The inheritance tax rate rises progressively, so the more inheritance you receive, the higher the percentage of your inheritance you have to pay tax on. An inheritance can be money, shares, a share in a dwelling, a cottage, a forest or land, anything. The value of the inheritance is added up and the tax is based on the total amount.
Inheritance tax starts from an inheritance of €20,000
In Finland, anyone can collect €20,000 tax-free. A widow inherits 110.000€ tax free. The inheritance can also be divided between several heirs. You should therefore exercise careful consideration as to whether your will gives you the right of ownership, the right of possession or the right to manage and use the property. Inheritance tax is always assigned to the person to whom the ownership is transferred. If the widow receives a right of possession, the inheritance tax is paid by the person who receives the right of possession.
The tax rate is also affected by the relationship: close relatives (for example, children, grandchildren and spouse) are in the first tax bracket, which is much lower, and siblings and all those further away are in the second tax bracket, which is correspondingly higher.
You can donate while you are still alive
A gift of less than €5 000 is tax-free if it is given over a three-year period. Gifts can therefore be anticipated and distributed before death.
During his or her lifetime, the deceased can split the inheritance into smaller amounts and donate less than €5 000 to anyone every three years. No gift tax is payable on the amount of less than €5 000.
It pays to leave a legacy to more than one heir
Inheritances can also be split between heirs, as inheritance tax is payable on a per-heir basis. The percentage decreases as the inheritance is shared by more people.
Example: in a will you can leave an inheritance of €20,000 to five grandchildren, leaving €100,000 tax-free to be passed on in the family.
The average age of a deceased person in Finland is around 60 years. At that age, the need for money may no longer be so great that you need the entire inheritance for your own use. The inheritance does not have to be accepted, but can be given up for the benefit of the children. When an inheritance is given up, the property goes to the person to whom it would have gone if the person who gave it up had already died - usually his or her own children.
Widow's tenure reduces inheritance tax for heirs
Spouses may need to protect their spouse in the event of death, and at the same time may want to consider how to pass on their assets with the least possible tax consequences.
Typically, the spouses make a mutual will between themselves, which gives the widow the right to control and use all or part of the property of the deceased. In the case of a joint home, the surviving spouse already has a direct legal right of possession. The right of possession and use means that even if the ownership passes to the legal heir, the holder of the right of possession and use can continue to use and manage the property.
”There are definitely tax advantages to the right of possession and use. The management right deduction reduces the inheritance tax value of the property, thus reducing inheritance tax.”
A right of possession and use can also be granted for assets other than real estate or dwellings, such as investments or financial assets.
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Inheritance tax calculator
You can use the Inheritance Tax Calculator to work out how much inheritance tax you will have to pay. The result of the calculator is based on the amount you enter. The calculator does not take into account all possible deductions, such as the deduction for the right of possession. It also cannot calculate the penalties for late payment of inheritance tax.
If your share of the inheritance is less than €20 000, you do not have to pay tax. You can check which tax bracket you belong to in the calculator below.
The will and any will determine the size of the inheritance on which everyone pays tax.
The article was written by: Tuula Rainto, Lawyer, Amos Law Office. You can always call him free of charge on 010 299 5090. You can check our price list Here. Article updated 20.6.2022.
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Inheritance division
Reduce inheritance tax with a will
[avatar user=”amoslaki” size=”352″ align=”left” link=”https://amoslaki.fi/ajanvarauskalenteri/” target=”_blank” ]Attorney Tuula Rainto, Amos Attorneys at Law. You can always call her free of charge, tel.010 299 5090[/avatar]