How to plan my succession in Luxembourg?

Why plan your succession in Luxembourg?

Throughout your life, you’ve worked hard or invested to build precious capital in the form of a family business, property or assets of any other kind.
You’ve spent time carefully planning for your future. Today, you want to transfer these assets to your heirs, under the best possible conditions.

Planning and transferring your estate in a structured way during your lifetime is an integral part of good asset management. This will also help prevent problems for your loved ones.

What are the advantages of good estate planning?

Planning your succession in Luxembourg ensures that:

• your assets are distributed as you see fit, within the legal limits;
• the maximum possible amount reaches your chosen beneficiaries as quickly as possible;
• the specific needs of each beneficiary are met;
• your business stays within the family;
• your beneficiaries receive the maximum amount available.

Good to know

Planning your succession in Luxembourg can help reduce the tax burden and potential costs, as well as protecting the amount available to your heirs.

What are the inheritance laws in Luxembourg?

In Luxembourg, estate administration begins on the date of death, and is governed by the laws of the deceased’s most recent country of residence, regardless of their nationality.

If you haven’t left a will, the order of inheritance is as follows:

1. Descendants: the child or children;
2. Surviving spouse;
3. Ascendants and privileged collateral relatives: mother and father, brother(s) and sister(s);
4. Ascendants other than the mother and father;
5. Collateral relatives other than the siblings of the deceased and the siblings’ descendants.

Descendants are therefore priority heirs. If the deceased has a living spouse, they are entitled to:

• the smallest legitimate child’s portion, in full ownership, provided that it is not less than a quarter of the estate;
• or the usufruct of the property jointly occupied by the spouses and its furniture, provided that the deceased had full ownership of the property or joint ownership with the surviving spouse.

If there are no children, the spouse will inherit all property in its entirety.

Good to know

If the deceased has no heirs up to the sixth degree, and no spouse, the State inherits the entire estate.

What inheritance taxes in Luxembourg apply?

Inheritance tax in Luxembourg is payable:

• on all of the deceased’s movable and immovable assets located in Luxembourg;
• on all movable assets located abroad and not already subject to inheritance tax;
• on gifts made by the deceased in the year prior to his or her death;
• on life insurance policies for which the deceased is the principal policyholder.

These inheritance taxes in Luxembourg vary in accordance with the degree of kinship and the scale of the assets. Fees will be calculated based on the net share received minus the following debts:

• current debts on the day of death;
• taxes to be paid;
• funeral expenses.

No inheritance tax is payable:

• in a direct line, between ascendants and descendants and vice-versa,inheritance benefits from an exemption to cover the legal share;
• between spouses or partners linked by a declaration of civil partnership dating back at least three years, where the couple have children together.

However, inheritance taxes are levied ⁽¹⁾:

• between spouses or partners that have been linked by a declaration of civil partnership agreed in Luxembourg for at least three years at the time the inheritance process begins who do not have children together: 5%. However, a discount of EUR 38,000 is applied to the net share received by a person who has been the spouse or partner of the deceased for at least three years.
• between brothers and sisters:
  • on what they collect pursuant to laws on inheritance: 6%;
  • on what they receive over and above that: 15%.
• between uncles or aunts and nephews or nieces:
  • on what they collect pursuant to laws on inheritance: 9%;
  • on what they receive over and above that: 15%.
    

Good to know

The base rates are increased according to the size of the estate allocated to the heirs. The increase ⁽²⁾ applies to any amount in excess of EUR 10,000 and is added to the base rate.

What estate transfer solutions are available?

You can transfer your assets in several ways, depending on your personal situation and assets. There are multiple flexible and adaptable solutions, which can be combined depending on your needs.

Will

The simplest solution involves drawing up a will in order to modify, within the legal limits, the legal order in which inheritance is carried out, and to give preference to certain people. In this document, you can precisely define which assets you wish to bequeath, and to whom.

You can revoke your will at any time:

• in the form of a subsequent will;
• through a specific notarised deed.

Good to know

You may disinherit legal heirs, provided they are not forced heirs.
Disinheriting forced heirs is only possible in particularly serious circumstances governed by a strict legal framework.

Gift

Gifts enable you to transfer, during your lifetime, immediately and irrevocably (unless a right of return is stipulated), a portion of your assets to a person of your choosing. A deed of gift must be signed and notarised. No inheritance tax in Luxembourg is payable unless the giver passes away in the year following the transfer of the gift.

Good to know

For moveable assets: cash, furniture, a car or jewellery, for example, you can give a gift by hand. The giver transfers the property or moveable asset to the recipient with no other formalities. In this case, you do not need to involve a notary. There are therefore no gift taxes.

Life insurance

Life insurance policies are very useful estate planning tools. You can choose the beneficiary or beneficiaries for each policy, thereby protecting your loved one from any unexpected events.

BGL BNP Paribas partners with Cardif Lux Vie to offer a range of tax-deductible policies tailored to your estate planning needs.

Non-trading company

A non-trading company enables communal ownership of certain assets and real estate with your heirs. By forming a non-trading company, you can retain your estate for several generations.

Société de patrimoine familial (family wealth management company)

Family wealth management companies allow you to hold and build a portfolio of transferable securities and financial assets.

SPFs are subject to a highly favourable tax regime because they are exempt from corporate income tax and only incur subscription tax equivalent to 0.25% of the value of the capital.

Foundation

Foundations enable you to protect the assets of your estate and pass full ownership of them to the foundation.

How to plan your succession in Luxembourg

The successful transfer of an estate requires careful thought and rigorous planning. A tailored strategy must be defined, in accordance with your personal and professional situation, as well as your assets.

Your personal BGL BNP Paribas advisor will take the time to listen to you and help you identify the most appropriate solutions. As an experienced specialist, they will give your plans their undivided attention and answer any questions you may have. This allows you to focus on the things that really matter, safe in the knowledge that your estate is in good hands.