Finance

Protection for people with disabilities and tax savings

The protection of the family is not something new; it has occurred in all cultures and in all historical periods; today, it is also one of the main concerns of both citizens and countries.

In the event that a member of our family suffers from a disability, this protective umbrella must be much broader and provide sufficient financial funds to guarantee the care and special needs of the disabled person.

The social security systems set up in favor of people with disabilities, managed through an insurance company, offer a solution with fully guaranteed capital and very important tax advantages for both the person with disabilities and the contributing family members; let us know their characteristics.

What are the social security systems constituted in favor of a person with a disability?

These are products to which the financial regime of insured pension plans is applied when contributions are made in favor of people with a degree of physical or sensory disability equal to or greater than 65% or mental disability equal to or greater than 33%, as well as to people who have a judicially declared disability regardless of its degree.

Who can make contributions to these social security systems?

The disabled person himself, those who have a family relationship with him (in the direct or collateral line up to the third degree inclusive), the spouse, or those who were in charge of the disabled person under guardianship or foster care.

Who can be beneficiaries?

The person with a disability must be designated beneficiary in a unique and irrevocable way for any contingency.

However, the death of the person with a disability may generate the right to benefits for widows, orphans, or in favor of those who have made contributions.

What is the maximum contribution limit?

The maximum annual contributions made in favor of a person with a disability, including the disabled person’s own contributions, may not exceed 24. €250.

Contributions made to social welfare systems in favor of people with disabilities with whom there is a family relationship may not exceed €10,000 per year per contributor. This is without prejudice to the contributions that contributors may make to their own social review plans, with the general limits established in each case.

Although they coincide in amount, these maximum limits are independent of the maximum contribution limits for the purpose of applying tax advantages.

Are contributions made to social security systems in favor of people with disabilities deductible in personal income tax?

Yes. The contributions made to these systems in favor of people with disabilities with the degrees of disability indicated above are subject to a reduction in the tax base of the contributor’s income tax.

Is there any limitation on the reductions to practice in personal income tax?

Yes. As we have seen previously, the reduction in the tax base will have the following maximum limits:

  • Annual contributions made in favor of people with disabilities with whom there is a relationship of up to the third degree or guardianship will have a limit of €10,000 per year per contributor.
  • The annual contributions made in favor of insured persons with disabilities have a global limit of €24,250

The set of reductions made by all the people who make contributions in favor of the same person with a disability, including those of the person himself, may not exceed €24,250 per year.

When there are several contributions in favor of people with disabilities, those made by the disabled people themselves will be reduced first, if they do not exceed the maximum, the rest of the people will reduce proportionally, without, in any case, the whole of the reductions made exceed €24,250.

  • The contributions that could not have been subject to a reduction in the tax base due to its insufficiency may do so in the following five years.

Are contributions to these systems subject to Inheritance and Gift Tax?

NO. They are not subject to Inheritance and Gift Tax.

How are benefits received?

If the contributions are made by people other than the disabled person, the benefits may only be received in the form of income, except for certain exceptional cases provided for in the Regulation of Pension Plans and Funds. In the event that the contributions are made only by the disabled person, benefits may be received under the same conditions as any Insured Pension Plan, that is, in the form of capital or income.

How are the benefits of these social security systems taxed?

They constitute earnings from work at the time they are received by people with disabilities. The same qualification will proceed in the case of the anticipated disposition of the mathematical provisions or the rights consolidated by the disabled person.

Benefits in the form of income enjoy significant exemptions, up to a maximum amount of three times the Public Indicator of Income for Multiple Effects (IPREM). In 2018, therefore, the amount exempt from annual income would amount to €19,362.09 (IPREM 2018 6,454.03 x 3).

What conditions are necessary to dispose of mathematical provisions in advance?

Being Retirement the main contingency to be covered by this product, the special situation of people with disabilities in terms of their needs throughout life makes the provision of mathematical provisions in these contracts more flexible, being able to dispose of the capital constituted in the following cases:

  • If access to Retirement is not possible, they may receive the benefits corresponding to the age indicated according to the specifications of the plan from the age of 45, provided that the disabled person lacks employment or professional occupation.
  • Long-term unemployment, death, Retirement, incapacity and dependency, both of the disabled person and of his/her spouse or one of the relatives in the direct or collateral line up to and including the third degree on whom he/she depends, or whoever was in charge of him/her in guardianship or foster care.
  • Likewise, the aggravation of the degree of disability of the participant that permanently incapacitates him for the job or occupation that he has been exercising, or for all work, including the great supervening disability, when access to benefit is not possible. Under a Social Security Regime.
  • Death of the disabled.
  • Serious illness of the disabled, in addition to that already contemplated resulting from the aggravation of the degree of disability, situations that require, continuously for a minimum period of three months, their internment in a residence or specialized center, or treatment and home care.
  • The consolidated rights of the participants covered by this special regime correspond to contributions made with at least ten years of seniority. This last liquidity window has been implemented for all social security plans & ownership of life insurance, with the first provisions being effective as of January 1, 2025.

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