There is no statutory deadline for inheritance division, unlike the probate. Inheritance can be divided as soon as the probate is completed, but estates can also remain undivided for decades. Both situations are common. So, what would be wise?
One reason estates have often remained undivided is due to taxation. The deceased’s assets, no longer subject to wealth tax, could continue under the estate structure, providing an additional tax subject. While this incentive has disappeared, there are still tax benefits to leaving assets in the estate, such as using the lower capital gains tax rate for amounts under €30,000. If there are unused capital losses in the estate, they should be deducted before division. Also, splitting assets between the deceased and spouse or two estates can result in significant tax advantages. However, tax benefits alone are rarely enough to justify keeping the estate undivided for long.
As time passes, even a simple division of an estate can become complicated. The values assigned to the assets in the estate inventory are used not only for inheritance tax but also as the basis for capital gains taxation. More importantly, these values give heirs information about the size of their inheritance. Over time, these values can change significantly. It is clear that the party interested in acquiring an asset in the inheritance division may present different arguments regarding the value compared to the one willing to relinquish the asset. These differing views can be substantial and may spark disputes.
Heirs have managed the estate's assets after the deceased's death, both financially and with their own efforts. Were the hours and money spent evenly? How are these contributions reflected in the final division? Do such arguments hold any weight at all? It is clear that the diversity of perspectives can lock the communication between the heirs. Even worse than the asymmetric labor and financial contributions of heirs is the situation where the estate has not been adequately maintained. Common life experience shows that jointly owned property is rarely cared for with the same diligence as property owned solely by one individual.
A typical situation is when the estate's real estate properties are left undivided, but securities and apartments have been sold and all the proceeds distributed. Unfortunately, from the perspective of the final division, this is the most difficult situation. Money can no longer balance things out when the childhood home or summer cottage is to be bought out from the estate. External financing is needed. To make matters worse, any compensation paid using funds from outside the estate triggers both transfer taxes and the capital gains tax, which is considered harsh.
It is not uncommon for heirs to pass away before they have divided the inheritance they themselves received. Especially when dealing with real estate, it is often the case that nested and parallel estates are co-owners of the same asset. Unless a clarification of title has been requested, all the probate documents, along with the family documentation, from the deceased parties are needed for the transaction. Having five unresolved estates as owners is not unusual. The mere preparation of such a transaction is costly legal work.
As heirs age, the loss of legal capacity can delay inheritance division or asset sales, requiring the involvement of a guardian. Though largely formal, this can add months to the process. For example, a potential buyer may withdraw their offer due to extra bureaucratic steps. Timely division between the deceased's estate and the spouse helps minimize these challenges.
Patience is key, but unnecessary delays can multiply challenges in inheritance division. Even if you're late, address issues early to avoid unanticipated problems. With my extensive experience, I can help get the wheels of inheritance division moving.
