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INHERITED PROPERTY

Inherited property – sell or keep?

Inheriting a property brings not only joy but also responsibility and important decisions. What 3 options do you have when you inherit a property?

1. Realizing a gain
In the Grand Duchy of Luxembourg: The surviving spouse – if descendants exist – is, just like the descendants themselves, fully exempt from inheritance tax on their legally entitled share.

If there are no descendants, the surviving spouse benefits from a specific allowance of thirty-eight thousand euros (€38,000) on the net value of the inherited estate.

If there is an inheritance community, any sale of an estate property requires the express and unanimous consent of all co-heirs. Sales are therefore usually carried out on the open market, as this best guarantees achieving a price that reflects the true market value of the property.

It should also be noted that when selling a rental property acquired by the deceased less than five years before death, any profit made is subject to the so-called speculation tax, in accordance with applicable tax provisions.

2. Keeping the property
Keeping and using an inherited property can bring both emotional and financial benefits. In Luxembourg, the surviving spouse (with children) as well as direct descendants are fully exempt from inheritance tax on their legal share. The surviving spouse without children benefits from an allowance of €38,000.

In an inheritance community, any heir wishing to retain full ownership of the property must compensate the other co-heirs. The value of his own inheritance share is deducted from the amount to be paid. It is therefore necessary to assess one’s own financial capacity and, if necessary, resort to bank financing.

In this context, it is also possible to acquire the property and then rent it out. Rental income can contribute to covering ongoing costs as well as repaying the financing obtained.

3. Renunciation of inheritance
The image of the “happy heir” is often deceptive. Inheriting means first and foremost taking on responsibility – also towards oneself. If the deceased leaves, for example, a villa burdened with mortgages, the bank may already have initiated foreclosure proceedings. An heir who neglects legal formalities and deadlines risks serious consequences.

In Luxembourg, inheritance opens automatically upon the death of the deceased. The legal heirs – or those designated by will or inheritance contract – acquire the status of heirs by operation of law. This right arises automatically, even if the person concerned is unaware of the inheritance.

With the death of the deceased, the estate passes ipso iure to the legal or testamentary heirs. There is no special probate jurisdiction in Luxembourg.

If a will exists, it must be deposited with a notary. The notary is responsible for its opening and registration. He then informs the heirs about the content of the document and their rights.

Each heir acquires the inheritance automatically. If they do not wish to accept it, they must actively act and file a formal declaration of renunciation at the registry of the competent district court within the statutory period of three months and forty days.

Acceptance of the inheritance may be express – through acts clearly showing intent to accept – or tacit, for example when an heir uses estate assets or pays estate debts.

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