Inheritance Tax
Taxes levied by the State on the transfer of wealth on death, varying according to the family relationship.
Full definition
Inheritance tax is the tax due to the State on the transfer of wealth following a death. In Luxembourg, this tax is particularly favourable compared with neighbouring countries, in particular in the direct line.
The Luxembourg scale provides for: in the direct line (parents-children), a rate of 0% up to a certain threshold then from 2,5% to 5% according to the brackets. Between spouses or partners, the rates are similar with specific allowances. Between brothers and sisters, the rates range from 6% to 15%. Between non-relatives, the rates can reach 48%.
Several strategies make it possible to reduce inheritance tax: making gifts during one's lifetime to benefit from renewable allowances, using dismemberment of ownership to transfer the bare ownership at a lower cost, taking out life insurance (outside the estate), or selling one's property via a life annuity to convert property wealth into a non-transferable annuity.
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Related terms
Inheritance
Transfer of a deceased person's wealth to their heirs according to legal or testamentary rules.
Gift
Legal act by which a person transfers a property free of charge to another person during their lifetime.
Dismemberment of Ownership
Legal division of ownership between usufruct (right of use and income) and bare ownership (ownership without enjoyment).
Life Annuity
Property sale where payment is made in the form of an annuity paid to the seller until their death, with or without an initial bouquet.
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