Elisa Ilmoniemi
Partner, Attorney-at-law, Master of Laws with court training
Using a gift as an inheritance tax planning tool
In its simplest form, a gift is a legal act without consideration – the donor gives the donee a benefit or property of pecuniary value without any compensation from the donee.
Nevertheless, gifts can be classified into different categories according to their type. This includes, for example, advancements, which may be given to direct descendants. Advancements can influence the amount of legal shares and shares of inheritance. There are also gifts equivalent to wills and so-called favour gifts. In the context of the succession, life annuities, i.e. a system in which someone who sells property keeps the right to live on it for the rest of their life or similar pension-like arrangements, may also include gifts. Donations due to death are prohibited, and therefore all legal transactions relating to death can only be made by testament.
If sufficient consideration is paid for the property, the transfer is not necessarily defined as a gift. An intermediate form between a gift and a sale may be considered to be an interest-free loan.
Things to consider when planning a donation
When planning a donation, you need to be aware of all the legislation relating to donations. The provisions of, for example, the Marriage Act can therefore have a significant impact on gifts.
When making a donation, different provisions may also be made regarding the nature of the gift, for example in the case of an advancement. A provision in a deed of gift may also restrict the right of the spouse of the donee to the donated property. However, in order to be valid, the restriction excluding the matrimonial right must be in the strict form required by law.
Knowledge of the legislation closely related to donations helps to ensure that the donor’s intentions are fulfilled even after the donor’s death. In case of uncertainty, it is always advisable to consult an expert, and it is also possible to obtain advance rulings on gift tax from the Tax Administration for a fee.
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With more than twenty years of experience, we offer our clients a personalised and client-oriented service in various areas of family property law. Whether your matter falls under family law or inheritance law, we always handle it efficiently, without forgetting the human aspect.
Family law
The area of family law usually includes financial matters relating to marriage and cohabitation, as well as child custody, living arrangements, right of access and maintenance.
Law of inheritance and succession
Before proceeding with the distribution of the estate, a deed of estate inventory, which is a list of the deceased’s assets and liabilities, must first be drawn up and the estate must be settled. Only then can an agreement on the distribution of the estate be concluded.
Inheritance planning
Inheritance tax planning emphasises the importance of properly prepared documents in good time. A continuing power of attorney is a document that allows you to take care of your own affairs over your lifetime well in advance. You can plan for the distribution of your assets and their tax treatment by having a comprehensive deed of gift and/or testament in place.
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