Wills are an excellent and also the main tool for inheritance tax planning. Wills can be used to change the ownership structure of an estate and to allocate assets in a way that differs from the statutory order of inheritance.
A will can usually determine either the ownership or the right of possession (right of use) of property.
A will that provides for ownership of property gives the beneficiary the widest possible rights to control the property received from the testator. The beneficiary pays inheritance tax.
As the name suggests, a will that grants a right of possession of property gives the beneficiary the right to control and use the property he or she has received. The beneficiary of such a testament does not pay inheritance tax on the property received. Instead, the person who receives the title is liable to pay the tax. However, the right of possession order reduces the amount of inheritance tax the owner must pay.
Testators can use different types of wills in their own estate planning.
A general legacy will can provide for the entire estate, a part of it or the part that remains after the other provisions have been fulfilled.
A special will is an order that provides for a specific beneficiary to receive, for example, a specific item of property or a specific sum of money.
Thus, in addition to the possibility of distributing the tax burden of an inheritance by means of wills providing for ownership and possession rights, property can be channeled to its beneficiaries, for example by means of special will provisions. Therefore, the inheritance tax exemption of €19 999 can be used effectively through various testamentary provisions. For surviving spouses, it should be noted that the spouse is granted a marital deduction of EUR 90 000 on the inheritance received.
Current case law has established the possibility of partial renunciation of wills. In such a situation, tax is imposed on the beneficiary only to the extent that he or she has accepted the will.
However, the contents of the will must be so designed that partial renunciation is possible in the sense required by the tax authorities. Otherwise, there is a risk that the partial renunciation will be regarded as a transfer of inheritance rights. In such a case, the transfer will be subject to gift tax.
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.