The purpose of an advancement on inheritance is to ensure equitable treatment among direct heirs.
A parent may provide financial assistance to one of their children during their lifetime, and stipulate that the gift is an advance on inheritance. In the final in the division of the estate This child will receive a gift worth less from the estate to be divided at that time than the other children.
The pre-inheritance system supports the principle of equal division among heirs. The deceased may deviate from equal division by stipulating that an advance inheritance shall not be considered an advantage received by a descendant heir or other heir. The aim of the system is the fair implementation of the division of inheritance.
An advance inheritance is a gift that, upon the death of the donor, becomes part of the recipient's inheritance, counted as having been received in ”advance”.
The donor can stipulate whether or not their gift should be taken into account as an advance on inheritance during the division of the estate. This should be expressed in the gift book.
A gift given to a child is always presumed to be an advancement on an inheritance, unless the donor expressly revokes this in the gift deed or. in the will.
Presumption of advancement
The presumption of advancement means that a gift received by a direct heir is always considered an advancement on inheritance, unless the deceased has stipulated otherwise in the gift deed or it can be inferred from the circumstances that they intended so.
The presumption of an advancement applies only to direct descendants. Gifts received by other heirs can be designated as an advancement by the deceased, or they can be presumed to be an advancement if the deceased is deemed to have intended that. Generally, gifts received by individuals other than heirs cannot be considered advancements. There are a few exceptions to this rule: a gift given to a stepchild and a gift given by a spouse to their spouse's secondary heirs.
Taxation of advance inheritance
A gift tax is paid on the value of a pre-inheritance at the time it is received. However, the tax is taken into account as a deduction in the inheritance tax payable after the death of the testator. If the gift tax has been higher than the inheritance tax would have been, the difference will not be reimbursed.
Gift and inheritance taxes are progressive taxes.
Gift or advance inheritance?
To get the best tax advantage from a gift or advance inheritance, and when transferring assets to someone, like a child, during your lifetime, it's worth being careful about how you do it. It will take a qualified lawyer about 1-2 hours to work out the best solution for you and draft the document.
Article drafted by the AdvocateTuula Rainto, Asoianajotoimisto Amos. You can always call him free of charge, tel. 010 299 5090. You can see our price list Here.
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