An Introduction to Advance Inheritance in Norway
Advance inheritance refers to a situation where parents transfer assets or values to their children before their own passing, with the intention that this amount will later be deducted from the child’s future inheritance. The distinction between an ordinary gift and advance inheritance is that the latter is to be set off against the inheritance at a later stage. This ensures that all children are treated equally in the distribution of the estate.
In this article, we provide a brief overview of the most important rules one should be aware of when distributing advance inheritance.
How much can be given as advance inheritance?
There is no upper limit to the amount that may be given as advance inheritance, but it is important to be aware of the following:
- Deduction: The value given as advance inheritance must be deducted from the recipient’s share of the inheritance during the estate settlement. If the advance inheritance exceeds the recipient’s share, the recipient is not obliged to pay the excess back to the estate unless otherwise agreed.
- Time of valuation: As a general rule, the value at the time the advance was given is used, unless otherwise agreed.
- Adjustment: If you wish the amount to be adjusted for inflation (for example, according to the consumer price index), this must be specified.
How is advance inheritance given?
There are no formal requirements for giving advance inheritance, but the donor must inform the recipient that the value is to be deducted from the recipient’s share of the inheritance during the estate settlement. To avoid misunderstandings and conflicts, it is recommended to draw up a deed of gift for advance inheritance. This should include:
- The identity of the person giving the advance and the recipient
- The amount or value of what is given
- That it is advance inheritance, to be deducted from the recipient’s share of the inheritance
- Any conditions, such as adjustment for inflation
In addition, we recommend informing all heirs about the advance inheritance to ensure transparency and predictability.
Example:
A father wishes to assist his daughter with the purchase of a home and gives her NOK 500,000 as advance inheritance. He writes a deed of gift stating that the amount is to be deducted from the her share of the inheritance, and informs his son of this. When the father later passes away, the daughter receives NOK 500,000 less than her brother in the estate settlement.
Calculation of advance inheritance
In the example above, let us assume the father owns NOK 6,000,000 when he gives NOK 500,000 to his daughter. When the father dies, he owns NOK 3,500,000. For the calculation of the deduction for the daughter, the advance is added to the value of the estate, resulting in NOK 4,000,000. Each child is then entitled to NOK 2,000,000 before NOK 500,000 is deducted from the daughter’s share. Upon settlement, each child has received an equal amount from their father.
- Amount given as advance inheritance: NOK 500,000
- Value of the estate at the time of the father’s death: NOK 3,500,000
- Son receives: NOK 2,000,000
- Daughter receives: NOK 1,500,000
Advance inheritance from an undivided estate
If a surviving spouse is in possession of an undivided estate, separate rules apply:
- Advance inheritance cannot be given to one direct heir without the consent of the other heirs, or without providing them with an equivalent settlement.
- There are also restrictions on giving large gifts from an undivided estate.
Is advance inheritance subject to tax?
There is no gift or inheritance tax in Norway. For control purposes, gifts and inheritance exceeding NOK 100,000 must be reported in the tax return.
Do you need assistance?
Distinguishing whether a transfer should be considered a gift or an advance on inheritance can be challenging, yet it is essential to ensure clarity in the estate settlement process and to prevent conflicts among heirs.
Our lawyers have extensive experience advising individuals and families at all stages of transferring assets as advances on inheritance. We assist you and your family in finding solutions tailored to your specific circumstances. Whether you have already given advance inheritance or are considering doing so, we can assist with everything from drafting deeds of gift to advice on further estate planning.
Read more: Brækhus’ expertise within family and inheritance law
