Asset Protection for Persons with Disabilities.

On November 20, 2023, Law 41/2003, of November 18, on the asset protection of persons with disabilities, came into force. Its mission is to regulate new mechanisms for the protection of persons with disabilities, especially regarding their assets.

The law establishes appropriate measures and channels to facilitate the creation of an asset mass, through the gratuitous contribution of goods and rights to persons with disabilities.

This protected asset can be created for persons with severe physical or sensory disabilities and for persons with intellectual disabilities. Specifically, persons with an intellectual disability equal to or greater than 33% or with a physical or sensory disability equal to or greater than 65%.

Its purpose is to allow the contribution of assets (money, real estate, rights, etc.) so that, with them and what derives from their administration, the vital needs of the person with a disability can be guaranteed.

1.- Advantages of the protected asset mass for persons with disabilities

• Persons wishing to create such assets can transfer these goods without having to make a donation, sale, or hereditary transfer, which incur higher tax costs.
• This asset mass is independent of the rest of the personal assets of the person with a disability and is subject to a specific administrative regime.

To justify these decisions, a regularly issued accreditation certificate or a judicial resolution is sufficient.

If the person with a disability has sufficient legal capacity, they can decide on:

• Whether or not to establish the protected assets.
• Being the administrator of the assets or appointing another person.
• Receiving contributions from third parties.
• Adopting any provision related to their person or assets for the future.

On the other hand, parents or guardians act on behalf of the person with a disability when the latter does not have sufficient legal capacity to make decisions about their assets or person. Thus, guardians can:

• Establish the protected assets
• Be administrators of said assets or appoint a third party. The administrator holds legal representation exclusively for acts of administration.
• Give consent to receive contributions or not. In case of refusal, it must be for a justified cause and resolved by a judge.

2.- What assets can be included in the protected assets?

Any type of assets that can generate economic returns can be contributed. Therefore, money, insurance or life annuities, properties, usufruct rights, shares, and other assets that can generate asset returns can be contributed.

Additionally, depending on the specific characteristics of the constitution, the following actions must be carried out:

• If real estate is contributed, it must be registered in the Property Registry indicating that it forms part of protected assets.
• If the administration of these assets is not carried out by the beneficiary, nor their parents or legal guardians, the legal representation must be registered in the Civil Registry.

The Protected Assets of a person with a disability can be created by themselves, their parents, guardians, curators, or de facto caregivers, or any person with a legitimate interest.

3.- Termination of Protected Assets

These Assets can be terminated for three reasons:

• Death of the person with a disability, i.e., the beneficiary of the protected assets.
• The beneficiary ceases to be a person with a disability.
• By judicial decision, when deemed convenient for the person with a disability.

4.- Tax Payment

The person with a disability pays tax on the amounts received in their Personal Income Tax (IRPF) as employment income, but only on the part that exceeds “twice the interprofessional minimum wage.” This means that tax is only paid on the remaining amount after multiplying the interprofessional minimum wage by two.

Amounts exceeding the annual maximums, which are €8,000 or €24,250, are not considered employment income but are taxed as Inheritance and Gift Tax.

It should be noted that, to apply these tax benefits, the assets can be used to meet the beneficiary’s needs, but they cannot be transferred to a third party within four years from the contribution.

The benefits for the persons who contribute to the Assets are:

• Relatives in direct or collateral line up to the third degree, the spouse, or the guardian, can benefit from a reduction in the IRPF taxable base of up to €8,000 or €24,250 annually.
• If the contributor is a Corporate Income Tax payer, they can deduct 10% of the integrated amount from the full tax liability, with the limit that this deduction cannot exceed €8,000 annually per person with a disability.

Here is an introductory paragraph you can use to insert a link related to the tax treatment of protected assets. I have marked the place where you can add the link:

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The Protected Assets for persons with disabilities offer significant tax benefits for both the beneficiary and those who make contributions. These benefits allow for optimizing asset management and ensuring that it covers the vital needs of the person with a disability, while also taking advantage of IRPF reductions and Corporate Income Tax deductions. If you want to know more details about the tax implications of Protected Assets, do not hesitate to consult this article on Protected Assets: Tax Treatment

Author: Lucia Arce Espejo

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