A will, which institutes the right of possession on property, is grouped with other similar testaments instituting access and usage rights to a certain property. The devisee of the testament is granted rights to manage property under the testament as well as entitled to receive any revenue or interest from the property.
For example, if the devisee is granted access and usage rights to a forested land, they may cut down timber amounting to the annual growth of the trees.
The inheritor who benefits from a right of possession testament can also avoid paying inheritance tax, since inheritance tax is paid by the owner of the property. The owners, however, may deduct the value of the right of possession. Thus, granting a right of possession reduces the tax the owners must pay. Property under the right of possession may not be sold, gifted or destroyed.
The Difference Between Full and Limited Ownership Will
A will granting full ownership is a will, which grants unlimited right to sell or gift property. The inheritor gaining full ownership is entitled to redistribute property via a will of their own.
A will granting limited ownership on the other hand forbids the devisee and inheritor to redistribute the property by bequeathing, since a will granting limited ownership includes a clause, which defines the following devisee and inheritor when the first inheritor’s right has ceased (so called secondary clause). Limited ownership allows sale and similar distribution of property.
When to Give Right of Possession Instead of Ownership?
A will granting ownership is well suited to inheritance tax planning. If the inheritor receives less than 20,000 euros in inheritance they avoid inheritance tax due to taxation being applied only to an inheritance of more than 20,000 euros. In other words, by bequeathing property of less than 20,000 euros to each other members of a family can avoid paying taxes.
A will instituting the right of possession is well suited to minimize the tax. For example a couple can utilize a testament granting the right of possession to ensure the subsistence of the widow after their spouse dies.
The widow need not pay inheritance tax on their right of possession. This way it possible to gain tax benefits, especially in situations when there are multiple probates over a short period of time.
The Devisee Must Acknowledge the Wishes of the Testator!
As the devisee receives property under a testament they must acknowledge the wishes of the testator or risk tort/delict liability.
Among other things, the principle of trust makes the trustee who receives the right of possession obliged to ensure that the property does not diminish in harm of its owner.
As per net principle the person having the right of possession must pay any expenses arising from the property by any revenue received from it.
The holder of the right of possession is liable to compensate any damage caused to the owner of the property unless the damage was caused in petty negligence. On the other hand, the owner must acknowledge the interests of the holder of the right of possession by asking for their consent when the property is being sold.
The devisee thus may not infringe the rights of another rightsholder, but they must honor the testator’s will.
Refusing Bequest of Right of Possession is Always for the Benefit of the Owner
The devisee may refuse the bequest only in benefit of the owner. Thus, the right of possession may not be transferred to anyone else but the owner of the property.
An owner, who benefits from right of possession on property before the end of the duration of the possession of a third person as set in the clauses of the will, must pay gift tax since they received something with a monetary value from the person refusing the bequest. I.e. If the devisee would be gaining the right of possession from the decedent as per a will, but they refuse to accept such an inheritance and thus the right of possession transfers to the actual owner of the property, the owner is obliged to pay the tax.
English translation by Lasse Jelekäinen