Inheritance taxation when the decedent left a will

It may be that the decedent wrote a will that provides the right of possession to the entire property left behind, or only the right of possession to a specific part of the property, or only to a single item included in the estate.

If you stand to inherit a right of possession by a will and you accept to receive the right, make sure that a clause to that effect be recorded in the estate inventory deed or in a separate certificate of service related to the will.

If the possession right is the only inheritance you receive, you need not pay inheritance tax. In this case, there is another inheritor who gets the right of ownership to the property concerned. This inheritor must pay inheritance tax, with the tax base being the property’s value minus the possession right’s value.

Example: Matti wrote a last will stating that his spouse can have the right of possession to a unit of real estate. After Matti’s death, the spouse inherits the right of possession and does not have to pay any inheritance tax for it. Matti’s two children inherit the ownership rights. Both of them must pay inheritance tax in accordance with the divided parts of the real estate they received. When inheritance taxes are assessed, both children will benefit from a reduced tax as follows: The Tax Administration uses the information recorded on the estate inventory deed and subtracts the value of the right of possession from the real estate unit’s value.

Read more about inheritance taxes relating to a right of possession

It may be that the decedent wrote a will containing detailed provisions on how ownership should be passed on to heirs and inheritors. If a will determines that you receive property with the right of ownership and the right of possession, you must pay inheritance tax based on the full value of the inherited property.

However, if the decedent’s will says that the right of possession goes to someone else too, the Tax Administration will subtract the possession right’s value from the property’s value before assessing your tax. As a result, the base for your inheritance tax is only your ownership, because someone else has the right of possession. Under the tax rules in force, no inheritance tax is imposed on mere possession rights.

Example: Under the provisions of a will, you inherit a housing-company apartment. However, the will gives your mother the right of possession to the apartment. The full value of the apartment is €150,000. The right of possession is worth €52,500 in this particular case. In tax assessment, after the Tax Administration subtracts the possession right’s value as appropriate, your inheritance tax base equals €97,500. Because you are the decedent’s close relative, the amount of your inheritance tax will be €8,375. No inheritance tax is assessed for your mother because she does not inherit property; she only inherits the right of possession to property.

The type of will called “general legacy” is one where the decedent has stipulated that a certain person will receive the decedent’s entire property or, for example ¼ or some other comparable part of it. If the decedent wrote a general-legacy will, the inheritor can be someone not belonging to the immediate family, such as a godson or goddaughter.

If you stand to inherit property by virtue of a general legacy

• you must pay inheritance tax based on the value of the inherited property
• you become treated as a shareholder of the estate, which means that jointly with the other shareholders, you have responsibility for the estate’s tax affairs.

Example: The godmother of a child wrote a general-legacy will giving her godson ¼ of the property she leaves behind. The property is worth 200,000 euros, so the godson stands to inherit €50,000. There is no family relationship between the godmother and the godson: the assessment of inheritance tax is based on the 2nd tax bracket. He will have to pay €6,400 in inheritance tax. Because the will is a general legacy, the godson is treated as being a shareholder of the estate. Jointly with the other shareholders, he will carry responsibility for the estate’s tax affairs.

It may be that the decedent wrote a special will, which designates a named inheritor as the person to whom a specific part of the decedent’s property should go.

If you become an inheritor based on a special will:

• Your inheritance tax is based on the value of the inherited property
• You are not a shareholder of the death estate

If you inherit an item of property but will grants the right of possession to that property to someone else, you must pay inheritance tax but its amount will be reduced. Read more about inheritance taxes relating to a right of possession

Example: Eino, the decedent, wrote a will that provides that the son of one of his two daughters, Pauli, stands to inherit an amount of money. The rest of Eino’s property goes to his two daughters in accordance with the provisions of law. Pauli the grandson must pay €100 as his inheritance tax because he received €20,000 and his inheritance taxation is based on tax bracket 1. Because Pauli only inherited a specific item of property by virtue of the decedent’s will, Pauli is not a shareholder of the estate. Accordingly, Eino’s two daughters will have responsibility for all of the estate’s tax affairs.