First of all, you have to know that unlike the UK or the US where you can leave whatever you want to whomever you want, Luxembourg has a system of forced heirship. Like many other civil law countries in continental Europe, you may not freely determine who gets what and you are not allowed to cut off your children without any inheritance. The rules require that you give a defined proportion of your estate to your reserved heirs. All your children are reserved heirs. Under Luxembourg law, the defined proportions are the following: 50% of your estate if you have one child, 67% if you have two children and 75% if you have three children or more.
And what happens if you have children from different spouses? Your current spouse may struggle to retain the family home or keep sufficient assets to support herself/himself. This problem can be solved with a marriage contract, giving ownership to the unreserved portion of the estate and lifetime use of the reserved portion.
As an expatriate living in Luxembourg, you can choose the rules of inheritance of your country of nationality rather than the rules applicable in the Grand Duchy. It can be an advantage if you want to sidestep the forced heirship system. However, you may not choose between the different inheritance tax rates.
The legally accepted wills in Luxembourg are the holographic will and two notarial wills: the authentic will and the mystic will. The first is free and the two others are fee-based but the three have the same legal value. One is no more valid than another.
You write yourself your last wishes and you keep them at home. To be valid, a holographic will must be entirely handwritten, dated (with the day, the month and the year) and signed by the testator. There are no other validity conditions except the fact that your intentions must be clearly and unambiguously expressed and are only signed by you. A joint testament in both the names of the spouses is not valid.
The holographic will is the simplest and cheapest solution. However, the major inconvenience is that your holographic will can be lost, deleted or stolen if you keep it at home.
You can keep your holographic will safely but it will cost a little bit of money:
- you can keep your will in a bank safety deposit box but you have to inform a family member, a friend or one of your heirs of its existence;
- you can register your testament at the central database of wills of the Administration de l’Enregistrement et des Domaines (AED);
- you can deposit your will at a notary’s office. The notary will keep the original in a safe place. He can also register your will for you at the central database of wills.
The authentic will is made in the presence of two notaries or in the presence of a notary and two witnesses. In this case, the will is dictated by you, written – mostly in typewritten form – by the notary and signed by the testator, the notary and the two witnesses or the two notaries. The main advantage of an authentic will is that it is legally secure: your will is written by a notary who knows and respects the law. The risk of error is limited and an authentic will cannot be contested as it could be for a holographic will.
The mystic willis written and signed by you, sealed and deposited at the notary office in the presence of two witnesses. The notary draws up an act – acte de souscription authentique – signed by you, the two witnesses and the notary. The main advantage of a mystic will is that its content remains secret until it is opened after your death.
Whichever type of will you choose, you may cancel or modify it at any time. You just have to create a new will revoking any previous one or to make any changes. Don’t forget that if you have registered your previous will at the AED, you should do it again for the new version.
What about the inheritance taxes?
There are two categories of taxes on inherited property. If you are a Luxembourg resident and your wealth is primarily located in the Grand-Duchy, the inheritance tax is applied. It is based on the value of your assets. It varies to zero for your direct descendants to 15% for persons who have no family ties with you for the legal portion and provided that the net taxable value of the portion collected by the beneficiary does not exceed EUR 10,000. Beyond this limit, another scale is applied. You can consult it on the website of the AED (only in French). If you are a non-resident or your wealth is not located in Luxembourg, your heirs must pay a transfer tax or estate duty (droits de mutation) on the value of real estate based in Luxembourg as the same rate as the inheritance tax.
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