Distribution of inheritance and ceased estate
After the estate inventory meeting has been held, the property can be distributed. However, there is no time limit for finalising the distribution. If preferred, the shareholders can agree to only distribute a part of the estate or not to distribute the estate at all.
The estate does not need to be distributed if there is just one shareholder. In the case of just one shareholder, the property is deemed as having been inherited by the shareholder at the time when the decedent died.
The property is distributed to the shareholders of the estate. If the decedent did not leave a will, the statutory order of inheritance determines the portions of the inheritance devolving to each inheritor.
The statutory order of inheritance:
- Children. If the child is dead, the inheritance is passed on to the decedent’s grandchildren and then to great-grandchildren.
- Surviving spouse. The surviving spouse inherits the deceased spouse’s estate, if the surviving spouse was married to the decedent and the decedent has no direct heirs, i.e. children or grandchildren.
- Mother and father. If the father and mother are dead, the inheritance is passed on to the decedent’s siblings and then on to their children.
- Grandparents. If the grandparents are dead, the inheritance is passed on to the decedent’s uncles and aunts. After them, the inheritance goes to the state of Finland. The decedent’s cousins are not considered inheritors.
What are the rules concerning distribution of inheritance?
The property that can be distributed consists of the property recorded in the estate inventory deed.
If the decedent was married, the property of the spouses must be divided, i.e. partitioned before the estate of the deceased spouse can be distributed. However, the property does not have to be divided at all if the spouses do not have matrimonial rights to each other’s property.
Inheritance is usually distributed as follows: First, the parts of it going to each inheritor are determined. For example, if the decedent has three inheritors in the same family line (such as brothers and sisters), the part is ⅓ for each. The ‘shares of distribution’ determine what portions of the total inheritance value belong to each inheritor. The inheritors can receive their personal part of the inheritance as a sum of money or as property.
Prepare a deed of partition and a deed of estate distribution
To document the division of matrimonial property, you must write a deed of partition; correspondingly, to document the estate’s distribution, write a deed of distribution. However, both the division of matrimonial property and the distribution of the estate can be included in one deed. One photocopied example of the above documents must be sent to the Finnish Tax Administration.
If a shareholder is a minor or is under legal guardianship
If any of the estate shareholders is under 18 years old or has a guardian appointed for them for other reasons, certification by the Digital and Population Data Services Agency is required concerning the distribution. The certification is also required if the distribution only concerns a part of the estate.
However, circumstances other than those stated above require no certification by the Digital and Population Data Service Agency.
Obtain title registrations of the property you inherited
After the Tax Administration has received the photocopied deed of estate distribution, we proceed to enter the necessary updates to our registers.
However, do not forget to request updates for the registers maintained by other public authorities besides the Tax Administration, in order to ensure that you are on record as the new owner of the inherited property.
- If you receive real estate – such as a plot of land or a house – in the distribution of the estate, you must submit an application for title registration to the National Land Survey of Finland in order to have your right of ownership recorded officially (application form available in Finnish and Swedish, link to Finnish).
- In the same way, if you receive corporate stocks or other securities in the distribution, you must take the steps necessary for having yourself registered as a new shareholder in the company because the stocks or securities have been transferred to you.
It may be necessary to submit a tax return for transfer tax and pay the tax
The following circumstances are examples of when, after a distribution of a death estate, transfer tax must be accounted for by submitting a tax return and by paying the transfer tax:
- you receive property (such as real estate), the value of which is greater than the item of property that another inheritor receives (such as the balance of savings in a bank account);
- you make a payment, from your personal funds, to the other inheritor i.e. you use money outside of the death estate.
It may be necessary to pay capital gains tax
The inheritors may receive capital gains. Conversely, it may be that the estate receives them. Capital gains are profits subject to tax, so you must have them declared on the tax return.
Examples of situations where taxes on capital gains must be dealt with:
- You have inherited some property but you decide to sell it. If the selling price is greater than the property’s value confirmed for purposes of inheritance taxes, you are treated as having made a profit. You must submit your pre-completed tax return with sufficient information on the sold property and the gains received.
- The estate sells some property. If the selling price is greater than the property’s value confirmed for inheritance tax purposes, the estate made a profit. The estate’s pre-completed tax return must give sufficient information on the property and the gains received.
In the same way, sufficient information must be provided on the tax return if property is exchanged.
However, if the selling price is lower than the property’s value confirmed for purposes of inheritance taxes, you are treated as having made a loss. The Tax Administration allows subtraction of such a loss from the year’s profits — i.e. offset of capital losses against capital gains — or if no gains were received that year, subtraction from other capital income.
- “Tax treatment of capital gains and capital losses in the case of a death estate’s property” — Kuolinpesien luovutusvoitoista ja tappioista verotuksessa (in-depth guide in Finnish and Swedish)
- General guidance on capital gains and losses (in Finnish and Swedish)
What needs to be done to make an estate cease?
After the following events have taken place, the estate ceases to exist:
- The assets and property were distributed.
- One photocopy of the deed of inventory was delivered to the Tax Administration.
- At tax year end, it is established that no income was received and no property was owned.
Please note that no notification is sent out by the Tax Administration on the subject of a ceased death estate.
Example: In January, February, March and April 2022, a tenant paid rent to an estate, i.e. the estate still received rental income. The estate was distributed at the end of June 2022, and photocopy of the deed of distribution was delivered to the Tax Administration in July 2022. In spring 2023, the estate will receive a final pre-completed tax return. The estate ceases as of 31 December 2023 because it no longer receives income and no longer owns any assets or property.
Final tax affairs relating to the estate
After the deed of distribution is delivered, there are still a few issues relating to taxation for the estate shareholders or the estate’s authorised agent to deal with.