Why Estate Inventory Must Include Surviving Spouse’s Assets and Debts

Family and Inheritance Law

If the decedent was married at the time of death, an estate inventory deed must include the surviving spouse’s assets and debts in addition to the decedent’s assets and debts. Also, an ex-spouses assets and debts must be included in the deed if division of property is not carried out after the dissolution of the marriage by the time of death. Both surviving spouse and ex-spouse’s assets and debts are to be documented for taxation purposes carried out by the Tax Administration. We could call this virtual division of property as no assets are yet transferred between the parties. The Tax Administration does a calculation of the assets and debts and divides it as per marital shares but does not decree how the real division of property should be done. Virtual division of property is purely for taxation purposes and it exists to find out how the share of the assets is to be divided between the spouses. The real division may be carried out as the parties wish. Virtual division in the estate inventory deed does not replace an actual division deed but it can be used as a template when real division is carried out.

The baseline for the virtual division of property carried out by the Tax Administration is equal division as the Marriage Act provides. Should the spouses have a prenuptial or postnuptial agreement, virtual division is carried out as decreed in the agreement. If there is a post- or prenuptial agreement and some assets are decreed not to be included in the scope of the agreement these assets must be specified clearly in the estate inventory deed. Similarly, if all the property is agreed to be excluded from the matrimonial right, it must be stated in the deed. Aside from this, the estate inventory deed must also include information whether the surviving spouse will not give property adjustment to the decedent’s estate or refrains from claiming adjustment to themselves from the estate. It is important to note that if division between the decedent and an ex-spouse has not been carried out the ex-spouse is not entitled to refrain from giving adjustment to the estate in contrast to the surviving spouse’s right. The ex-spouse may notify the estate that they do not claim adjustment from the estate, nevertheless. The notification must be documented in the inventory deed.

The right to refrain from giving adjustment to the estate does not pass the surviving spouse’s beneficiaries if the surviving spouse has not invoked the right during their lifetime. This is why it is beneficial to carry out the real division of property when the surviving spouse is alive. However, if the surviving spouse has invoked the right to adjustment but passes away before the real division, the first spouse’s beneficiaries inherit the adjustment as a new, separate inheritance from the first spouse and are taxed accordingly. Respectively, the surviving spouse’s beneficiaries are taxed of the inheritance constituting of the virtual marital share of the decedent’s estate property as well as the separate non-matrimonial property the surviving spouse owned.

Having a list of ex-spouse or surviving spouse’s assets and debts in the inventory deed is meant to provide a disclosure on which assets belong to the decedent’s beneficiaries and which to the surviving or ex-spouse. In accordance with this information the Tax Administration carries out a virtual division of property as a part of calculating inheritance tax. Assets that belong to the surviving or ex-spouse are not taxed whereas the decedent’s assets are objects of inheritance tax, which is paid by the beneficiaries.