

However, many people use this term to refer to the transfer of assets to children or relatives while the owner is still alive. This early transfer has its own name and carries legal and tax implications that should be understood to avoid mistakes that can be costly or cause future conflicts among heirs.

In practice, “inheriting while alive” almost always means making a gift (donation) or, in certain autonomous communities, a succession agreement (inheritance pact). Correctly identifying the legal figure is essential, because they work differently and have distinct impacts on the legal share, taxation, and control over assets.

The incorrect term: why “inheriting while alive” does not exist

Inheritance is defined as a mortis causa transfer — that is, it only occurs after death. Therefore, any transfer of assets before the moment of death is not an inheritance, but an inter vivos transfer.

Legally speaking, if a person wishes to give a property, a sum of money, or any other asset to a child while still alive, they are carrying out a donation. This donation is a legal act with immediate effects: from the moment it is signed before a notary, the asset becomes the property of the donee.

This distinction is important for two reasons:

1. The donation will later be taken into account when calculating the legal share (legítima).
2. The taxation of a donation and an inheritance differ, and in many cases, the donation is more burdensome.

Therefore, using the correct legal term from the beginning is essential to understand what it really means to transfer an asset during one’s lifetime.

The legal term for transferring assets before death

When someone decides to transfer an asset while alive, what is formally executed is a lifetime donation, which can take various forms depending on the family circumstances and the type of property involved.

The donation:

• is executed before a notary,
• takes effect at the time of signing,
• requires acceptance by the beneficiary,
• is generally irrevocable,
• and has specific tax obligations that must be assessed in advance.

In addition, in some autonomous communities, including the Balearic Islands, it is possible to make a succession pact — a legal instrument that allows assets to be transferred during life with inheritance effects and may have more favorable tax treatment. However, it involves strong commitments and must be carefully analyzed before making a decision.

Differences between donation, inheritance, and succession pact

Although all of them aim to transfer assets between generations, each has different legal and tax effects:

Donation

This is the voluntary transfer of an asset during life. The donor loses ownership, unless they reserve the usufruct. It has a specific tax cost, usually higher than that of inheritance, and affects the later calculation of the legal share.

Inheritance

This is the transfer that occurs after death. It allows the owner to maintain full control of their assets throughout their life and is usually more tax-efficient. It is the safest way to avoid conflicts among heirs, as long as there is proper planning through a will.

Succession pact

Available only in certain autonomous communities, it allows lifetime transfers with the legal effects of succession. It can be a useful tool in some cases, but it has important requirements and consequences that must be studied individually.

Gifting during life or leaving an inheritance: which option offers more control and security

Choosing between gifting an asset during life or leaving it as part of an inheritance is a decision that affects both the owner’s estate and the family’s future peace of mind. Although both options allow the transfer of a house, land, or money, they do not offer the same level of control, legal security, or protection against family disputes.

The most relevant difference lies in the moment when ownership is transferred. While in a donation the transfer is immediate, in an inheritance it only occurs after death. This simple distinction completely changes the legal effects of each option.

What happens to ownership depending on the chosen option

In a donation, the transfer becomes effective from the very moment the deed is signed before a notary. The child becomes the owner and the donor loses ownership of the asset, unless a usufruct right has been reserved. This means that if the child incurs debts, divorces, or sells the property without authorization, the donor has no real control over what happens afterward.

In an inheritance, the situation is different. The owner retains full ownership throughout their life. They can sell, rent, mortgage, or change the use of their assets without needing anyone’s authorization. This control is especially important when there are several children or when the family assets have significant emotional or economic value.

How the decision affects the rights of the children

All families want to avoid disputes among siblings, but many hasty decisions create the opposite effect. Gifting a high-value asset to one child during life can harm the legal share of the others, since that donation will later be considered when the inheritance is distributed.

If the donation disrupts the legal portion that belongs to the other heirs, they may claim compensation or even seek to reduce the donation. This often happens with the transfer of houses or land and can generate family tensions that could have been avoided with proper planning.

Inheritance, on the other hand, allows for a more balanced distribution. The owner can specify in a will how they want their assets to be divided, respecting the legal share and using tools such as improvements or legacies when necessary. All of this occurs after death, without affecting the family’s daily life while the owner is alive.

Can a donation be revoked?

As a general rule, a donation is irrevocable. This means that once the donation is made, the asset definitively becomes the property of the donee and cannot be recovered except in very specific cases: serious ingratitude, breach of obligations, or the appearance of previously unknown children at the time of the donation.

In practice, this means that any mistake made when donating has permanent consequences.

Inheritance, however, is completely revocable. The testator can change their will as many times as they see fit, adapting it to new family or financial circumstances. This flexibility provides legal security and allows for much stronger long-term planning.

When a donation may cause conflicts among heirs

Conflicts usually arise in two very common situations:

1. Donations made to a single child without later compensation. If the value of the asset is high, the donation can directly affect the legal share of the others, allowing them to demand a reduction or inclusion (collation) of the donation.
2. Donations made without considering the tax implications. In some cases, the tax burden from a donation is so high that the family would have paid far less had they waited for the inheritance.

For this reason, before donating it is advisable to jointly assess both the family impact and the real tax cost. In many cases, inheritance through a well-drafted will offers a more balanced, cost-effective, and secure solution.

When children can claim if an asset was transferred during life

In many families, the decision to gift during life a home or a sum of money to one child is made with good intentions, often to help at a specific moment. However, this act can have consequences within the inheritance when the time comes to distribute the estate. To avoid conflicts, it is essential to understand when a child may have the right to claim if a lifetime donation affects their inheritance rights.

Under Spanish civil law, all children are entitled to receive a minimum share of the inheritance: the legítima (forced heirship share). Therefore, when a parent transfers an asset before death, the value of that asset is added to the total estate for inheritance purposes. This rule is key to understanding when conflicts among siblings may arise.

How the legal share works and why it affects lifetime donations

The legal share (legítima) is a portion of the estate that the law reserves for the children. This means that, even if there is a will, the testator’s wishes cannot eliminate or reduce this minimum portion except in very exceptional cases.

For this reason, when a lifetime donation benefits one child more than the others, that transfer must be collated (added back into the estate). In practice, this means that the value of that donation is added to the total inheritance and checked to ensure that everyone’s rights have been respected.

This is one of the main sources of confusion regarding the difference between donation and inheritance: even if an asset is transferred before death, the transaction will still have effects on the future inheritance.

In which cases a child can challenge a lifetime donation

A child can make a claim when they believe that a lifetime donation has harmed their rightful portion within the future inheritance from parents to children, whether there is a will or not. The most common situations are as follows:

1. The donation reduces the legal share of the other children

If the value of the donated asset is high and not balanced out in the final distribution, the other heirs have the right to request a reduction of the donation in order to preserve their legally protected share.

2. The donation was made under unfair or unbalanced conditions

This occurs, for example, when one child receives a full property through a lifetime donation while the others only receive lower-value assets.

3. There are signs that the donation deliberately harms an heir

The law includes mechanisms to prevent an act of generosity from emptying the estate or depriving other children of their rightful share.

Although gifting during life is a valid and useful tool in many situations, it requires proper planning to avoid future claims. Some measures that can help prevent conflicts include:

• Assess the donation within the context of the entire estate.
• Study the types of lifetime donations available (full ownership, bare ownership, usufruct, succession pacts, etc.).
• Consider whether it is advisable to make a will that reflects the donor’s intentions and anticipates possible compensations.
• Analyze the tax impact so that no child bears a disproportionate cost.
• Seek specialized legal advice to clearly document the donor’s intentions.

A poorly structured donation can cause disputes and legal claims that last for years. A well-planned donation, on the other hand, can help organize the succession and bring peace of mind to the family.

Taxes on gifting during life and on inheritance

When a family is considering whether to gift during life or wait until assets pass through inheritance, one of the first questions that arises is how much will have to be paid. The tax burden is undoubtedly one of the key factors when choosing between the two options. In practice, a poorly informed decision can mean thousands of euros in difference.

The taxes applicable are not the same for donation and inheritance, and the difference can be substantial. That’s why it’s important to analyze each case before signing any document.

In this article we also explain what happens if you don’t pay inheritance taxes. There, you’ll find full details on the potential consequences.

How much tax must be paid for a lifetime donation

Every lifetime donation is subject to the Inheritance and Gift Tax. The exact amount depends on several factors: the relationship between the parties, the value of the asset, the autonomous community where the donee resides, and whether any regional tax relief applies.

Other expenses may also apply:

• Municipal capital gains tax when a property is donated.
• Capital gains tax in the donor’s personal income tax (IRPF) if the asset has increased in value.
• Notary and land registry fees.

This means that in many regions, gifting during life is more expensive than inheriting.

Which is taxed more: donation or inheritance?

In most Spanish autonomous communities, a donation is taxed more heavily than an inheritance. This difference is mainly due to two reasons:

1. Most regions apply higher tax reliefs to inheritances between parents and children.
2. Donations usually generate capital gains for the donor in their income tax, something that does not occur with inheritance.

This means that while gifting during life may solve an immediate need, it can result in a much higher tax cost.

How much tax is paid to the Treasury for a €100,000 donation

The exact figure depends on each region, but for reference:

• In some regions with high tax reliefs, a €100,000 donation between parents and children may only cost a few hundred euros.
• In other communities, the tax could reach several thousand euros.
• If that same amount is received through inheritance, the tax burden is often much lower.

Therefore, before gifting money or property, it’s advisable to request real tax simulations to avoid unpleasant surprises.

How much money can I gift my child without paying taxes?

There is no nationwide exemption in Spain that allows lifetime gifts without paying taxes. Each autonomous community establishes its own reductions and reliefs. In some, moderate sums can be gifted at a very low cost; in others, any gift is taxed almost from the first euro.

In addition, most regions require that even cash donations be properly documented and justified (for example, through a notarized deed and bank transfer proof) to qualify for available reliefs.

How much does a lifetime gift of a house cost?

Gifting a property involves the highest cost among the different types of lifetime donations because it combines several taxes:

• Inheritance and Gift Tax for the donee.
• Capital gains tax in the donor’s income tax (IRPF).
• Municipal capital gains tax.
• Notary and Land Registry fees.

Depending on the region, the total amount can range from moderate sums to very high amounts. In many cases, the total tax cost of gifting a property during life far exceeds what would be paid if that same property were transferred through inheritance.

How much does the Tax Office take from a €200,000 inheritance?

Inheritance usually has a lower tax burden. Again, this depends on the autonomous community, but in many regions:

• Children may benefit from tax reliefs of up to 95% or even higher.
• The final amount to be paid can be significantly lower than for a donation.
• There is no capital gains tax in the deceased’s income tax (IRPF).

For this reason, most comparative tax studies conclude that, except in special cases, inheritance is more economical than gifting during life.

Which is cheaper: making a will or a lifetime donation?

Making a will is an inexpensive and simple procedure. The notarial cost is low, and it has no tax implications for the heirs until death occurs.

By contrast, a lifetime donation has an immediate cost that is much higher, especially when it involves real estate. It also generates tax obligations that the beneficiary must pay within a specific period.

Therefore, from an economic point of view, it is generally cheaper to:

• make a will,
• and let the assets pass naturally through inheritance.

Which is better: gifting during life or waiting for inheritance?

The question of whether it’s better to gift during life or let the asset pass through inheritance is one of the most delicate decisions in family estate planning. There is no universal answer, since every case depends on the donor’s financial situation, the child’s real needs, and the tax consequences of the operation. However, there are objective criteria that help mak

When gifting during life can be a good option

Gifting during life can be advisable in certain circumstances, especially when there are immediate needs or when the family has proper legal and tax advice. Some common situations where it may be useful include:

When a child needs help now

It is common when a child wants to buy their first home, start a business, or make a significant investment. In such cases, a lifetime donation of money or bare ownership can be a valid and practical tool.

When planning for the long term

Some families use lifetime donations to anticipate the division of their estate and avoid future tensions. This can be effective as long as it respects the legal share (legítima) and takes the tax impact into account.

When using a succession pact (if permitted by the region)

In regions such as the Balearic Islands, succession pacts can offer tax advantages compared to donations. However, they come with rigid commitments: once executed, they generally cannot be revoked.

When the donor retains the usufruct

Among the various types of lifetime donations, donating the bare ownership while reserving the usufruct allows a parent to help a child without losing the right to use the property. This option can be useful when the tax burden is manageable.

When it is better to let the asset pass through inheritance

In most situations—especially in cases of inheritance from parents to children under a will—the most reasonable and economical option is usually to let assets pass through inheritance upon death. This is due to several reasons:

Greater control over the estate

Until the very end, the owner can sell, rent, reorganize, or use their assets as needed. A donation does not offer that flexibility.

Lower tax burden

Inheritance is generally taxed more favorably in most Spanish regions. Furthermore, no capital gains tax applies to the deceased’s estate in income tax (IRPF), avoiding a cost that often arises in donations.

More balanced distribution among siblings

With a well-drafted will, it is possible to organize a fair division that respects the legal share (legítima) and prevents conflicts. Lifetime donations, if not properly compensated, can easily disrupt that balance.

Simpler and more controlled process

Making a good will is always cheaper and simpler than executing a donation of valuable assets. Moreover, it can be updated whenever family or financial circumstances change.

Which is better: a will or a lifetime donation?

Generally speaking:

• A will is cheaper, more flexible, safer, and easier to adapt if family circumstances change.
• A lifetime donation can be useful in specific cases, but it carries an immediate cost and loss of control over the asset.

For most families, making a will and letting the assets pass through inheritance tends to be the most balanced and least risky option.

Which is better: giving money or leaving it as inheritance?

Giving money (a cash donation) can be useful if the child needs it for an immediate purchase. However, from a tax perspective:

• Gifting money is usually taxed more.
• Receiving money through inheritance is generally cheaper.

Therefore, if there is no urgent need, leaving the money to be inherited is often more advantageous.

When gifting during life can be a good option

Gifting during life can be advisable in certain circumstances, especially when there are immediate needs or when the family has proper legal and tax advice. Some common situations where it may be useful include:

When a child needs help now

It is common when a child wants to buy their first home, start a business, or make a significant investment. In such cases, a lifetime donation of money or bare ownership can be a valid and practical tool.

When planning for the long term

Some families use lifetime donations to anticipate the division of their estate and avoid future tensions. This can be effective as long as it respects the legal share (legítima) and takes the tax impact into account.

When using a succession pact (if permitted by the region)

In regions such as the Balearic Islands, succession pacts can offer tax advantages compared to donations. However, they come with rigid commitments: once executed, they generally cannot be revoked.

When the donor retains the usufruct

Among the various types of lifetime donations, donating the bare ownership while reserving the usufruct allows a parent to help a child without losing the right to use the property. This option can be useful when the tax burden is manageable.

When it is better to let the asset pass through inheritance

In most situations—especially in cases of inheritance from parents to children under a will—the most reasonable and economical option is usually to let assets pass through inheritance upon death. This is due to several reasons:

Greater control over the estate

Until the very end, the owner can sell, rent, reorganize, or use their assets as needed. A donation does not offer that flexibility.

Lower tax burden

Inheritance is generally taxed more favorably in most Spanish regions. Furthermore, no capital gains tax applies to the deceased’s estate in income tax (IRPF), avoiding a cost that often arises in donations.

More balanced distribution among siblings

With a well-drafted will, it is possible to organize a fair division that respects the legal share (legítima) and prevents conflicts. Lifetime donations, if not properly compensated, can easily disrupt that balance.

Simpler and more controlled process

Making a good will is always cheaper and simpler than executing a donation of valuable assets. Moreover, it can be updated whenever family or financial circumstances change.

Which is better: a will or a lifetime donation?

Generally speaking:

• A will is cheaper, more flexible, safer, and easier to adapt if family circumstances change.
• A lifetime donation can be useful in specific cases, but it carries an immediate cost and loss of control over the asset.

For most families, making a will and letting the assets pass through inheritance tends to be the most balanced and least risky option.

Which is better: giving money or leaving it as inheritance?

Giving money (a cash donation) can be useful if the child needs it for an immediate purchase. However, from a tax perspective:

• Gifting money is usually taxed more.
• Receiving money through inheritance is generally cheaper.

Therefore, if there is no urgent need, leaving the money to be inherited is often more advantageous.

Which is better overall: gifting during life or inheritance?

In summary:

• Gifting during life can be useful in specific situations, particularly when there is an immediate need or when a fiscally advantageous option such as a succession pact is used.
• Inheritance is usually more economical and safer, especially when there are several children or high-value assets.

The key lies in analyzing each family’s situation individually and understanding how each option affects the overall family estate.

Succession pact, donation with usufruct and bare ownership: intermediate solutions

Between gifting during life and waiting for inheritance, there are intermediate legal solutions that allow balancing both objectives: helping the next generation while keeping certain rights or control. The most common are the following:

Succession pact (pacto sucesorio)

This is an agreement allowed only in some autonomous communities such as the Balearic Islands, Catalonia, Galicia, Navarre, or Aragon. It enables transferring assets during life, but with the legal and tax treatment of inheritance.

The main advantages are:

• More favorable tax treatment compared to donations.
• The transfer is final, but it can be conditioned or limited in its effects.
• It is an ideal option for long-term family planning.

However, it is an irrevocable agreement in most cases, so it should only be used with careful legal and fiscal advice.

Donation with reserved usufruct

This form of lifetime donation allows the donor to transfer the bare ownership of a property but retain the usufruct, meaning the right to live in it or receive income from it until death. It is one of the most common solutions when parents wish to help their children but still maintain use of the property.

It also has a lower taxable value than a full donation, so it can significantly reduce the tax cost.

Donation of bare ownership

It consists of gifting only the bare ownership while keeping the usufruct, meaning the donor still controls the property. Upon the donor’s death, the usufruct merges with the bare ownership automatically, and the heir becomes the full owner without additional taxes.

It is a very efficient and frequently used estate planning mechanism when the goal is to anticipate succession without losing rights during life.

Succession pact, donation with usufruct and bare ownership: intermediate solutions

Between gifting during life and waiting for inheritance, there are intermediate legal solutions that allow balancing both objectives: helping the next generation while keeping certain rights or control. The most common are the following:

Succession pact (pacto sucesorio)

This is an agreement allowed only in some autonomous communities such as the Balearic Islands, Catalonia, Galicia, Navarre, or Aragon. It enables transferring assets during life, but with the legal and tax treatment of inheritance.

The main advantages are:

• More favorable tax treatment compared to donations.
• The transfer is final, but it can be conditioned or limited in its effects.
• It is an ideal option for long-term family planning.

However, it is an irrevocable agreement in most cases, so it should only be used with careful legal and fiscal advice.

Donation with reserved usufruct

This form of lifetime donation allows the donor to transfer the bare ownership of a property but retain the usufruct, meaning the right to live in it or receive income from it until death. It is one of the most common solutions when parents wish to help their children but still maintain use of the property.

It also has a lower taxable value than a full donation, so it can significantly reduce the tax cost.

Donation of bare ownership

It consists of gifting only the bare ownership while keeping the usufruct, meaning the donor still controls the property. Upon the donor’s death, the usufruct merges with the bare ownership automatically, and the heir becomes the full owner without additional taxes.

It is a very efficient and frequently used estate planning mechanism when the goal is to anticipate succession without losing rights during life.