Wills in estate planning

How can a will be used for inheritance tax planning?

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.


Wills determining rights of ownership or possession and use of property in inheritance tax planning

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.

Different types of wills can be used to split the inheritance tax burden

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.

Is it possible to renounce a will?

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.

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