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Advancement of inheritance – how gifts can affect inheritance tax assessment

If you receive a gift as an advancement of inheritance, you must pay gift tax on it. The gift will be taken into account in the distribution of the estate and in the assessment of inheritance taxes.

  • If you have received an advancement of inheritance, you will receive a smaller share of the decedent’s other property in the distribution of the estate than the other inheritors.
  • If you have not received any advancement, you will receive a larger share of the decedent’s property in the distribution of the estate than the inheritors who have received an advancement.

Read more about the difference between a gift and an advancement of inheritance

Advancement of inheritance – how is inheritance tax calculated?

If you previously received a taxable gift from the decedent as advancement of inheritance, you have already paid gift tax on it. After the decedent’s death, the amount of inheritance tax is calculated as follows:

  • The value of the advancement must first be determined, usually based on the date when the gift was given.
  • The sum total of the decedent’s property and all advancements is calculated.
  • The total is then divided between the inheritors. After this, we impose inheritance tax on each inheritor’s share separately.
  • We deduct the amount of gift tax you have already paid from your inheritance tax. Gift tax is deducted based on the gift tax scale that was in force when the decedent passed away. Even if the amount of gift tax you paid was more than the amount of inheritance tax, the exceeding amount will not be refunded to you.

The deceased person had given out €30,000 as an advancement. After subtracting liabilities from the estate’s property and assets, net value stands at €120,000. However, for purposes of distributing this estate, the total net value is €150,000. There are 3 heirs. Because one of them was given €30,000 as an advancement, he will receive €20,000 when the estate is distributed. The other heirs receive €50,000 each.

Gifts can sometimes be accounted for in inheritance tax assessment – how is tax calculated then?

If you have received a gift from the decedent in the 3 years before their death, the gift is taken into account in the assessment of inheritance tax. The amount of inheritance tax is calculated as follows:

  • We add the value of the gift to your portion of the inheritance.
  • We calculate your inheritance tax based on the total amount.
  • We deduct the amount of gift tax you have already paid from your inheritance tax. Gift tax is deducted based on the gift tax scale that was in force when the decedent passed away. Even if the amount of gift tax you paid was more than the amount of inheritance tax, the exceeding amount will not be refunded to you.

After subtracting liabilities from the estate’s property and assets, net value stands at €120,000. Portions of inheritance, going to 3 heirs, are €40,000 each. In addition, three years or less before the deceased person died, one of the heirs received a gift worth €15,000. This means that the base for this heir’s inheritance tax equals €55,000.

Advance rulings on inheritance tax

You can request an advance ruling on inheritance tax

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Page last updated 5/10/2017