Managing inheritance tax payments: Suggestions for financial relief
Settling an inheritance's tax bill can be as complicated as the estate itself, but fret not! Here's a lowdown on several ways to handle your tax dilemma.
Nice image of a pile of bills and a worried-looking heir By Fabien Bordu Updated on
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Inheritance taxes are due within six months from the date of filing the inheritance declaration with the tax center. Each heir contributes according to their share of the estate, but all are jointly and severally liable for the payment, except those with exemptions (surviving spouse, civil partner, and, under certain circumstances, siblings). If there are financial hardships, heirs can seek a payment plan or auction valuable assets to cover the bill. This last option is known as "cession" and requires that the taxes owed to the tax administration exceed 10,000 euros.
Solidarity: One Heir May Pay the Whole Bill
The law states that heirs are jointly and severally responsible for the inheritance taxes, along with any penalties for late declaration, undervaluation, or omissions. In practical terms, this means that the tax administration can demand payment from a single, presumably wealthy, heir. This wealthier heir can then seek reimbursement from the others. This scheme does not apply to the surviving spouse or civil partner, who are exempt from any and all taxes.
Spreading the Cost with Installments
Financial difficulties can lead to challenges in making the full inheritance tax payment. One possible solution is requesting an installment plan upon filing the inheritance declaration. The tax office will only approve this request if adequate guarantees are provided, including mortgages, pledges, or personal guarantees approved by the comptroller general of public accounts. Once accepted, the heir is obliged to make three regular payments over a year, with interest payable from the second payment (2025 rate: 2.3%). The period can be extended to three years with at least 50% non-liquid assets, allowing for seven payments with increased interest.
Deferred Payment for Extra Time
Heirs who receive property in bare ownership can defer their duties' payment. The same facility is available to heirs following an unequal division of the deceased's estate, or to those inheriting a dwelling where the surviving spouse enjoys the right of lifetime occupation since February 1, 2024.[2] In these cases, payment is deferred from the sale of the property, the death of the surviving spouse, or the end of the payment period, requiring additional guarantees and interest payments (2025 rate: 2.3%).
Business Transmission: Defer and Spread
For businesses, the payment of inheritance tax can be both deferred for five years and spread out over ten years in certain circumstances. The payment becomes due when it is spread out, paid in six-monthly installments with the remainder due at once in case of large sales.[3]
When in Doubt, Offer Art!
In difficult cases, when the heirs lack the necessary funds, they can offer alternative payment methods such as artworks, jewelry, collectibles, properties, or even land. This "cession" can only be applied if the tax owed is at least 10,000 euros.[1] The tax office will propose an acceptable market value for the goods, and disagreements must be mediated within thirty days. Failing to reach an agreement will result in late interest charges.
Diving Deeper:
Learn more about inheritance tax calculations and allowances [Inheritance Tax: Calculation, Schedule, Allowances...]
Guarantees:
Discover the various guarantees required by the tax authorities to grant a payment plan
Strategies and Deadlines:
Find out about the 5 most common strategies for managing inheritance taxes and their deadlines
[1] [Art in Exchange for Taxes]
[2] [Heirs of a Dwelling]
[3] [Business Transmission]
[4] [Lifetime Gifts and Allowances]
[5] [Structured Settlements]
- The complexities of settling an inheritance's tax bill can extend to managing personal-finance, especially when dealing with valuable assets and multiple heirs.
- If heirs face financial difficulties, they can seek a payment plan or consider offering personal assets like art, jewelry, or properties to the tax administration, known as "cession," to cover the tax bill, provided the value of the tax owed exceeds 10,000 euros.
