Inheritance law, property and taxes question.

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Montey
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Inheritance law, property and taxes question.

Post by Montey » Fri Oct 27, 2017 10:19 pm

Hi, I'm new to the forum and wondered if anyone has knowledge or experiance in relation to inheritance laws and taxes.

Our situation is as follows and we have been discussing if we should to take steps to change this in the event of death. We bought a property in Finland in 2006 (value 130.000,00) and it has been our current home ever since. The house is in my wifes name only but we have a joint morgage. We also have no children or marital contract.

We have been discussing what happens in the event of the death of either one of us in relation to how the property is then handled and if any taxes might need to be paid depending on who passes away and the assumption the morgage is payed off. we are in disagreement on the following situation.

My wife says that in the event of her death and because there is no marital contract and no children the property and deed would automatically pass onto myself and no Inheritence taxes would need to be paid my myself on the properties value.

I say based on what I have read online (and I could well be wrong). In the event of her death the property should indeed pass onto myself (I'm not 100% clear on this) but I would have to pay a tax of 1.500,00 euro (7% on 20.000,00 euro + 100,00 euro). This is because the house is in her name and value is 130.000,00 euro, so minus 90.000,00 from that (spouce allowence) leaves 40.000,00 of which only 20.000,00 is taxable (100 euro to pay on other 20.000 euro). I'm not sure if there would be costs involved in deed transfer also given my name is not on it at all?

Her arguement to this is the house is already half mine by marital law so no tax or costs would be payable given only 65.000,00 (half the value) would be taxable and that is well within the 90.000,00 spouce allowence.

Who of us is correct or are we both out? Would it be in our interest to add myself onto the deed now as a joint owner in the event to avoid possible taxes or problems in the future? Or would adding myself to the deed in itself require me to pay tax on a 65.000,00 gift?

Its all very confusing to me given Inherritence laws in the UK seem to be a little easier.

Inheritance law, property and taxes question.

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Piet
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Re: Inheritance law, property and taxes question.

Post by Piet » Sat Oct 28, 2017 6:34 pm

If you bought the house while you were already married, then by law you are entitled to half of it when she dies as if it were your own (same as with a divorce).
the other half will be subject to inheritance law, to see who inherits what, you should read the "inheritance code" on the web page Finlex.fi

http://www.finlex.fi/en/laki/kaannokset ... 650040.pdf

Chapter 3 section 1 tells you that if there are no direct descendants (children) all will go to you when your wife dies and vice versa.

To get to the value of the house, it will be valued at the Fair Market Value at the moment of death.
indeed you have a free sum to inherit of 90.000€ as a spouse.

So, half of the maybe 180.000 euro value estate will be yours because of marriage, the other half you will get (when there are no children) and will not be taxed until 90.000€ so no inheritance tax needs to be paid.

So yes you are right! (if the house was bought during your marriage).
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Montey
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Re: Inheritance law, property and taxes question.

Post by Montey » Sat Oct 28, 2017 8:19 pm

Thanks Piet.

Although I had my calculations correct, I think my wife wins this one. I will have to eat some humble pie, she will be happy :)

Do you have any ideas in the unfortunate situation of such an event happening how the house deeds would be changed into my name given my name is not there at all? Does that process happen automatically or is it something I would have to initiate? This part for both of us is unclear (house deeds) given if we understand finnish inheritance law correctly, in the event of my death after my wife, her family (parents or brother and sisters if living) would have an claim to part of my remaining estate. Because of this would there be problems for example if for any reason I wanted to sell the property and live somewhere else after her death?

Looking back it would have probably been better to have had my name put on the deeds when we purchased.


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Piet
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Re: Inheritance law, property and taxes question.

Post by Piet » Tue Oct 31, 2017 9:38 pm

Montey wrote:Thanks Piet.

Although I had my calculations correct, I think my wife wins this one. I will have to eat some humble pie, she will be happy :)

Do you have any ideas in the unfortunate situation of such an event happening how the house deeds would be changed into my name given my name is not there at all? Does that process happen automatically or is it something I would have to initiate? This part for both of us is unclear (house deeds) given if we understand finnish inheritance law correctly, in the event of my death after my wife, her family (parents or brother and sisters if living) would have an claim to part of my remaining estate. Because of this would there be problems for example if for any reason I wanted to sell the property and live somewhere else after her death?

Looking back it would have probably been better to have had my name put on the deeds when we purchased.


After death, a deed of estate must be made, see the inheritance code. In the deed of estate (have a lawyer make it, costs about 1000€) there is mentioned what values are there, if it has already been split according to marriage division or not. The debts are mentioned. The heirs are mentioned etc. etc.
After the deed of estate is finished and signed, the estate is settled and can be divided among the heirs. If there are no direct descendants (kids), you will be the only heir and all the estate can be transferred without problems to your name after the making of the deed of distribution, ask the lawyer how to do this (cost you another 1000). No it does not go automatically. Documents need to be filed for the real estate. If there are valuables that pre-date your marriage or are left out of your marriage because for example of an inheritance your wife received with a condition that stipulated such, these will be subject to inheritance for your wife's family to inherit, you have no claim for that unless your wife appointed you as her heir, then the family only will get their legal share (which is half).

Please read the inheritance code carefully, read it multiple times, all info is in there (I read it more than 50 times now, so much for my previous photographic memory, it sucks to get old :wink: . )

If as you say, the house would be partly inherited by family other than you, you can sell it but the heirs need to be compensated, they also can buy you out if they wish so at the moment you offer it for sale.
So if there are other heirs and you sell the place, you cannot use all the money to buy a new house, after sale you have to give the sum of the share of the other heirs to them immediately.
When you do not sell the place, you can as a surviving spouse, stay in the house as long as you wish including everything in it (furniture and appliances), they cannot force you to move if you have no other dwelling suited for you, already in your possession.

Most important for you now is to have a (joint) testament made where you both appoint each other as heir of everything. Also make sure it is on paper that the house was bought during your marriage and you both paid for the mortgage, this makes the (money paid for the) house half yours in case of a divorce (death is a divorce by law). (I would check this with a lawyer though).

About the house and who owns it: according to the information I understood from you: you both own half in case of a divorce (death).
See marriage act. http://www.finlex.fi/fi/laki/kaannokset ... 290234.pdf
Part 11 chapter 2 section 35 paragraph 1.

good luck
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betelgeuse
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Re: Inheritance law, property and taxes question.

Post by betelgeuse » Tue Oct 31, 2017 11:57 pm

Montey wrote:We bought a property in Finland in 2006 (value 130.000,00) and it has been our current home ever since. The house is in my wifes name only but we have a joint morgage. We also have no children or marital contract.
This is a bad idea if you have been paying part of the mortgage (and are not there just to guarantee payment). Paying to a mortgage that financed something that is not in your name (which includes spouses) can be considered a gift and as such liable for gift tax.


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Piet
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Re: Inheritance law, property and taxes question.

Post by Piet » Wed Nov 01, 2017 9:36 pm

betelgeuse wrote:
Montey wrote:We bought a property in Finland in 2006 (value 130.000,00) and it has been our current home ever since. The house is in my wifes name only but we have a joint morgage. We also have no children or marital contract.
This is a bad idea if you have been paying part of the mortgage (and are not there just to guarantee payment). Paying to a mortgage that financed something that is not in your name (which includes spouses) can be considered a gift and as such liable for gift tax.
I thought of the same problem but then again, if the house is bought during the marriage, it is to be considered owned by both, even when there is only one name on the ownership document, then there is no gift tax to be paid. (But agreed, this can be a legal mine-field :? )
The name on the house is now only important for to whom the real estate tax bill will be send. (as far as my experience goes :wink: )
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betelgeuse
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Re: Inheritance law, property and taxes question.

Post by betelgeuse » Wed Nov 01, 2017 11:19 pm

Piet wrote:I thought of the same problem but then again, if the house is bought during the marriage, it is to be considered owned by both, even when there is only one name on the ownership document, then there is no gift tax to be paid. (But agreed, this can be a legal mine-field :? )
The name on the house is now only important for to whom the real estate tax bill will be send. (as far as my experience goes :wink: )
During marriage there is no difference on how two total strangers and a married couple is handled in terms of ownership. The above is total hogwash.


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Piet
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Re: Inheritance law, property and taxes question.

Post by Piet » Sat Nov 04, 2017 5:40 pm

betelgeuse wrote:
Piet wrote:I thought of the same problem but then again, if the house is bought during the marriage, it is to be considered owned by both, even when there is only one name on the ownership document, then there is no gift tax to be paid. (But agreed, this can be a legal mine-field :? )
The name on the house is now only important for to whom the real estate tax bill will be send. (as far as my experience goes :wink: )
During marriage there is no difference on how two total strangers and a married couple is handled in terms of ownership. The above is total hogwash.
Not according to finlex.fi

Marriage act: Part II chapter 2 section 35 paragraph 1 first sentence reads:

Each spouse shall have a marital right to the property of the other spouse.

So no hogwash! There is clearly a huge difference between how property ownership is considered between total strangers and a married couple, this is called "Marital right to property of the other spouse", strangers do not have that right.

Example, man buys car for his wife, wife needs to pay gift tax? I don't think so.. that would be really weird....

But then again, this is Finland... somehow a banana Republic when it comes to taxes and Law in general (my personal experience). This country never had Napoleon introduce certain laws (read logic in laws :lol: ).
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betelgeuse
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Re: Inheritance law, property and taxes question.

Post by betelgeuse » Sun Nov 05, 2017 10:26 am

Piet wrote: Not according to finlex.fi

Marriage act: Part II chapter 2 section 35 paragraph 1 first sentence reads:

Each spouse shall have a marital right to the property of the other spouse.

So no hogwash! There is clearly a huge difference between how property ownership is considered between total strangers and a married couple, this is called "Marital right to property of the other spouse", strangers do not have that right.
The marital right comes into play when the marriage ends. I said during in my comment.
Piet wrote: Example, man buys car for his wife, wife needs to pay gift tax? I don't think so.. that would be really weird....
She does. That's why you would keep the car in the man's name and let the wife freely use it.
Piet wrote:But then again, this is Finland... somehow a banana Republic when it comes to taxes and Law in general (my personal experience). This country never had Napoleon introduce certain laws (read logic in laws :lol: ).
There is reason behind the Finnish system. Just because something is different, it doesn't make it worse.


betelgeuse
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Re: Inheritance law, property and taxes question.

Post by betelgeuse » Sun Nov 05, 2017 10:29 am

Piet wrote: Not according to finlex.fi
Maybe next time also read more than just one section. The section just above says:
Section 34
The property that a spouse has when concluding marriage shall remain his or hers. He or she shall also own what he or she acquires during the marriage.
https://www.finlex.fi/fi/laki/kaannokse ... 290234.pdf


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Piet
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Re: Inheritance law, property and taxes question.

Post by Piet » Wed Nov 08, 2017 11:42 am

betelgeuse wrote:
Piet wrote: Not according to finlex.fi
Maybe next time also read more than just one section. The section just above says:
Section 34
The property that a spouse has when concluding marriage shall remain his or hers. He or she shall also own what he or she acquires during the marriage.
https://www.finlex.fi/fi/laki/kaannokse ... 290234.pdf
I did, I just interpreted it differently (with my Napoleonic background :lol: )

Regarding your previous remark, when one the two spouses dies, the marriage legally ends so the marital rights issue comes before inheritance rights issues.
I did not find anywhere that marital rights "come into play" when the marriage ends and not before.. that is apparently the difference in interpretation of the law here by me, due to my not Finnish background. In Germany Netherlands and Belgium (some of the countries where I have lived) it is (was) even more strict, there without contract, everything before and during marriage is from both spouses. There these situations are easy and clear, there any payment from one spouse to another is not considered a gift because both own it already.
I knew the Finnish system was different in that detail, that everything you acquired before marriage will stay yours after. But what you tell me here is that if a spouse is jobless and the other spouse is earning a million a year and pays all holidays and housing and food and cars etc. etc, the jobless spouse needs to pay gift tax over the expenses his or her spouse makes for them... ridiculous ....that could never have been the meaning of this law and therefore my interpretation was different. If my interpretation is wrong, this country is with right a banana republic, whatever the reason behind this law was (generating more tax income for the state). Your interpretation gives the spouse with the highest income / amount of assets, leverage in an argument between spouses where is being threatened with a divorce, that is so wrong! but again ... that is just my opinion :wink:

Sadly I cannot access the link to the webpage finlex anymore, Mozilla suddenly reports an unknown issuer of the security certificate and blocks access.. to be continued later (maybe).
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betelgeuse
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Re: Inheritance law, property and taxes question.

Post by betelgeuse » Wed Nov 08, 2017 12:37 pm

Piet wrote: I knew the Finnish system was different in that detail, that everything you acquired before marriage will stay yours after. But what you tell me here is that if a spouse is jobless and the other spouse is earning a million a year and pays all holidays and housing and food and cars etc. etc, the jobless spouse needs to pay gift tax over the expenses his or her spouse makes for them... ridiculous ....that could never have been the meaning of this law and therefore my interpretation was different. If my interpretation is wrong, this country is with right a banana republic, whatever the reason behind this law was (generating more tax income for the state). Your interpretation gives the spouse with the highest income / amount of assets, leverage in an argument between spouses where is being threatened with a divorce, that is so wrong! but again ... that is just my opinion :wink:
The above is incorrect for the following reasons:

1. There is an exemption for living expenses for gift tax.
2) siitä, mitä joku on käyttänyt toisen kasvatusta tai koulutusta varten tai toisen elatukseksi taikka muutoin antanut toiselle näihin tarkoituksiin sellaisessa muodossa, että lahjansaajalla ei ole mahdollisuutta käyttää lahjoitettua määrää muihin tarkoituksiin; eikä
https://www.finlex.fi/fi/laki/ajantasa/ ... 0378#L3P19

2. There is a duty to support the spouse
46 § (16.4.1987/411)

Kummankin puolison tulee kykynsä mukaan ottaa osaa perheen yhteiseen talouteen ja puolisoiden elatukseen. Puolisoiden elatus käsittää puolisoiden yhteisten sekä kummankin henkilökohtaisten tarpeiden tyydyttämisen.
https://www.finlex.fi/fi/laki/ajantasa/ ... 0234#L4P46

3. When there is a joint account it does not automatically trigger gift tax when one deposits 90 euros and the other 10 euros.

The main point is that one spouse can not transfer things like money, stocks or cars to be solely in the name of the other spouse without triggering the obligation to pay gift tax.


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Piet
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Re: Inheritance law, property and taxes question.

Post by Piet » Wed Nov 08, 2017 2:02 pm

betelgeuse wrote:
The above is incorrect for the following reasons:

1. There is an exemption for living expenses for gift tax.
2) siitä, mitä joku on käyttänyt toisen kasvatusta tai koulutusta varten tai toisen elatukseksi taikka muutoin antanut toiselle näihin tarkoituksiin sellaisessa muodossa, että lahjansaajalla ei ole mahdollisuutta käyttää lahjoitettua määrää muihin tarkoituksiin; eikä
https://www.finlex.fi/fi/laki/ajantasa/ ... 0378#L3P19

2. There is a duty to support the spouse
46 § (16.4.1987/411)

Kummankin puolison tulee kykynsä mukaan ottaa osaa perheen yhteiseen talouteen ja puolisoiden elatukseen. Puolisoiden elatus käsittää puolisoiden yhteisten sekä kummankin henkilökohtaisten tarpeiden tyydyttämisen.
https://www.finlex.fi/fi/laki/ajantasa/ ... 0234#L4P46

3. When there is a joint account it does not automatically trigger gift tax when one deposits 90 euros and the other 10 euros.

The main point is that one spouse can not transfer things like money, stocks or cars to be solely in the name of the other spouse without triggering the obligation to pay gift tax.
Thank you for the explanation, sadly my Finnish is not that well that I understand law text in Finnish :?
Regarding what you mention at point 3, I believe they repaired that loophole in the tax law in the Netherlands, just this year, but only to the extend that you cannot do this just before a divorce (time limit and amount/value limit) to the purpose of obviously evade tax.

Basically what you are saying is that in Finland you should always buy expensive things (cars, bonds, property) together when married (2 signatures on the "kauppakirja") to prevent gift tax in case of the other spouse paying for expensive repairs (car / property) or down payments, dividend etc... weird country...

I have lived here for more than 20 years now, but I keep amazing me about the (Tax) laws here. I thought the Dutch (Netherlands) were the worst from all countries I lived in, but this is by far the worst county regarding tax for the middle and lower income earners I have lived in (although the Dutch are catching up rapidly :evil: ).
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betelgeuse
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Re: Inheritance law, property and taxes question.

Post by betelgeuse » Wed Nov 08, 2017 2:24 pm

Piet wrote: Regarding what you mention at point 3, I believe they repaired that loophole in the tax law in the Netherlands, just this year, but only to the extend that you cannot do this just before a divorce (time limit and amount/value limit) to the purpose of obviously evade tax.
I don't see a loophole in that. They money does become taxed if it's, for example, transferred out to spouses not in 90/10 relation.
Piet wrote: Basically what you are saying is that in Finland you should always buy expensive things (cars, bonds, property) together when married (2 signatures on the "kauppakirja") to prevent gift tax in case of the other spouse paying for expensive repairs (car / property) or down payments, dividend etc... weird country...
Not necessarily. 2 signatures also implies shared payments which is not feasible in case of wealth disparity. Ownership has to be decided on a case by case basis in Finland.


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