Inheritance law and tax planning are linked to matrimonial property law in many respects, so knowledge of the law governing both is essential.
The matrimonial property of spouses and cohabiting partners is settled after death in the same way as in divorce. In a division of the estate, the spouse who owns more property gives an adjustment to the spouse who owns less. No inheritance tax or any other tax is paid on the received adjustment.
The widow or widower also has the option of not claiming the adjustment, in which case it is not a gift to the estate, but the shareholders of the estate are taxed on the entire estate under the normal inheritance tax regime.
However, in the division of the estate, the widow or widower has the right to invoke the so-called “adjustment privilege”, i.e. a widow or widower who is wealthier than the first spouse to die has the right to refuse to transfer the adjustment to the estate of the first deceased spouse.
In addition to the division of matrimonial property, the spouses’ matrimonial property rights or possible prenuptial agreements can influence inheritance tax planning. For example, a prenuptial agreement can influence the amount of property to be transferred in the distribution of the inheritance.
In many cases, the so-called ‘total exclusion’ prenuptial agreement is designed to protect the wealthier party and prevent the transfer of property to the less wealthy spouse. It is also relevant in the case of death estates, as it prevents the less wealthy widow from succeeding in a claim for adjustment.
For tax purposes, it is also important that the widow or widower is in principle entitled to retain possession of the undivided estate of the deceased spouse. The right to retain possession of the undivided property does not prevent the direct descendants of the decedant from making a claim for distribution, which in an extreme situation reduces the surviving spouse’s right of possession to the possession of the common home and customary household effects.
It is often not considered that a timely sale of property belonging to a deceased person’s estate in relation to the division of the estate can result in varying degrees of tax advantage. In the case of the realisation of property belonging to the estate, attention must therefore also be paid to whether it is reasonable to sell before or after the division.
From the point of view of the resulting taxation, the matrimonial property regime between the spouses, a prenuptial agreement, determining what is to be sold from the estate, whether the sale is made before or after the division or distribution of the estate, etc., are all relevant.
The timing of the transaction has an impact on, among other things, the amount of possible capital gains tax. The heirs may not consider that, despite an agreement on an amicable distribution, consulting an expert could be worthwhile from a tax point of view.
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.
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.
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 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.