Family Wealth Planning - Wills, Prenuptial Agreements, etc.

Personal finances
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A thread about family wealth planning and tips. What should be considered if wealth has accumulated/is accumulating enough to leave something for future generations? As an inheritance, advance inheritance, or gift? What about marriage, a prenuptial agreement, or a potential divorce? Is a lawyer’s/consultant’s help always needed for documents, or can an ordinary person manage with drafts found online and common sense?

Inheritance tax has been much discussed recently, but family wealth planning is much more than that. There are certainly wealthier people here who have considered this matter and prepared documents. According to what’s read online, the three “cornerstones” for anyone wealthier are a will, a prenuptial agreement (if married), and an enduring power of attorney. Insurance, investment companies, etc., are then somewhat more complex arrangements.

A couple of excerpts from the media on the topic:

Hesari’s tips for inheritance planning (for subscribers)
Rahapodi episode on the topic

Related threads on the forum:
Ylisukupolvinen varallisuus ja perheen oma sijoitusyhtiö - Raha & säästäminen - Inderes forum
Lapselle säästäminen - Raha & säästäminen - Inderes forum
Pohdintaa sijoittajan avioehdosta - Raha & säästäminen - Inderes forum

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Now to a practical case. Hopefully, my own departure isn’t too close yet, but a will would still be good to work on. At least the division of inheritance into parts and the right to partial renunciation sound like things that should be included.

Any experiences with wills that utilize these? Links to templates or screenshots of clauses?

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At least those threads touch upon the topic

For me, when it comes to wealth transfer, the first things that come to mind are tax-free donations and covering living expenses.

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When transferring suitable assets, it’s worth at least considering reserving the right of use and administration. Of course, everyone should have a prenuptial agreement, but in addition, for example, when gifting to a child, it’s worth seriously considering in the gift deed to exclude the child’s current and/or future spouses from the gift itself and any property acquired in its place. These are fundamental matters for which it is indeed worth seriously considering the use of a lawyer, as there are usually quite costly pitfalls due to formalities for negligible savings.

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Life insurance for inheritance taxes is a good idea.

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Inheritance or Gift – My Own Thoughts from a Taxation Perspective. I am certainly not a professional in the field and take no responsibility for these writings :grinning: When delving into these matters for my own situation, I can, of course, share them with others as well.

There is currently a lot of political debate ongoing about inheritance taxation, but let’s leave that outside this thread and proceed according to the current situation for now. It should be noted, however, that reforming inheritance tax might also lead to changes in gift taxation.

Both inheritance tax and gift tax are progressive taxes, meaning the amount of tax increases as the gifted/inherited sum grows. Both taxes also have two tax classes: 1 closest relatives (lower taxation), 2 others (higher taxation). The tax authority’s website provides good material, instructions, calculators, tables, etc. I will put the links at the end. In this review, we will focus on class 1, i.e., close relatives.

Inheritance Tax Table
kuva

Gift Tax Table
kuva

Key takeaways:

  • Inheritance tax is tax-exempt up to 19,999 euros, gift tax only up to 4,999 €
  • The progressivity of inheritance tax is stricter than that of gift tax (the tax increases more steeply as sums grow)
  • You can only die and inherit once, but you can give gifts throughout your life. In gift taxation, gifts given within 3 years are aggregated, meaning you can aim for tax benefits by distributing smaller sums every 3 years. The most well-known of these is the tax-exempt 4,999 € donation every 3 years mentioned above by @SentinVenyttaja1, but nothing prevents distributing a larger sum (in which case tax is naturally paid, but at a lower percentage than by distributing everything at once).
  • The recipient pays the tax, meaning you can distribute more tax-efficiently the more recipients there are.
  • A given gift is counted as part of the inheritance if death occurs within 3 years of giving the gift.
  • There are deductions for inheritance tax: at least for a minor recipient and a spouse deduction, and reliefs: e.g., family companies. To my understanding, there are no deductions/reliefs for gift tax.

Let’s forget about deductions and reliefs and put the taxes side by side in a table. The crossover point is at approximately 250,000 €, if the gift is given all at once.

Amount Inheritance Tax Gift Tax
4,999 € 0 € 0 €
10,000 € 0 € 500 €
19,999 € 0 € 1,292 €
50,000 € 2,500 € 4,200 €
100,000 € 8,700 € 10,100 €
200,000 € 21,700 € 22,100 €
250,000 € 29,700 € 29,600 €
500,000 € 69,700 € 67,100 €

If there is a fair amount of expected lifespan left and one knows that not all assets will be used personally, then from a tax perspective, gifts should definitely be utilized. Depending on the wealth and the number of heirs, it is definitely worth considering giving larger sums than the tax-exempt 4,999 € every 3 years. Generally, heirs also appreciate assets more the younger they receive them.

The real world is, of course, not as simple as the Excel world, as there are various deductions, one can play with partial renunciations through a will, and retain the right of usufruct and ownership, marriage/marital conditions affect when inheriting from spouses, etc.

Links: https://www.vero.fi/henkiloasiakkaat/omaisuus/lahja/
https://www.vero.fi/henkiloasiakkaat/omaisuus/perinto/

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There are dangers in such threads. Having dealt with inheritance matters some time ago, I would never have reached the same conclusion as the bank’s lawyer if I hadn’t used their services. For example, the partition of marital assets can be used very liberally in an inheritance situation. Of course, the service wasn’t entirely free.

The danger arises from the fact that situations are so different. If, for example, the estate or its heir has undivided estates themselves, families are contentious, there are many siblings, or the property to be divided is remarkably large or consists of many different assets, I would certainly not look for advice on any discussion forums, but would go straight to a lawyer specializing in inheritance matters. A few thousand for things to go right the first time is not a very large sum of money.

When people have tried to save money on this, they have often ended up paying much more in the end.

Of course, there is a demand for informing about alternatives and carefully weighing them at a general level. However, I believe that the basics of gift tax matters are quite well known, especially in investor forums. Most questions here seem to be about cost-effectively transferring assets to descendants already during one’s lifetime. For this, there are already the threads mentioned above.

My own opinion, even from an educational perspective, leans towards the view that everyone is the master of their own destiny and should use their own money during their lifetime. This does not exclude financing the offspring’s studies, assisting with housing, providing investment grants for mopeds, cars, etc., or walking hand in hand through life situations. I have seen more than one young heir and heiress suddenly spend the money they received completely without consideration, down to the last penny, exactly where the testator certainly did not wish it to be put. At the same time, the heir’s health has deteriorated, and future dreams have suddenly moved much further away.

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From my perspective, the purpose of this thread is certainly not to encourage people not to use expert help. On the contrary, I personally strongly recommend it, especially if the situation is even slightly more complex or if one is not familiar with drafting documents. On the other hand, “Talk to a lawyer” is a very loose piece of advice. There are lawyers/consultants of many kinds, and I personally like to approach the matter by trying to find out things myself even before a consultation, which allows me to ask questions/present views, or at worst, realize that this is not the right person to handle my case. If I recall correctly, for example, in that ‘rahapodi’ (money podcast) episode (I listened to it a long time ago), one of them mentioned having received really poor service from a lawyer. In one estate where I was a co-owner, the local bank’s lawyer was quite lost even with basic matters. Of course, most of those who do that for a living are certainly tough professionals.

The worst and probably most common solution is to do nothing, the matter explodes after death, and then you pay the most. That’s why I would see the discussion as welcome. I absolutely agree, of course, that advice should not be taken directly from an online forum for one’s own use, but I believe that the readers of this forum understand this themselves. However, ideas can emerge.

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In my opinion, the discussion about inheritance and gifts is perhaps too much driven by taxation. Taxation is important to consider in solutions, but one should not make decisions that are difficult or unpleasant later. For example, instead of a right of occupancy, it might be wiser to bequeath ownership of the apartment to the surviving spouse, and other solutions that are not as tax-efficient but which save trouble and problems later (a right of occupancy lasting decades can lead to all sorts of issues).

Probably the smartest thing to do is to list things roughly as one wants them to go, and then with a lawyer, tailor the documents so that an optimal solution is found, where taxes are optimized to achieve the desired outcome.

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Question regarding wills and the distribution of assets:

As I reach the threshold of middle age, I have become aware of my own mortality, and matters concerning my will have started to occupy my mind. My situation is a marriage without a prenuptial agreement, with three children together (still minors, hopefully adults by the time I pass). All the assets we have accumulated during the marriage are shared, and I have saved and invested specifically with retirement in mind. Our financial assets are several times larger than our remaining loans. Fixed assets include a detached house and a small cabin. I have done most of the saving in my own name on a book-entry account (AOT) and a few private equity funds. However, a while ago I realized the potential problems my death would cause my spouse, as a large part of our liquid assets is in my name. We have now started saving all “new” investment money into my spouse’s brokerage account (AOT), but it will take years before our investment assets are “equal.” My spouse has enough money in a savings account that they wouldn’t face immediate trouble if something unexpected happened.

We are both in the workforce, but my income is several times higher than my spouse’s.

My wish would be that if one of us passes away, the survivor would have full use of all the jointly saved investment assets. However, this seems easier said than done when there are direct descendants (rintaperilliset) involved. With a usufruct will (hallintaoikeustestamentti), the survivor would gain control over the financial assets, but what benefit is that when the assets are in non-dividend-paying funds?

To clarify: I don’t necessarily want to leave my children anything; through saving, I specifically want to secure the rest of my and my spouse’s lives.

What options would there be for drafting a will in this case?

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In any case, you will want a will drafted by a lawyer, so it is best to handle the discussion regarding the content and details with them. What comes to my mind—as a layman—are, for example, the spouses’ marital right to property, based on which assets (without a prenuptial agreement) are equalized anyway, and the children’s statutory share (lakiosuus), which they can demand regardless if they wish (i.e., there are limits to what can be dictated in a will).

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I agree with the writer + the right of possession (hallintaoikeus) came to mind. The offspring will get what they get :slight_smile:

I’m also a bit worried about the current discussion, as gifted and inherited assets can end up being used for purposes very different from what was intended. I have small children myself, and in this digital age, I definitely don’t want them to have large savings and real-time access to mobile banking, where assets could be liquidated, for example, due to pressure or on a whim. In the worst-case scenario, my hard-earned money would go toward substances…

My partner and I are also considering how to reasonably sort out the finances in the event of death, since we aren’t married.

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I’ve been mulling over the same thing as a cohabiting partner and father of a little toddler. We have a 50-50 owned apartment intended as our forever home, for which my own mortgage is relatively small. In addition to this, I have a well-diversified liquid investment portfolio, the value of which is approximately 3x the value of my half of the apartment, and which holds more cash than I have mortgage debt. Furthermore, an inheritance from my own parents is expected in due course. Modeling with a 7% return rate, ceteris paribus, the portfolio value on my son’s 18th birthday would be seven figures, and the first digit wouldn’t be a 1.

In my reflections, I’ve ended up with the opposite conclusion. I want specifically to protect that little, flaxen-haired boy of mine. I consider the worst-case but possible scenario to be a situation where I suddenly kick the bucket, my partner finds a new man, spends my money on god-knows-what, and when my son turns 18, he is bluntly shown the door. If my son has inherited a thrifty and deliberate nature from me, I think he would eventually appreciate the capital left by his father, which would enable a free life and a career choice of his own making.

I am considering whether, instead of a will, I should create some sort of guidance where a 100% trusted friend from my inner circle would manage the investments and first pay off the mortgage. This way, the home wouldn’t need to be liquidated, yet the apartment would still remain half in her ownership. Based on some Googling, however, this might even happen ex officio (viran puolesta), which is why the matter has been left pending.

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The heir would be your child; a cohabiting partner does not inherit from their partner without a will.

Regarding a minor’s assets, the property belongs to the child themselves, and it is worth familiarizing yourself with the regulation and reporting requirements via the DVV (Digital and Population Data Services Agency) website.

I wasn’t sure if the cohabiting partner is your child’s mother? This may have an impact on who is appointed as the guardian.

You can likely stipulate the management of assets in a will, including paying off loans.
Or provide instructions on the management of investments depending, for example, on how far or near the date is when you want the inheritance to pass into the child’s control.
And a will can also be updated, provided one doesn’t die suddenly in a traffic accident or otherwise.

Be careful and check the DVV website to ensure that the witnesses are independent.

Of course, if the partner does not have an actual maternal relationship with the boy, and custody does not go to the partner, and there are risks regarding the darker sides of life, then a joint apartment between a minor child and a partner with mortgage debt might not be a good idea.

Guardianship of a minor’s property | Digital and Population Data Services Agency https://share.google/oKQiBSaFCKVLGHKJj

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Exactly. That DVV (Digital and Population Data Services Agency) setup is familiar, and it’s something those considering similar things should take into account. However, my understanding is that there aren’t many resources or much interest in the actual monitoring of individual clients, as long as money isn’t moved away from the ward’s use, or used to trade warrants or anything similar. I would imagine global index investing would pass through fine.

My common-law wife is the child’s mother, so she would likely end up as the child’s guardian unless I stipulated otherwise in a will. I have a suitable law firm in mind for the task: making the will itself isn’t particularly difficult, but those independent witnesses + the testator’s capacity for the aforementioned legal act are probably the most typical pitfalls. The question of the statutory share (lakiosa) doesn’t need to be considered, as everything would go to the heir.

Finally: the whole matter would hardly have crossed my mind without a situation that happened years ago. A childhood friend’s father died when my friend was quite young, and the apartment solely owned by the father went to my friend. The apartment was a fairly valuable family home, and as far as I understand, no other significant assets were left. My friend’s mother (the deceased father’s wife) continued living in the apartment as before, in accordance with the widow’s right of occupancy, and even found a new husband. As I understand it, the son and stepfather weren’t on very good terms, and at age 18, in the middle of high school, a situation arose where he was no longer welcome at home but couldn’t get any money out of the apartment either. Consequently, the relationship with his mother was also severed. My friend lived pretty much penniless and I even lent him some cash myself, but he has since gotten his life on track and carved out quite a fine career.

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Such instructions have no legal significance unless they are a provision included in a will regarding an executor. The administration of the estate will, if it chooses, override such a “manager” based on a lifetime authorization. You shouldn’t try any self-invented testamentary arrangements; they only create a mess.

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Because you have a child together, you have what is known as a statutory cohabitation (avoliitto). This means that the common-law spouse has the right to demand a separation of property, financial assistance, and compensation. The separation of property can become expensive/lengthy if it is handled by an estate distributor appointed by the district court.

When a statutory cohabitation ends due to the death of a spouse, the surviving common-law spouse has the right to receive discretionary assistance. If the criteria are met, they have the right to receive assistance even if the decedent has disposed of their property in a will. However, the assistance must not infringe upon the descendant’s statutory share (lakiosa) unless there are compelling reasons. As assistance, the surviving spouse can be given, for example, the right to live in the couple’s shared home for a certain period or for the remainder of their life.

Compensation can be obtained if the common-law spouse has helped the other accumulate or preserve their property through a contribution to the common household. Additionally, it is required that the separation of property leads to an unjust enrichment at the expense of the other spouse. This contribution can be, for example, work or the use of funds for the benefit of the common household.

A child’s guardian cannot be determined by a will, especially not by bypassing the child’s own mother. Instead, you can appoint a separate manager for the property bequeathed to the child until the child reaches adulthood.

A law firm will provide independent witnesses for the will; typically, the lawyer themselves and their assistant act as witnesses. Your own capacity to make a will is also quite clear if you are a person in normal health; the texts you have written here already demonstrate a sufficient cognitive level to make a will.

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Exactly.

By “investment management,” I effectively meant that a trustworthy person from my own or the child’s inner circle would look after the inherited securities until the child turns 18. In practice, this would likely involve minor reinvestment of dividends, responding to situations where index funds are liquidated, or other similar matters.

I am not familiar with the discretionary assistance for a surviving cohabiting partner in the event of a spouse’s death or the related case law. I would estimate that in my case, this is unlikely to be relevant, unlike perhaps in family businesses or for agricultural entrepreneurs. And in general, one would hope the child’s mother would have a relatively high threshold for making claims against an estate where the sole beneficiary is the child. Conversely, I consider it a greater risk that while the child’s mother oversees the estate’s assets, money might be directed toward investments that are disadvantageous from the child’s perspective or toward (luxury) consumption.

In general, I can recommend making a will to just about everyone, as it is ultimately not a very complicated document. For older people, of course, a medical check-up just before making the will is advisable to mitigate claims regarding the testator’s lack of legal capacity.