An inheritance is a gift from the deceased to his or her heir during his or her lifetime. After the death of the donor, this gift becomes an anticipated inheritance, since, unlike normal gifts, anticipated gifts are taken into account in the distribution of the estate. An anticipated legacy ensures that the heirs are treated equally in the distribution of the estate.
If one of the heirs has been given a gift, i.e. an anticipated inheritance, this may give rise to a dispute over the distribution of the inheritance.
Gift to heir, presumption of inheritance
Gifts made to a bastard heir are deemed to be anticipated inheritances, unless the donor orders otherwise or the circumstances are such that it is considered appropriate to do so. This is called the presumption of anticipated inheritance. This presumption of anticipation may be rebutted freely by the donor at any time. To avoid disputes in the distribution of the estate, it is advisable to make such a declaration in writing.
In practice, the notification would go like this: ”I hereby declare that the gift I am making to XX should not be treated as an advance inheritance.”
Exceptions to the presumption of anticipated inheritance
There are exceptions to the presumption of anticipated inheritance. For example, an ordinary gift that is not unrelated to the financial circumstances of the donor is not considered an anticipated inheritance. Gifts of the same amount to all the heirs in the same family are also not generally regarded as anticipated inheritances. On the other hand, the sale of property to an heir at a price well below its fair market value, for example, is regarded as an anticipated inheritance for its part without consideration. If this is not desired, this must be expressly provided for in writing.
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How are prepayments treated in the distribution of inheritances?
If a gift from the deceased is deemed to be an advance inheritance, it will be taken into account in the distribution of the estate. The value of the anticipated inheritance is added to the estate of the deceased and then deducted from the inheritance of the beneficiary of the anticipated inheritance. Even if the value of the anticipated inheritance received by an heir exceeds the value of his/her share of the estate, he/she is not obliged to return the property received as an anticipated inheritance.
Gift tax is payable on an advance inheritance, i.e. a gift
Gift tax is payable on the advance inheritance. The amount of such gift tax paid is in turn deducted from the inheritance tax payable when the estate is distributed. It is worth noting that an advance inheritance can increase the amount of inheritance tax, as inheritance tax is progressive. If, on the other hand, the transfer is considered a gift and not an inheritance, it will not be taken into account for inheritance tax purposes. An exception is a gift made within three years before the death of the deceased.
The donor's right to donate property
The donor, or the deceased, has the right to control his or her property during his or her lifetime and can donate his or her property - as a gift or an advance inheritance - to whomever he or she wishes. The designation of gifts to heirs as anticipated inheritances makes it easier for heirs to distribute their estates.
An entry in the succession register for advance inheritances
After the death of the donor, i.e. the deceased, any advance legacies made by the donor must be entered in the deceased's succession book.
Article drafted by the Advocate Tuula Rainto, Amos Law Firm. You can always call him toll-free, tel.010 299 5090. You can check our price list Here.
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