This article provides a brief overview of what protected assets are and how they work.
Protected Assets are a legal framework designed to safeguard the assets of people with severe disabilities, whether physical, sensory or intellectual. They allow assets to be transferred outside the scope of inheritance or traditional donations and come with significant tax advantages.
At national level, they are regulated by Law 41/2003 of 18 November, on the protection of the assets of people with disabilities, as amended by subsequent legislation. In Catalonia, they are governed by Law 25/2010 of 29 July, Book II of the Catalan Civil Code.
What are protected assets?
Protected assets consist of a pool of assets and rights contributed free of charge with the sole purpose of covering the essential living needs of a person with a disability.
They form a separate estate from the beneficiary’s personal assets and are subject to a specific management regime. Importantly, protected assets do not have their own legal personality. They may benefit:
- People with an intellectual disability of 33% or more.
- People with a physical or sensory disability of 65% or more.
If a person with a disability has sufficient legal capacity, they may decide whether to set up protected assets, manage them personally or appoint a third party, and accept or refuse contributions.
Where the person lacks sufficient legal capacity, these decisions are taken by their legal assistants or representatives.
As a result, protected assets may be established by:
- The person with a disability themselves (if legally capable),
- Their parents or legal assistants, or
- Any person with a legitimate interest.
Assets that can be contributed
Any assets capable of generating economic returns may be included, such as cash or bank deposits, life annuities, insurance policies, real estate, usufruct rights, shares, bonds, and similar assets.
How are protected assets set up?
They must be created by a notarized public deed, which identifies the beneficiary, the assets initially contributed, the rules governing their management, and the appointed administrator. This public formalization is essential to access tax benefits. Additional contributions may be made over time.
Real estate contributions must be registered with the Land Registry. If the administrator is not a parent or court-appointed assistant, this representation must also be recorded in the Civil Registry.
In exceptional cases, protected assets may be created by a court ruling.
Termination
Protected assets may be terminated upon the death of the beneficiary, the loss of the required disability threshold, or by court decision. Under Catalan law, they may also end due to the beneficiary’s waiver or the expiry of a fixed term or fulfilment of a specific condition.
Tax treatment
Setting up protected assets offers significant tax advantages. For personal income tax purposes, direct relatives or collateral relatives up to the third degree may contribute up to €10,000 per year individually, with a combined annual cap of €24,250, reducing their taxable income. Non-cash contributions do not trigger capital gains or losses.
There are also tax benefits under Corporate Income Tax regulations.
For further information or advice, the procedural team at addwill is available. You can contact us by clicking here.