Handing over your wealth and property is a sensitive issue. To help you prepare for this critical step, you need to ask yourself the right questions from the outset in order to define the factors that could affect your succession.
1. What impact does your matrimonial property regime have on the distribution of your assets?
There are three main types of matrimonial property regime (or marital property system) in Luxembourg:
- Separate property, in which each spouse owns their own property.
- Universal community of property, in which all the property owned before or acquired during the marriage belongs to both spouses.
- Community of acquisitions, in which some property is shared between the two spouses and some property is owned separately.
The choice of matrimonial property regime will influence the division of assets between spouses during their lifetime as well as the estate bequeathed on death. Understanding the implications of the different possible regimes is a first and critical stage in planning to pass on your assets.
2. How are the assets divided between the different members of the family?
Your children and surviving spouse will have a priority claim to your assets over other members of your family. It is possible to modify this ruling by writing a will. Note, however, that you cannot disinherit your children. Whatever provisions you make in your will, your children will always be entitled to a reserved portion.
3. What constitutes the estate?
The estate is composed of assets owned at the time of death, depending on the deceased’s matrimonial property regime, after deduction of debts and the addition of gifts made by the deceased. The estate is then distributed between the heirs.
4. What inheritance taxes are payable?
There is no inheritance tax on the direct line: you are not therefore taxed (except on the non-reserved amount if you have arranged to favour one heir over the others) or between spouses or partners after three years of partnership. For all other heirs, the inheritance rate is a function of their degree of kinship to the deceased and the amount received, ranging from 2.5% to a maximum of 48%.
5. What are the options for making a gift?
You can gift assets in your lifetime. This can take the form of a physical handover or a gift made by a deed drafted by a notary. Gifts may be intended as an advance on inheritance (anticipated inheritance) or to favour one heir over the others, outside the reserved portion. While a physically handed-over gift is exempt from gift tax, this is not the case for a gift made by notarial deed. Gift tax is generally lower than inheritance tax.
6. What advice is available on the legal and tax aspects of succession?
Our wealth-engineering specialists are experts in Luxembourg and international law. They can answer specific questions about your personal and business assets. They can also help with cross-border issues – for example, if you own property abroad. They will alert you to the financial, tax and inheritance consequences of your decisions.
Find out more about our advisory services on succession and inheritance