It is often thought that there is no need for a will because the inheritance is to be left to the children and this is already done by the provisions of the law alone. In many ways this is true, but it may come as a surprise to learn that even minor exceptions to the law are not possible - even though they may be justified and necessary. In this article, I will discuss the reasons why a will may be worth making, even if the inheritance is to be left to children.
Population ageing and increasing prosperity
There are more elderly and wealthy people in Finland than ever before. As the elderly population dies, the number of inheritances will increase rapidly in the near future, while the value of estates will increase. According to Statistics Finland, people aged 65 to 74 currently have the highest net wealth. At the same time, the older population is wealthier than ever before relative to the younger population.
Inheritances will therefore be increasingly shared in the coming years and will be more valuable than ever before. The beneficiaries are also older than before. Quite often it is the pensioner who inherits the pensioner. This may raise the question of whether, for example, an heir living in a debt-free home and drawing a reasonable pension needs the whole inheritance. Especially if the heir's own children are living their peak years, paying mortgages and car loans while providing for their offspring. In such a case, tax laws alone do not allow for a case-by-case assessment and consideration of each individual's personal needs.
A will can give your loved ones a free hand in the distribution of your estate
When no will has been made, the inheritance can only be distributed as provided by law. For example, the inheritance must either be accepted in full or renounced in full. Nor can the testator himself determine to whom he will give up the inheritance.
A soon-to-retire wealthy heir, who would receive an inheritance of around €200,000 under the law, might want to take €10,000 of this to pay off a renovation loan and save €40,000 for old age. The remaining €150,000 would naturally be left to children in their thirties. Perhaps a few thousand euros could also be set aside for the grandchildren in a reserve fund for capital appreciation - the accumulated funds could be used when the time comes to move away from home. It is also possible that the inheritor's children are of very different ages and at very different stages in their lives, and that the common will would be to give more to one child and less to another.
The family and intergenerational distribution of inheritance described above cannot be achieved without the testator enabling it by stipulating it in his or her will. As inheritance tax is progressive, the distribution of the estate to more than one beneficiary, as in the example, would also lead to significant tax savings.
If it is known that a dispute or disagreement may arise over the inheritance, it may be necessary to be quite specific about the amount of the inheritance. On the other hand, many families know in advance that the distribution of assets will be amicable. However, heirs cannot tax-efficiently agree in advance how they will divide the inheritance that will come to them in due course. The law only allows for a tax-efficient division between the beneficiaries and the complete renunciation of the inheritance.
Partial termination and order for partial surrender
A will can therefore stipulate that the beneficiaries can decide how much of their inheritance to accept and for whom to give it up. At the same time, they can only accept part of the inheritance by way of a right of use or a right of succession, which may be both practical and tax-saving. To guard against disputes, it is possible to provide that, although the heirs are free to divide the inheritance as they wish, this must be done by common consent. In this way, the will will also contain instructions to cover the eventuality that there is no easy agreement on the distribution of the inheritance.
Because it is not always easy to predict the time of death, a carefully drafted will provides for all the different possible circumstances in which the deceased may be living when he or she dies. This will allow assets to be transferred between family and loved ones in accordance with their wishes and needs, and to plan the inheritance as efficiently as possible.
Article written by Lawyer Samvel Margarjan. You can always call him free of charge, p. 010 299 5090.
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