How to value the estate of someone who has died
Tax authorities require that the assets are valued at their fair market value (FMV) at date of death. The FMV is usually the same as the probable selling price of the assets. Inheritance tax is separately assessed for each heir or beneficiary.
Taxable value depends on the size of your share
Tax authorities use the estate inventory deed (and Last will and testament, if any) to work out the taxable portions of the inherited assets for each heir. Thus, the amount of inheritance tax is not directly connected with what types of assets each heir actually received; instead, it is the result of an arithmetical process in which the taxable portions are assessed. Because the typical estate is usually divided between the heirs after the official decisions on inheritance tax have been made, the tax authorities dealing with asset valuation usually rely on statistical information on the FMVs of similar property or assets. If there has been a Last will and testament, directing the succession of a certain part (or a certain asset) to someone, the amount of inheritance tax for this particular beneficiary is directly connected with the FMV of that asset.
Debts and expenses may be deducted from total Estate value
Estate value is not only diminished by its debts and liabilities, but also by deducting the typical expenses from it, including funeral costs and estate-execution costs, on the condition that such deductions are reasonable. For example, it is not acceptable to deduct the shareholders' travel expenses to the inventory conference, or to deduct any indirect losses of earnings they may have because of the time spent making various arrangements.
However, the following typical expenses are acceptably deductible because they relate to the decedent's lifetime but have remained unpaid when he or she passed away:
- Home loan, amounts owed for consumer goods, credit card debt;
- Tax debt, on the condition that it had emerged in the deceased person's lifetime;
- Water bills, utility bills, telephone bills;
- Health costs of the deceased person, if any unpaid bills remain.
The value of any rights of possession (Finnish: hallintaoikeus, Swedish: förvaltningsrätt) is deducted if a will has been made and it provides for special possession of some assets, or if the surviving spouse is entitled to keep the matrimonial home. The Tax Administration performs the computations, based on the values shown in the Deed of estate inventory.
If the decedent had an unpaid student loan balance, its value should be displayed as zero euros in the Deed of estate inventory, because the estate will not be expected to pay back the loan to Finnish State.
Deductions of the spouse; deductions of surviving children under 18
The decedent's spouse in entitled to a deduction of €90,000 (€60,000 before 1.1.2017) against his or her inheritance taxes. An heir under 18 years of age is entitled to a deduction of €60,000 (€40,000 before 1.1.2017), if he or she is the decedent’s most immediate heir and a lineal descendant.
Valuation of insurance contracts
As of 1 January 2018, insurance indemnities will be fully subject to inheritance tax.
Advance rulings on inheritance tax
After the decedent’s death, an advance ruling on the amount payable of inheritance tax can be requested from the Tax Administration. The request can be made by a party to the estate, a beneficiary of a special will, and the surviving spouse. Requests must be written. The cover page of your request must be a separate covering form:
The form states the address to which the advance ruling request and the covering form should be sent.
An advance ruling that has gained legal force must be complied with in the taxation if the tax payer so demands, in accordance with the provisions set out in the ruling. Advance rulings are subject to a fee.