Inheritance and Gift in Luxembourg
Wealth transmission in Luxembourg can be done by inheritance (after death) or by gift (during your lifetime). Each option has its tax and practical advantages. The life annuity is an attractive alternative for seniors wishing to monetise their property while avoiding inheritance issues.
Inheritance or Gift: How to Choose?
Inheritance
Automatic transmission after death according to legal rules.
- ✓No steps during your lifetime
- ✓You keep all your rights
- ✕Inheritance tax sometimes high
- ✕Risk of joint ownership between heirs
- ✕Possible family conflicts
Gift
Voluntary transmission during your lifetime, with choice of terms.
- ✓Renewable tax allowances
- ✓You choose who receives what
- ✓Avoids joint ownership in inheritance
- ✕Divestment of the property
- ✕Generally irrevocable
Inheritance Tax in Luxembourg
| Family relationship | Indicative rate | Allowance |
|---|---|---|
| Direct line (children, parents) | 0% to 5% | High |
| Between spouses/partners | 0% to 5% | High |
| Brothers and sisters | 6% to 15% | Moderate |
| Uncles, aunts, nephews, nieces | 9% to 15% | Low |
| Non-relatives / third parties | 15% | None |
Indicative rates. Inheritance tax in Luxembourg varies according to the amount inherited and the personal situation. Consult a notary for your specific case.
The Life Annuity: An Alternative to Classic Transmission
The life annuity offers a radically different approach: instead of passing on your property, you sell it during your lifetime while keeping the right to live in it. This solution offers several advantages for seniors.
Advantages of the Life Annuity
- ✓Immediate capital (bouquet) + lifelong annuity
- ✓Stay in your home (occupied life annuity)
- ✓No inheritance issue for this property
- ✓Avoids joint ownership between heirs
- ✓Guaranteed additional income for life
- ✓No more need to maintain the property (major works)
Points of Caution
- →The property leaves the family estate
- →The heirs do not inherit the property
- →Important and definitive decision
- →Depends on life expectancy
The Life Annuity Is Ideal If...
- • You have no direct heirs or wish to benefit them otherwise
- • You prefer to enjoy your wealth during your lifetime
- • You want to avoid any inheritance conflict over this property
- • You need additional income for your retirement
Comparison of Transmission Options
Classic inheritance
Advantages
- ✓Automatic
- ✓No steps during your lifetime
Disadvantages
- ✕High duties outside the direct line
- ✕Possible joint ownership
- ✕Family conflicts
Lifetime gift
Advantages
- ✓Tax allowances
- ✓You choose who receives what
- ✓Avoids joint ownership
Disadvantages
- ✕Divestment of the property
- ✕Irrevocable
- ✕No more rental income
Gift with reserved usufruct
Advantages
- ✓Allowance on bare ownership
- ✓Keep the use of the property
- ✓Optimised transmission
Disadvantages
- ✕Property passed to the children
- ✕No immediate capital
- ✕Legal complexity
Life annuity
Advantages
- ✓Capital + lifelong annuity
- ✓Stay in your home
- ✓No inheritance of the property
Disadvantages
- ✕The property leaves the family estate
- ✕Heirs excluded
- ✕Duration uncertainty
Frequently Asked Questions
Inheritance or gift: what is the difference?
A gift is a transmission during your lifetime: you decide the timing, the beneficiary and the conditions. Inheritance occurs after your death according to legal rules. A gift often allows tax optimisation thanks to allowances.
How can inheritance tax be reduced?
Several strategies: giving during your lifetime (allowances every 15 years), using property dismemberment (giving the bare ownership while keeping the usufruct), taking out life insurance, or selling via a life annuity to transform the wealth.
Does the life annuity avoid inheritance?
For the property sold via life annuity, yes. The buyer becomes the owner, so this property is no longer part of your estate. You transform property wealth (subject to inheritance) into capital and an annuity (more easily transmissible).
What is inheritance joint ownership?
After a death, if several heirs inherit a property, they become joint owners together. No one can sell alone, which often creates deadlocks and conflicts. A lifetime gift avoids this situation.
Which Solution for Your Wealth?
Our advisers help you choose between gift, prepared inheritance or life annuity according to your family and wealth situation.