Inheritance and Estates

When an individual dies, an Estate is established which takes over the financial obligations and rights of the deceased.

The District Commissioner has custody of the Estate from the time of death until the Estate is settled. During this period he alone has the authority to make arrangements with the assets of the Estate. The heirs do not have authority to make arrangements with the Estate's assets, such as the sale of real estate.

When the death has been notified to the District Commissioner, he will issue an authorization for the heirs to pay the cost of the funeral from the bank accounts of the Estate and to gather information on the Estate's finances.

The funeral may not take place before the priest or other person in charge of the funeral service receives a certificate stating that the death has been notified to the District Commissioner. A family member presents the certificate to the person who takes care of the funeral.

Estate settlement

Heirs are required to make a decision regarding the settlement of Estate within four months of the death, and according to the following options:

If the heirs do not decide on the settlement of an Estate within four months of the death, the District Commissioner shall send them a letter challenging them to take action. If the heirs fail to comply with the challenge, the District Commissioner can close the Estate if it is without assets or demand on division of the Estate before court if the estate has properties.

Heirs

Inheritance is divided between heirs according to laws of succession and/or according to a will.

Legal heirs may be the spouse, children or descendants of the deceased, parents of the deceased, siblings or their descendants, grandparents or children of deceased grandparents. The same applies to adoptive parents and adopted children.

Of the legal heirs, the spouse and children of the deceased or their descendants are forced heirs at law under the Inheritance Act. The same applies to adopted children.

Testamentary heirs are individuals or legal entities who take inheritance in accordance with a will.

People in registered cohabitation are not heirs at law. Cohabiting partners may inherit each other by will. If the deceased has children or other descendants exist, only 1/3 of the assets may be disposed of by will.

If the deceased has no heirs alive and has not made a will, his assets will revert to the State Treasury.

Refusal of inheritance

An heir can refuse a inheritance in part or in full. A written declaration of rejection of an inheritance signed by an heir must be submitted in the presence of two witnesses. An heir may decide that the rejection of an inheritance also applies to his descendants who, if he were deceased, would take his place in his inheritance.

Will – Testamentary Disposition

A written, formal legal document for the disposition of assets after death or by inheritance paid in advance.

In the Inheritance Act, various conditions are laid down regarding the eligibility for a will, the form of a will and certification of the signature. District Commissioners do not prepare wills and it is recommended that the person intending to make a will be assisted by a lawyer in the preparation of the will. The same applies if a person is to withdraw a will he has made or to alter individual provisions of his will. A will may be notarized by a District Commissioner who will then keep a copy of the will.

If an individual has neither a spouse nor descendants, he may dispose of part or all of his property by will. If a spouse or descendants are present, only 1/3 of the assets may be disposed of by will.

Spouses may decide in their will that the surviving spouse is authorised to postpone the division of the Estate for as long as the spouse so requests. It may be decided in a will that inheritance, including inheritance to a forced heir, shall be separate property in the marriage of an heir.

Advance inheritance

An individual (testator) who wishes to dispose of part or all of his property before his or her death to his or her heirs may do so by means of advance inheritance.

An inheritance tax report must be completed prior to payment of advance inheritance and a signed inheritance tax report is to be turned in to the District Commissioner where the testator is domiciled. The report must be signed by both the testator and the heirs.

If an heir is not legally competent, his guardian must attain a permission from the supervisor of guardians (District Commissioner).

After the payment of inheritance tax has been made, it is possible to obtain the District Commissioner's endorsement of the inheritance declaration of division required to register assets with the heir. A inheritance declaration of division in respect of a property shall be submitted to registration to the District Commissioner where the property is located.

Waiver of inheritance

An heir can waive his right to inherit to the person to whom he/she is to receive inheritance from, in part or in full. A declaration of waiver of inheritance must be signed by the testator and the person who is the heir. If not otherwise stated, a waiver of inheritance shall be binding upon the descendants of the person who waives their inheritance, as he himself or herself.

Inheritance tax report and inheritance tax

When advance inheritance is handed over or when an Estate is closed, an inheritance tax report must be completed and turned in to the District Commissioner where the Estate closure takes place.

Inheritance tax report is a form for calculating the tax base of inheritance tax and the inheritance tax on heirs. The form automatically calculates all amounts when information on the date of death, assets, liabilities (debts) and inheritance ratios have been filled in.

On a inheritance tax report for advance inheritance only the assets being handed over shall be filled in by way of a advance inheritance.

A spouse in a marriage pays no inheritance tax. The same applies to a cohabiting partner who inherits the deceased in accordance with a will. The status of cohabiting spouses must be specified in the will.

Inheritance tax is not collected on pension savings going to heirs under the Act on mandatory Insurance of Pension Rights and on activities of Pension Funds, provided that the withholding tax is paid from the pension savings upon withdrawal.

Inheritance tax need not be paid from gifts and contributions to associations, funds and institutions that do not operate a business and have the sole objective to distribute their profits for the public good according to their articles of association and are registered in a special Register of Public Interests with the Directorate of internal revenue (Skatturinn).

Other heirs pay inheritance tax on the amount that exceeds the tax-free threshold. Heirs are granted tax freedom in proportion to their inheritance.

Liability for the Debts of the Deceased

Note that by obtaining permission for heirs to divide the Estate, heirs will assume a solidary liability, one for all and all for one, of any obligations which may be owed by the Estate and any charges arising from the division or succession.If an Estate is subject to division of the Estate before court, heirs are not required to take responsibility for the obligations of the estate.

A surviving spouse that has obtained a permission for spouse to postpone the division of the Estate shall be liable for the financial undertakings of the deceased spouse as if they were his or her own.