Succession and Wealth Transfer in Luxembourg

Inheritance tax in Luxembourg

Luxembourg inheritance tax applies to assets located in Luxembourg and to the movable assets of residents. In direct line (parents-children), the rates are very favourable: 0% up to a certain threshold and moderate progressive rates beyond. Between spouses/partners, the rate is also reduced. However, transfers between non-relatives are taxed up to 15%. Inter vivos gifts of movable assets are not taxable in Luxembourg if they are not the subject of a deed registered in Luxembourg.

Succession planning tools

• Luxembourg life insurance: tax neutrality, safety triangle, flexible beneficiary clause
• Family SOPARFI: transfer of shareholdings with allowances and exemptions
• Succession pact (since European Regulation 650/2012): agreement between heirs on distribution
• Choice of applicable law: option to choose one's national law to govern the succession (professio juris)
• Gift-partition with reservation of usufruct to anticipate lifetime transfer

Cross-border aspects

For families with ties in several countries, planning must take into account the European Regulation on successions (determination of applicable law), bilateral conventions on inheritance tax (Luxembourg has signed such conventions with France, Belgium and Germany), and the risk of double inheritance taxation if assets are located in several jurisdictions. A country-by-country analysis is essential to avoid tax surprises and protect the heirs.