By: Partner Axel M. Hansson
Statue of justice
The new inheritance act, which is likely to come into force in 2020, limits testator’s freedom by requiring children to inherit more. Under the current inheritance act, children are entitled to two-thirds of testator’s fortune, capped at 1 MNOK per child. This is compulsory inheritance for children. Under the new inheritance act, this sum has been adjusted up to 15 times the base rate (G) set by Norway’s fiscal authority. Today, this amounts to approx MNOK 1.5, but the amount is adjusted each year so that children’s compulsory inheritance will increase in line with inflation. However, if testator has previously given a child an advancement of inheritance, there may be questions about which compulsory rules will apply.
It is important to be aware that the rules of compulsory inheritance limit the testator’s freedom only in the case of inheritance. Otherwise, the main rule is that anyone can give away all their wealth in person, without touching base with the rules of compulsory inheritance. In order for such dispositions not to be regarded as inheritance, they must have a reality for the giver while they are alive.
The new 15G minimum inheritance will take effect one year after the act came into force for testaments created before the new inheritance act comes into force. If you have created a testament where the children’s inheritance rights are limited to the compulsory inheritance, upwards limited to today’s minimum inheritance with 1 MNOK for each child, you may want to change the testament when the new rule takes effect. The compulsory inheritance must then be limited upwards to the new minimum inheritance of 15G. In this way one avoids interpretation ambiguity, and possibly that the children claim two-thirds of the wealth. When interpreting a testament, it is the testator’s last will to be clarified. If it is ambigous what the testator intended, this will often be a source of conflict. Therefore, it is very important that a testament is formulated as precisely and clearly as possible.
Both according to the current and the new inheritance act, the testator can by testament, set restrictions on the lineal descendant’s beneficial use over the compulsory inheritance. Under the current inheritance act, this can be done only in special cases, and when the consideration of the heir may allow for it. Under the new inheritance act, the condition is that it must be considered to be in the best interest of the lineal descendant. The big difference is that under the current act you are free to decide how long the restriction shall apply, while under the new act, the compulsory inheritance can only be imposed restrictions until the child reaches the age of 25.
Although the new compulsory rules restrict the testator’s freedom of action, testators have also been given more freedom under the new inheritance act in that testators may to a greater extent decide how the inheritance should be divided between the lineal descendants. Under the current inheritance atc , testators cannot in the testament rule on the compulsory inheritance. The new inheritance act, on the other hand, gives the right to divide assets so that, for example, testators can decide that one lineal descendant will receive the inheritance in cash, while another will receive property. This also applies if an asset is worth more than what the child is entitled to according to the compulsory rules. In which case, the person inheriting the asset must pay the excess to the Estate. If you want to decide how the assets should be divided, this must be regulated in testament when the new act comes into force.
More inheritance to the children means less inheritance to the spouse or cohabitant of the testator. Apart from this, there are no new rules for spouses and cohabitants. Therefore, it is still very important that cohabitants write a testament.
If you want to create a testament, under the new inheritance act, it is no longer necessary for the two required witnesses to be present at the same time to confirm your signature on the testament. It is enough that the witnesses individually testify to the signature. Thus, the formal requirements are somewhat modified, and it becomes easier to meet the witness requirement.
We at Hansson Law have long experience with inheritance casPrecision and clarity are vital to avoid misunderstandings and conflicts. Therefore, it may be important to engage a lawyer early to get help with inheritance planning, succession planning, creating or altering a testament, or carrying out gifts and advances on inheritance.