The declaration of inheritance or transfer on death

The loss of a loved one is a difficult time, which unfortunately brings with it a number of administrative formalities. These include declarations of inheritance or transfer on death, which will be used as the basis for determining the amount of tax to be paid to the state. myLIFE gives you a few details about these documents.

Etienne has lost his sister Marie, who lived in the Grand Duchy. As orphans, he and his brother Romuald have been dealing with the various administrative formalities connected with this tragic event. These include filing a declaration of inheritance or transfer on death. What does this mean?

The declaration of inheritance or transfer on death

In principle, heirs in Luxembourg must pay inheritance tax or transfer tax to the state. These taxes can range from 0% (for people exempt from duty) to 48% (taking uplift into account) of the share of the inheritance received. The tax rate varies depending, firstly, upon the relationship with the deceased and, secondly, the value of the estate inherited.

We have also addressed in detail the rates of inheritance tax and transfer tax on death in Luxembourg.

Useful info: if the deceased was resident in Luxembourg, their entire estate is subject to tax in the Grand Duchy, including their moveable property located abroad. However, real estate property located abroad is taxable in the country where it is located. If the person was not a resident of Luxembourg, only real estate assets situated in Luxembourg is taxed in the Grand Duchy.

The declaration of inheritance or transfer on death is compulsory, even if the beneficiaries of the inheritance are exempt from tax.

As brothers of the deceased, the two men know that they will have to pay tax to the state on Marie’s estate: 6% on the legal share and 15% on the discretionary share (in the event that their sister has drawn up a will benefiting one of her brothers). But they don’t yet know the exact amount this represents.

To determine this, they must submit an inheritance declaration or a transfer on death declaration to the Luxembourg Registration Duties, Estates and VAT Authority (Administration de l’enregistrement, des domaines et de la TVA – AED): This document lists the estate’s movable and real estate assets, as well as the deceased’s liabilities. It will be used as the basis for establishing the taxes to be paid.

• • If the last place of residence of the deceased was in the Grand Duchy, the heirs and universal legatees must complete a “declaration of inheritance”.

• • If the deceased was resident abroad but owned real estate (building, house, land, etc.) in Luxembourg, the heirs, legatees and donees of this property must complete a “declaration of transfer on death”.

As Marie lived in Esch-sur-Alzette before her death, Etienne and his brother must prepare a declaration of inheritance rather than a declaration of transfer on death.

Useful info: the declaration of inheritance or transfer on death is compulsory even if the beneficiaries of the inheritance are exempt from tax.

The declaration may be drawn up by the heirs, but it is strongly recommended that a notary be consulted to avoid inaccurate or incomplete declarations.

Who draws up the declaration of inheritance or declaration of transfer?

It can be drawn up by the heirs, but it is strongly recommended that a notary be consulted to avoid inaccurate or incomplete declarations. Etienne and Romuald can also obtain information from an AED inheritance office.

Useful info: if there is no inheritance or transfer tax to pay, the declaration of inheritance can be made by the AED inheritance office.

The declaration of succession or transfer on death may be filed individually by each of the heirs and legatees named in the will. However, it is common practice to combine all the information in a single declaration.

What must declarations of inheritance and transfer on death contain?

As each estate has its own particular characteristics, there is no standard form for this formality. However, it is important to bear in mind that to be admissible, declarations must include all the mandatory information required by law. The information to be provided will vary depending on whether or not inheritance tax is payable.

In the case of a inheritance declaration exempt from tax, for example, information must be provided on the identity, profession, address and death of the deceased. The contact details of the heirs and the share of the estate they are to receive. It must be specified whether there is a will, a gift between spouses, a usufruct on certain assets, and the land registry data for buildings located in Luxembourg must be listed.

Where the inheritance declaration is subject to inheritance tax, the document must also give details of the nature of the deceased’s assets (real estate, moveable assets, bank accounts, shares, cars, etc.), indicate their value, list any receivables owed to the deceased, whether there are any liabilities (loans, tax, etc.), etc.

Finally, for the declaration of transfer on death (where the deceased did not have their last domicile in Luxembourg, but owned real estate in the country), the information to be provided is the same as that required for the inheritance declaration subject to inheritance tax. However, the details of assets are focused more specifically on Luxembourg real estate assets (nature of the real estate, exact location and characteristics, liabilities linked to the property, etc.).

A number of supporting documents must be attached to these declarations: death certificate, identity documents of the declarants, extract from the land registry, marriage contract, various substantiating documents, etc.

There is an example of a declaration of inheritance (lineal inheritance and inheritance between spouses not subject to inheritance tax) that can be found on the AED website.

To find out exactly what information needs to be entered on the declaration and what supporting documents need to be provided, the two brothers can contact an AED office or a notary.

These declarations must be filed within six months if the death occurred in Luxembourg.

To whom must the declaration be submitted, and what is the time limit?

The declaration must be made in writing, on stamped paper or ordinary paper, with stamp duty affixed.

Etienne, his brother or the notary responsible for drawing up the declaration must submit it to the AED inheritance tax office at the location of Marie’s last place of residence in Luxembourg. If Marie’s last domicile was not in the Grand Duchy, the declaration of transfer on death should have been submitted to the inheritance or transfer tax office in the place where the deceased’s real estate was located.

These declarations must be filed within six months if the death occurred in Luxembourg. If the death occurred abroad, the time limits are longer: 8 months if it took place in Europe, 12 months if in the Americas, and 24 months if in Africa and Asia.

Useful info: failure to observe the time limits or places where declarations are to be filed may result in a fine. However, heirs may request an extension of the deadline.

Once it is submitted, the AED will assess the declaration and send a request for payment, which must be settled within six weeks.

N.B.: depending on the situation, the two brothers will need to plan for the cost of these declarations: stamp duty, a will search, notary fees, etc.

In conclusion, Etienne and Romuald are advised to contact a notary or a registry office to draw up their declaration of inheritance. This is all the more advisable in the case of complex or cross-border estates. Other experts may be called upon depending on the complexity of the case. Good luck!