Inheritance law Austria

1. What is the difference between bequests, wills and inheritance contracts?

In Austrian inheritance law, a distinction is made between legacies, wills and inheritance contracts. All three are forms of testamentary disposition through which a testator can determine the order of succession themselves - this is referred to as the so-called "intended succession". We will briefly explain the individual terms here:

Willthe terms will and legacy are sometimes used interchangeably, but they differ in terms of content. With a will, the testator bequeaths shares of his estate to one or more persons and thus appoints them as heirs. The testator has the right to revoke their will at any time. In our guide on the topic wills in Austrian inheritance law you will find further information.

Bequestbequest: If the testator does not bequeath a person a share of the estate as a whole, but a specific item, this is referred to as a bequest. Just like a will, a legacy can be revoked by the testator at any time.

Inheritance contracta third option for estate administration under Austrian inheritance law is the contract of inheritance. It can only be validly concluded between spouses, registered partners or persons who are engaged or have promised a registered partnership. In addition, the inheritance contract may relate to a maximum of ¾ of the estate, leaving the testator a pure quarter, which may not be encumbered by compulsory portions or other claims, for free testamentary disposition. Unlike a legacy or a will, an inheritance contract cannot be revoked unilaterally by the testator. However, it usually expires for both parties in the event of divorce or dissolution of the registered partnership.

As a general rule, bequests, wills and inheritance contracts should be drawn up as clearly as possible in order to prevent later inheritance disputes. This applies in particular if business assets are to be bequeathed in addition to private assets.

2. Which statutory succession applies in Austria?

Which relative inherits which part of the estate is determined by the order of succession. Inheritance law in Austria distinguishes between intestate and voluntary succession. Statutory succession always applies if the estate is not regulated by a will, a legacy or an inheritance contract.

In addition to the spouse or registered partner, the statutory heirs are the closest relatives of the deceased. These are generally divided into four lines, whereby relatives in a closer line exclude relatives in the subsequent line from succession. You can find the exact legal succession in our guide Compulsory portion and succession.

Who inherits what share?

According to inheritance law in Austria, the deceased's spouse or registered partner inherits one third of the estate alongside the children and their descendants. If the deceased leaves no children but their parents are still alive at this time, the spouse or registered partner inherits two thirds of the estate alongside the parents. If one of the parents is already deceased, their share also goes to the spouse. If the deceased has neither children nor parents at the time of death, the spouse or registered partner is the sole legal heir and inherits the entire estate.

3. How does intestate succession work in Austria?

Under Austrian inheritance law, the testator has the option of determining the succession themselves by means of a will, a legacy or an inheritance contract. In such a case, this is referred to as an intended succession. This so-called testamentary freedom allows you to deviate from the statutory succession as described above.

However, the compulsory portion imposes legal limits on the intended succession. If spouses, registered partners or descendants are not taken into account by the testator in the testamentary disposition, for example in the will, these relatives are nevertheless entitled to a minimum share of the estate in the form of the statutory compulsory portion. The compulsory portion amounts to half of the statutory inheritance share and must be actively claimed from the heirs.

However, the testator can leave the compulsory portion in any form: As an inheritance share, as a legacy, or even through a gift on death. In addition, the person entitled to the compulsory portion must allow gifts received from the testator, whether during the testator's lifetime or upon death, to be offset against their compulsory portion.

4. How is anticipated succession regulated?

If the testator decides to transfer part of their assets to potential heirs during their lifetime, this is referred to as anticipated succession in Austrian inheritance law. This should be harmonised with the actual succession as part of estate planning.

For this purpose, the question of offsetting, i.e. whether and to what extent the gift should be offset against the recipient's inheritance or compulsory portion, is also regulated in the gift agreement. A waiver of inheritance and compulsory portion can also be agreed.

Another option is for the testator to agree a gift on death with the donee. In this case, the testator is the unrestricted owner of the object of the gift until his or her death, which only passes to the donee in the event of death. As this is a legally binding contract, the testator can only revoke it unilaterally in exceptional cases.

If a gift agreement is to be concluded, the actual transfer of the object of the gift is required. Gifts between spouses and registered partners, gifts on death and gifts of shares in limited liability companies also require the form of a notarised deed. Gifts of real estate and property must also be documented with a Notarised deed in order to fulfil the formal requirements stipulated by law for an effective transfer.

5. How high are inheritance tax and gift tax in Austria?

Under Austrian inheritance law, neither inheritance tax nor gift tax is currently levied. However, the transfer of a property or real estate free of charge is subject to real estate transfer tax. In order to calculate this land transfer tax, the market value of the property or real estate is taken into account. On this basis, the tax is levied in staggered percentages:

• A tax rate of 0.5% applies to the first 250,000 euros.

• A tax rate of 2.5% applies to the next 150,000 euros.

• A tax rate of 3.5% applies to the market value in excess of 400,000 euros.

In addition, a fee of 1.1 per cent is charged for the entry of the heir as the new owner in the land register. In the case of free transfers between close family members, including the spouse or registered partner, the cohabiting partner if both have a joint residence, relatives in a direct line, siblings and the donor's/decedent's own nephews and nieces, this is based on three times the unit value of the property or real estate, and in all other cases on its market value.

Gifts of items other than real estate and property are tax-free, but must be reported to the tax office if their value reaches EUR 15,000 over a period of five years or EUR 50,000 between relatives.

6. What needs to be considered when inheriting in an international context?

Austrian inheritance law proves to be particularly complex in cross-border inheritance cases, for example if the deceased dies abroad or if foreign assets are included in the estate. In such cases, the question often arises as to whether Austrian inheritance law, foreign law or even both inheritance laws apply. The answer for testators with a connection to Austria can be found in the European Succession Regulation (EuErbVO). This states that the national law of the country in which the deceased had their habitual residence at the time of their death is to be applied.

7. What special features apply when bequeathing a property as part of company assets?

If you wish to bequeath a property that is part of the assets of a company, e.g. a limited liability company, it is possible to transfer company shares to your successors to the appropriate extent instead of the property. This can be done during your lifetime or upon your death.

In Austria, neither gift tax nor inheritance tax is payable on the transfer of company shares. However, real estate transfer tax may be payable if the transfer results in at least 95 per cent of all shares in the company being held by one person. This is independent of whether the 95 per cent shareholding is transferred to the transferee all at once or in several stages. In this case, the real estate transfer tax is calculated on the value of the property and amounts to 0.5 per cent.