Renunciation of Inheritance
Renunciation of inheritance is an heir's voluntary decision to not accept their inheritance share. It is a legally significant action that can have considerable tax consequences. Renunciation can be made either in advance during the decedent's lifetime or after death in connection with the estate inventory.
Methods of Renunciation
Inheritance can be renounced in two ways. Advance renunciation is made during the decedent's lifetime and is usually combined with acceptance of a will. Post-death renunciation is made after death, at the latest at the estate inventory proceedings. The renunciation must be unconditional and gratuitous — the heir cannot direct where the share goes nor receive compensation for it.
Tax Consequences
Effective renunciation of inheritance is an important tax planning tool. When an heir effectively renounces, their share passes directly to the substitute heirs (typically their children), who pay the inheritance tax. In this way, inheritance tax is paid only once instead of across two generations. The renunciation is effective only if the heir has not taken possession of the inheritance — meaning they have not participated in estate administration or used estate funds.
Practical Significance
Renunciation of inheritance also makes sense when the estate is over-indebted. By renouncing, the heir avoids liability for the estate's debts. Heirs may also renounce for family reasons, for example to strengthen the spouse's or children's position. The renunciation is recorded in the estate inventory deed and affects the entire inheritance distribution calculation. More information can be found in our article on estate inventory deadlines.
Frequently asked questions
How is an inheritance renounced?
An inheritance is renounced by a written declaration, usually made at or after the estate inventory proceedings. The renunciation is noted in the estate inventory deed. The renunciation must be gratuitous and unconditional — the heir cannot renounce only part of the inheritance or set conditions.
What are the tax consequences of renouncing an inheritance?
An effective renunciation of inheritance means that inheritance tax passes to the substitute heirs. For example, if a child renounces in favour of their children, the grandchildren pay the inheritance tax. This way, one generation's inheritance tax can be saved. The renunciation is effective only if it is gratuitous and unconditional.
Can inheritance be renounced due to estate debts?
Yes, indebtedness is a common reason for renouncing an inheritance. If the estate's debts exceed its assets, renouncing protects the heir from debt liability. The renunciation must be made before the heir takes part in estate administration or uses estate funds.
Related terms
Persons who have the right to inherit the deceased's property by law or by will.
A legal entity formed by the deceased's assets and liabilities at the time of death.
A tax paid on inheritance. The amount depends on the value of the inheritance and the relationship to the deceased.
A statutory procedure to determine the assets and liabilities of the deceased's estate. Must be held within 3 months of death.
Read also
The estate inventory must be conducted within three months of the deceased's death. Learn about calculating the deadline, consequences, and requesting an extension.
Guide to renouncing an inheritance in Finland: when to renounce, how the process works, impact on children, tax consequences and creditors' rights.
Guide to estate taxation: the deceased's final tax return, estate income tax, deadlines, deductions and practical guidance for the Tax Administration.