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Refusing inheritance ā€“ effects on the tax treatment

When you are an inheritor, you have the option to refuse to accept it, i.e. disclaim the inheritance. This can be done either during the lifetime of the person whose property you stand to inherit, or at a time when the person has passed away. If you inherit something under the terms of a will, you can disclaim the inheritance only after the decedent has died.

There are several different ways to disclaim inheritances, wills, and insurance indemnities. The way you do it has an impact on how the assets and property are taxed, and on who the people are that must pay the taxes.

No inheritance tax is imposed on you if you disclaim before you take possession of the assets or property. The heirs or inheritors who receive them in your place will pay the taxes.

Tax liabilities can only be transferred from you to another person if you did not yet exercise any ownership-related rights when dealing with the estate.

Possible uses of ownership rights:

  • You took steps to distribute some of the deceased person’s assets.
  • You contacted the estate’s debtors in order to collect the money they owe.
  • You took steps to sell some property.
  • You gave someone a letter of authorisation to sell some property.
  • You submitted a claim concerning a lawful share of the inheritance.
  • You made a claim against the testament and submitted it to a court of law.
  • You accepted to receive even just a small part of the estate’s property for yourself.
  • You received money or other assets in return for disclaiming your inheritance.

Please note that you can still participate in the meeting where the estate inventory is taken.

To disclaim an inheritance requires that the person doing so sets out no terms or conditions, and they also have to refrain from influencing the decisions of others concerning who will receive the disclaimed part of the inheritance. The part of the person disclaiming the inheritance goes to those who would stand to inherit it if the person disclaiming the inheritance had died before the decedent died.

If you first accept to receive property through inheritance and then donate that property to someone else, it is treated as giving a gift, not an inheritance disclaimed. In these circumstances:

  1. You must first pay inheritance tax for the entire inheritance you get.
  2. After that, the person you give the property to must pay gift tax.

Another example of a situation where both inheritance and gift tax must be paid is if you exercised any ownership-related rights before passing the property on — such as:

  • You disclaimed your inheritance only in part.
  • You disclaimed the right of ownership of the inherited property, but you still keep the usufructual rights related to it.
  • You set out restrictions concerning the rights of the person who receives the property.
  • You received money or other assets in return for the portion of the inheritance you disclaim.

Please note that you can still participate in the meeting where the estate inventory is taken.

After you are informed of what the will determines, you can decide whether you choose to receive the assets, fully or in part.

If you inherit something under the terms of a will, you may also disclaim it in part:

  • You can choose to take just some of the assets and property that the decedent’s will determines as yours. In this case, you only pay inheritance tax on the property you actually receive.
  • You can choose to take the possession rights to property, instead of taking full rights of ownership to it. In this case, you need not pay inheritance tax at all.

Please note that in some circumstances, you cannot disclaim a part of an inheritance that is based on a will. For more information, see “Tax treatment of refusals of inheritance and gifts” — Luopumiset perintö- ja lahjaverotuksessa, chapter 3, paragraph 4 of the detailed guide.

If you stand to receive one sum or several sums from the life-insurance company due to someone’s death, you have the option to disclaim the indemnities or a part of them according to the same rules as concern inheritances.

You can disclaim a right of possession to an item of property by submitting a disclaimer note for that purpose at any time, including at the time when the property is sold,

  • if you are a surviving spouse and you have made a claim to retain possession of your marital home; or
  • if possession was left to you in a deceased person’s will.

Read more about inheritance taxes related to withheld rights of possession

How to disclaim an inheritance?

You must prepare a written disclaimer letter or statement. You can either write the letter or have a statement indicating that you disclaim your inheritance entered into the deed of estate inventory. Remember to sign the letter or the statement.

If you inherit something through a will and you disclaim it only in part, you must enclose a free-text written account with the deed of estate inventory, listing the exact property items you are disclaiming.

In general, it is recommended that signatures by witnesses be added to the list or free-text account, but this is not absolutely necessary.

If you disclaim a future inheritance beforehand, during the property owner’s lifetime,

  • you can state that you approve of a will, including the will’s designation of someone else as the inheritor; or
  • you can deliver a written statement to the owner of the property during their lifetime where you indicate that you disclaim your future inheritance.
Page last updated 4/14/2023