How have the rules of property inheritance changed in Europe?

Purchase of foreignreal estate

According to information gathered by the British company Rightmove, the overwhelming majority of property buyers outside their home country are individuals over the age of 55. These individuals, while finalizing transactions, begin to consider how the transfer of their property to their heirs will take place. There are several sources that prompt them to think about inheritance issues.

• Firstly, owners do not always have complete freedom in choosing who to leave their assets to, as various European countries have laws that require mandatory shares for certain heirs.
• Secondly, the transfer of property often entails the need to pay taxes, which can be quite substantial and create an additional financial burden for those who inherit the assets.
• For example, in countries like France, it is possible to reduce the inheritance tax burden by registering real estate under a legal entity, which helps to avoid unpleasant tax consequences.

Changes in EU legislation

With the entry into force of new legislation on August 17, 2015, within the European Union, the approach to inheritance of real estate has undergone significant changes. Previously, foreign owners with assets outside their home country were required to follow the laws of the country where the property was located.

According to the new rules, the primary jurisdiction for inheritance matters depends on the state in which the owner passed away, but they can choose whether to apply the laws of their home country, whether it is an EU country or not. For example, if we are talking about the United Kingdom, the redistribution of the inheritance will occur according to British law, while in France, the acts of transferring property depend on the laws of the country from which the deceased originated.

The new law is in effect in all European Union countries, except for the United Kingdom, Denmark, and Ireland. In these countries, the heirs of foreign citizens will be governed by the existing local laws – British, Danish, or Irish.

Recognition of hereditary decisions

Decisions made in one of the EU countries regarding inheritance are automatically recognized in all other member states of the Union. There is also a document -European Certificate of Inheritancethat confirms the rights to the property.

In addition to the general union rules, each country has its own unique laws regarding inheritance tax and regulations determining who is entitled to the assets, as well as what minimum shares are allocated to the spouse and children of the deceased.

Order of inheritance

Regarding the order of inheritance, the presence of a will implies the distribution of assets according to the deceased's instructions. Otherwise, if there is no will, the assets will be divided among legal relatives according to the inheritance laws in that country. This highlights the importance of careful preparation and proper documentation to avoid potential complications in the future.

Inheritance systems in European countries

In most European countries that are part of the European Union, various inheritance systems are in place. Generally, the primary right to inheritance belongs to the children, spouses, and parents of the deceased. On the next level, siblings and grandparents join them. In the final stage, the interests of other family members and dependents are taken into account. For example, Germany distinguishes three degrees of kinship, while Finland divides heirs into two categories: the first includes spouses and children, and the second includes all others. Nevertheless, the main heirs typically remain the spouses and children, whose rights to inheritance come into effect automatically upon the death of the testator.

Notification periods for inheritance

In addition, different countries have specified timeframes within which heirs are required to notify tax authorities of their rights to the inheritance. These timeframes vary depending on the country, for example:

• In Germany — three months.
• In Italy — one year.
• In Spain and France — six months.

Certain time limits are also established within which an heir can renounce their share of the inheritance. For example, in Germany, this period is six weeks after receiving information about the inherited property.

Necessary documents for inheritance processing

To process the inheritance, it is necessary to present a number of official documents, such as:

• Certificate of heir's identity.
• Death certificate.
• Documents confirming family ties (for example, marriage and birth certificates).
• Will.
• Documents confirming ownership of the property left behind by the deceased.

Legislation on the mandatory share in inheritance

In many European countries, there is legislation regarding the mandatory share in inheritance, which guarantees family members the right to a certain portion of the estate, regardless of the contents of the will. This rule applies in almost all countries of the European Union, with the exception of the United Kingdom and Ireland. For example, according to French laws:

• One child automatically receives half of the inheritance from the deceased parent.
• Two children — two thirds.
• Three or more children - three quarters.

In the UK and Ireland, on the other hand, property owners can bequeath their property to anyone, even if they are not related to them.

Rules of mandatory share in Italy

In Italy, the law on mandatory inheritance shares is also applied. In this country:

• One child inherits half of the property.
• Two children - two thirds.
• In the absence of children, parents receive one third.
• The spouse inherits half, and if there are children, the inheritance is divided as follows: the spouse and the children each receive one-third of the total inheritance.

These provisions cover all forms of ownership, ensuring the protection of the rights of heirs.

Inheritance taxes in Europe

As for inheritance tax, it is absent in countries like Austria, Latvia, and Portugal. Cyprus also does not have such a tax. In other European countries, tax rates depend on the degree of kinship between the heir and the deceased: the closer the relationship, the lower the tax. Many states offer tax benefits, which ease the financial burden on heirs.

Inheritance taxation in Europe

The question of inheritance taxation in European countries raises many disputes and discussions, as the conditions and tax rates can vary depending on the region. Let's take a closer look at this topic, starting with Austria and ending with Spain.

Austria

In Austria, as in other European countries, there was an inheritance tax.canceledSince 2008, the focus has shifted to other types of taxes, such as property transfer taxes. Notably, an heir may face certain tax obligations depending on the assessed value of the inherited property. Thus, inheritance in the country will be associated with various taxes, which should be taken into account.

Germany

Next, let's move to Germany, where inheritance tax is assessed based on the value of the inherited property and the degree of kinship between the testator and the heir. For example:

• If a daughter inherits property from her mother, she receivestax deductionwhich amounts to 400 thousand euros.
• If the value of the inheritance exceeds this deduction, a progressive tax scale applies:
  • For an amount up to 75 thousand euros, the rate is7%.
  • From 75 to 300 thousand —11%.
• Since there are tax deductions, parents can transfer property to their children worth up to 800,000 euros each time.ten yearswithout paying inheritance tax.

Spain

Now let's consider Spain, where the inheritance process also involves the payment of tax, with rates that can vary from7.65%to34%It is worth noting that this figure can increase due to various factors that depend on the market value of the inherited property and the degree of kinship, and in some cases, it can reach81.60%For example:

• In autonomous regions such as Asturias and the Balearic Islands, no tax is levied on children who inherit property from their parents if they have not reached a certain age.21 years old.
• For close relatives, provisions are made.tax benefits.

France

Let's turn our attention to France, where inheritance taxation is based on the value of the inherited property and the closeness of family ties. The rates for children or parents of the deceased are:

• It starts from5%for property valued at less than 8,072 euros.
• They can reach45%for amounts over 1,805,677 euros.

There are also other categories of heirs, such as brothers and sisters, for whom the rates vary from35%to45%Additionally, provisions are made for close relatives.100,000 tax deductionthat allows to reduce the total tax amount.

Additional taxes

It is also important to consider that in some European countries, in addition to inheritance tax, there may be a need to pay a property transfer tax. This could imply the necessity of reviewing the tax obligations of the heir.

Conclusion

So, the issues of inheritance taxation in Europe are quite complex and require careful study of local legislation. Each country offers its own unique conditions, which can both facilitate and complicate the process of inheritance transfer. It is important to consult a lawyer or tax advisor in advance to avoid unexpected financial consequences that may arise during the inheritance process.

The transfer of assets in different countries, even in those where there is no inheritance tax, may still require the payment of a stamp duty. Alexey Panteleev, a tax consultant at UFG Wealth Management, emphasizes this issue.

Taxes on asset transfers in different countries

For example, in Austria, there is no inheritance tax; however, a transfer tax is levied when ownership rights are transferred, which is 2% in cases of inheritance between close relatives and 3.5% in other situations. In Cyprus and Portugal, there is also no inheritance tax, but heirs are required to pay a stamp duty when receiving property.

• In Cyprus, the rates of stamp duty range from 0.15% to 0.20% depending on the amount.
• In Portugal, the fee is 0.8%.

Tax optimization through legal entities

To reduce the financial burden related to inheritance taxes, many people prefer to register their real estate under legal entities such as family companies, funds, or trusts. In France, a scheme called a civil real estate partnership (société civile immobilière, SCI) is often used to optimize tax obligations.

In such cases, inheritance tax is virtually non-existent. The process consists of several stages:

• It is necessary to establish an SCI.
• To purchase real estate for a company on credit.
• Divide the property and transfer it to the heir as a gift.

For example, if a father at the age of 59 decides to gift property with an outstanding loan of 50,000 euros, and the shares of the property (without the right of use) are valued at 105,000 euros (which is half of the total amount of 210,000 euros), the tax will amount to only 250 euros.

Division of property

The concept of "dismemberment of property" (démembrement de propriété) refers to a situation where, for example, a parent has usufruct (the right to use the property), while their son, the heir, becomes the owner of the bare ownership (the right to ownership without the right to use, meaning just the "walls" of the property itself). Registering property under a legal entity significantly simplifies the process of tax optimization.

Inheritance taxes in Germany

In Germany, since 2009, there has been a law (Inheritance and Gift Tax Act) that allows for a complete exemption of 100% of a company's assets from inheritance tax, provided certain conditions are met:

• The business must operate for at least seven years after acquiring the assets.
• The salary expenses should exceed the initial level by eight times.
• The number of employees must be at least 20 people.

However, in December 2014, the Constitutional Court of Germany declared this law unconstitutional, raising concerns about the potential repeal of this tax benefit as early as 2016. Thus, the tax aspects of asset transfers largely depend on the jurisdiction, and it is important to plan your actions in advance to minimize possible tax liabilities.

Conclusion

In conclusion, it is important to emphasize that issues related to the inheritance of foreignreal estate are becoming increasingly relevant, especially for the older demographic of buyers who are looking for long-term investments and security for their loved ones. Considering the recent changes in European Union legislation, as well as the unique characteristics of national regulations, proper preparation for the inheritance process becomes a key element when acquiring real estate.

I understand that having a clear estate plan can not only simplify the process of transferring assets but also reduce the financial burden on heirs. The realization that each region has its own rules and nuances highlights the need for consultations with qualified professionals to avoid unforeseen complications.

Tax aspects

It is also important to consider that tax aspects can vary significantly, and understanding these details will help make more informed decisions at the time of purchase. The process of formalizing an inheritance requires careful preparation of documents and adherence to timelines, which should not be underestimated.

Family relationships

I would add that inheriting real estate is not just a legal and financial matter, but also an important aspect of family relationships. A proper approach to this process can ensure a harmonious distribution of assets and preserve inherited values within the family. When choosing real estate abroad, one should always think about the future and the opportunities it provides for your loved ones.

Main findings

• Conscious approachInheritance issues are of great importance for ensuring the smooth transfer of property.
• Consultation withqualified specialistswill help avoid legal mistakes.
• Knowledge of tax implicationscan help save money and time in the future.
• Compliancetime framescritical for the successful processing of inheritance.
• Inheritance of real estate is an important aspect.family relationshipsrequiring a delicate approach.

Ultimately, my goal is to convey to readers the importance of a conscious approach to inheritance issues in order to avoid unpleasant surprises and ensure a smooth transfer of property to those who truly deserve it. Understanding the inheritance laws of different countries will help make informed choices and protect oneself and one's heirs for many years to come.