Real Estate in Estate Inventory
· 2 min read
Reporting real estate in the deed
Real estate is one of the most common asset types reported in an estate inventory deed. The deed records the property's municipality, property identifier, area, and value on the date of death. If the deceased owned the property jointly with a spouse or another person, the deceased's ownership share is recorded. Jointly owned property is valued at total value, and the deceased's share is calculated based on the ownership ratio.
Any debts associated with the property, such as a mortgage or encumbrances, are recorded separately among the deed's debts. Any lease agreements and potential encumbrances related to the property should also be mentioned in the deed.
Fair market value and tax value
In inheritance taxation, the property's value is the fair market value, meaning the probable sale price on the date of death. The tax value shown on the property tax statement is usually significantly lower than the fair market value and is not used as the basis for inheritance taxation. To determine the fair market value, a real estate agent's appraisal, the Tax Administration's price maps, or actual sale prices in the area may be used. If the Tax Administration considers the value declared in the deed too low, it may adjust the value.
Required documents
For the estate inventory, a title certificate showing ownership is needed for the property, as well as a real estate register extract containing basic property information. An encumbrance certificate shows mortgages and encumbrances on the property. These documents are ordered from the National Land Survey of Finland. Additionally, an appraisal and the latest property tax statement may be needed. If the property is subject to a lease or other usage right, the related agreements must also be obtained.
Selling property from the estate
The estate can sell property before inheritance distribution with the unanimous decision of all shareholders. The acquisition cost for capital gains purposes is the inheritance tax value, so capital gains tax is calculated from the difference between the sale price and the deed value. If the property is sold within two years of the deceased's death, the taxation may be favourable for the shareholders when the deed value is close to the sale price.
Surviving spouse's right of possession
Under Chapter 3, Section 1a of the Code of Inheritance, the surviving spouse has the right to retain the home used as the shared residence undivided in their possession. This right of possession protects the spouse regardless of whether the home is the deceased's or the couple's joint property. The right of possession reduces the heirs' inheritance tax, as its value is deducted from the inheritance share. The value of the right of possession is calculated based on the Tax Administration's confirmed age coefficient and the property's yield value.
Frequently asked questions
How is property value determined in an estate inventory?
Property value in an estate inventory is determined based on the fair market value as of the date of death. Fair market value means the price that would be obtained on the open market. The Tax Administration uses multiple sources for property valuation: actual sale prices in the area, a real estate agent's appraisal, or an official valuation statement. The tax value is typically lower than the fair market value, and inheritance taxation always uses the fair market value. Shareholders are advised to obtain a reliable appraisal from, for example, a real estate agent.
What documents are needed for real estate in an estate inventory?
For real estate, the estate inventory requires a title certificate, a real estate register extract, an encumbrance certificate, any deed of sale or gift, and a property tax statement. The title certificate shows the owner, the register extract contains basic property information, and the encumbrance certificate shows encumbrances and mortgages on the property. An appraisal of the property's fair market value may also be needed. All documents are ordered from the National Land Survey of Finland or electronically through their service.
How does the surviving spouse's right of possession affect property valuation?
Under Chapter 3, Section 1a of the Code of Inheritance, the surviving spouse has the right to retain the home used as the shared residence undivided in their possession, even if the inheritance is distributed to other heirs. The right of possession reduces the property's inheritance tax value because the heir's received property is restricted by the right of possession. The value of the right of possession is calculated based on the spouse's age using the Tax Administration's age coefficients. The younger the spouse, the greater the deduction from inheritance tax.
Can the estate sell property before inheritance distribution?
Yes, the estate can sell property before inheritance distribution, but it requires the unanimous consent of all shareholders. An estate administrator can sell property without the shareholders' consent if the sale is necessary to pay the estate's debts. Capital gains tax is payable on the property transfer, with the acquisition cost being the fair market value confirmed in inheritance taxation. Shareholders should note that capital gains taxation depends on the difference between the deed value and the sale price.
Read also
What documents are needed for an estate inventory? A comprehensive list: family records, civil registry certificates, will, bank statements, and property documents.
How is inheritance tax determined based on the estate inventory? Tax classes, exempt portions, tax tables, and deductions clearly explained.
How much does an estate inventory cost? Free if done yourself, EUR 500–2,000 with a lawyer. Factors affecting price and saving tips.