Inheritance tax

When someone dies and leaves behind money or possessions, it is possible that inheritance tax will need to be paid. The actual inheritance that a descendant receives, is their inheritance share minus the taxes. In this article we will discuss what we mean with the term inheritance, and we will make clear when inheritance tax will need to be deducted from the inheritance share. 

Inheritance

An Inheritance consists of all the possessions and debts of the deceased (also known as the testator). The estate can consist of money, a house, household contents, securities or a company. However, debts are also part of the estate. When an estate consists of both capital and debts, the creditors can claim (part of) the inheritance. They will get priority over the descendants in regard to money or possessions. The testator can make it known how they want their inheritance to be divided by means of a will. When there is no will in place, the law of divide* applies for the descendants. 

Exemption

Up to a certain amount, you can receive an inheritance without having to pay taxes. This is the exempt inheritance amount. You owe inheritance tax when your inheritance is higher than the exemption that applies to you. The exemption and the rate are dependent on your relationship with the deceased and the amount of the inheritance. The table below shows what amounts are exempt as of 2020: 

Amount inheritance tax

When you receive an inheritance that is higher than the amount mentioned above, you will need to pay taxed over the inheritance amount that exceeds the exempt amount. A partner or child will pay 10 to 20% inheritance tax over that amount, and a brother or sister 30 to 40%. The Tax Authorities have developed a tool with which you can see how much inheritance tax you will (roughly) need to pay, based on a few questions. For more information about the amount you can expect to pay, you can click here*. Pay attention: the tool gives you an indication. The definitive amount is included with your tax assessment. 

Inheritance or donation?

Inheritance tax is different than donation tax. When you want more information about donation tax, click here. The exemptions in the inheritance tax are higher than the exemptions in the donation tax. Because these exemptions are higher, estate planning is also an option. To save on inheritance tax, you can donate money while you are still alive. You can do this in a donation plan. With succession in the family business, other exemptions apply. 

What is a donation plan? 

Every year, you can donate money tax-free. A donation plan is a model in which you can calculate how much you can donate each year, tax-free, and how much inheritance tax you can save this way. The donation plan contains a step-by-step plan in which is becomes clear how much you can donate while you are still alive. In the plan, you can see how much you can donate and when. 

Inheritance from abroad

When someone lived abroad on the moment they passed away, there is a chance that you do not need to pay taxes over the inheritance you receive. How that works, you can read in this article.

Would you like to know more?

Read more about inheritance and taxes on the Tax Authorities’ website. Would you like to get more information about creating a donation plan? Click here. This article contains more information about succession in a company. 

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