Upon the death of a person residing in Luxembourg, an estate is opened on all his assets and property which will be transmitted to his/her heirs, in a certain order and with different inheritance taxes depending on the status of the heir and the property transmitted.
Like its European counterparts (excluding Denmark, Ireland and the United Kingdom), Luxembourg signed an agreement in 2015 stipulating that the deceased may choose in advance the succession law applicable to his succession in the event of death: country of residence or country of nationality. In the absence of any expressed will, the law of succession of the country of residence shall apply.
Who inherits in Luxembourg?
When the deceased has established his/her last residence or the seat of his assets in Luxembourg, the succession applies as follows.
Legatees may or may not be resident in Luxembourg. The heirs are designated either by testament (if there is one) according to the reserved share, or in the order of succession established by Luxembourg law:
- descendants: children (or their descendants by representation in the event of the prior death of one of them) inherit equally. Regardless of their status (legitimate, adulterous, adopted or natural), they exclude all other heirs, except the surviving spouse.
- the surviving spouse has a privileged status. In the absence of children, he/she inherits all the property. However, he or she may be removed from the succession by testament. In the event of the presence of children, and unless otherwise specified “quotité disponible spéciale entre époux”, the spouse may opt to inherit all the usufruct on the marital home and the furniture (if he/she was jointly the owner). In this case, the children benefit from bare ownership of the property and full ownership of the rest. The spouse may also opt for a share equivalent to that of the children, i.e. at least 1/4 of the estate.
- In the absence of children and a surviving spouse, parents and collateral are heirs. They inherit the property, up to 1/4 for each of the parents and the rest is shared between the brothers and sisters or their representatives. In the absence of collateral, parents are the only heirs.
- In the fourth order, the ascendants inherit half of the maternal branch and half of the paternal branch. It is then the nearest ascendant who is the only heir. In the absence of one of the branches, the whole fortune is transferred to the other branch.
- In the fifth order, it is the closest collateral of each branch, maternal and paternal, that inherits half of each branch. The succession goes back to the 4th degree or generation. In the absence of one of the branches, the whole thing is transferred to the other branch.
- In the sixth and final order, the State will inherit the deceased’s fortune.
The designated heirs may accept the succession as it stands or subject to inventory, contest or waive it.
What are the death duties?
Deceased person with last residence in Luxembourg
Transfer taxes are calculated on the net value of the estate assets, i. e. movable property owned in Luxembourg or abroad, buildings located in Luxembourg. The inheritance tax on real estate located abroad depends on the inheritance law of the country in question. Movable property located abroad may, under certain conditions, be subject to inheritance tax in the country where it is held, depending on the nationality of the deceased.
The liability (debt) will be deducted from the tax base.
Inheritance tax is payable to the Luxembourg State, whether or not the heirs are resident in Luxembourg.
Inheritance taxes on property acquired abroad are the responsibility of the country’s tax authorities and inheritance taxes.
In the case of a direct descending or ascending line succession, the succession will be exempt within the limit of the legal share. In the context of a will, for example, the extra-legal share will be taxed at 2.5% or 5% depending on the case. The succession between spouses is also not taxable if the spouses or partners have common children. Otherwise, the estate will be taxed at 5%.
Deceased non-resident in Luxembourg
In this case, inheritance tax will be paid to the Luxembourg State on buildings located in Luxembourg, whether or not the heirs are Luxembourg residents.
In any case, be sure to find out about your personal situation in the event of death with regard to your country of residence, your country of nationality, the residence of your potential heirs and the location of the assets to be transferred.