In these cases, the first thing to do is determine what set of national rules will apply to the estate and estate administration. Depending on the countries involved, it can be challenging to decide what restrictions to use and understand these rules, mostly if no will was made. The procedural rules and devolution rights may differ significantly from one land to the other.
Especially when having a residence or assets in different countries, we always recommend our clients make a will to secure their heirs in the best possible way. Under the inheritance applicable laws from their home country, they probably comprehend best.
What you should know:
- The starting point in Denmark is that a deceased person’s estate shall be administered in the country where the dead was resident at the death time.
- If the estate is administered in Denmark, the Danish authorities will be most prone to apply Danish law to the inheritance. Thus a choice of law may not be taken into consideration in such a case.
- If a person dies without making a will, the rules of the Danish Inheritance Act will apply.
- The Danish Inheritance Act establishes a priority order in the succession line. Spouse and children (biologic and adoptive) of the deceased belong to group 1 and are first to inherit. Parents, siblings, and nieces/nephews of the dead are group 2, and next to inherit. Grandparents, aunts/uncles of the deceased are group 3, and the last group to inherit.
- If a person makes a will, she or he cannot decide ultimately freely on the distribution of her/his estate, as ¼ (or 25%) of the estate will be considered forced inheritance (“tvangsarv”).
- Depending on whether the deceased person made a will or not and the estate’s value, the estate can be administered in different ways.
- Sometimes the heirs can agree on administering the estate in Denmark if the connection with Denmark and the estate is strong enough – although this will require special permission from the Danish Ministry of Justice.
- Inheritance tax has nothing to do with administration and substantive rules. The heirs will be taxed in the country where the estate’s administration occurs, potentially in the country of the source (the country where the estate assets come from). In some cases, the heirs can also be taxed on the inherited taxes’ interests if they live in a third country.
- Inheritance distribution, administration of the estate, and inheritance tax are regulated in different Acts in Denmark. The law that governs the distribution of the estate and inheritance rights in Denmark is the Danish Inheritance Act (“Arveloven,” “AL”). The Administration of Estates Act (“Dødsboskifteloven,” “DSL”) regulates the procedural aspects of administering an estate in Denmark. These sets of rules do not restrict, however, inheritance taxes. Inheritance tax is regulated separately under “Boafgiftloven” (“BAL”) and “Dødsboskatteloven” (“DBSL”).
Estates with or without will
If you have particular wishes regarding how the estate should be distributed among your heirs, and you want to make sure that your wishes can be legally enforced, you should make a will. Otherwise, your estate will be distributed after the rules established by the Danish Inheritance Act.
How will this affect the distribution of my estate and the rights of my heirs?
Estate devolution rights, cf. sect. 1-4, AL
In case a person dies without making a will, the rules Inheritance Act rules will apply. The Danish Inheritance Act establishes a priority order in the succession line based on the legal heirs’ division in three different groups (“arveklasser”). Heirs belonging to group 1 will be the first to inherit after the deceased. If there are not family members of group 1, heirs from group 2 will inherit. If there are no family members from group 2, heirs from group 3 will inherit. If there are no heirs from group 3, the Danish State will inherit.
Spouse and children (biologic and adoptive) of the deceased belong to group 1.
Parents, siblings, and nieces/nephews of the deceased are group 2.
Grandparents, aunts/uncles of the deceased are group 3.
If you die leaving a spouse and children, the estate is divided by 50% to the spouse and 50% to the children. The children will divide their 50% among them into equal parts.
Forced inheritance rights, cf. sect. 5, AL
In case a person makes a will, she/he cannot decide ultimately freely on the distribution of her/his estate, as ¼ (or 25%) of the estate will be considered forced inheritance (“tvangsarv”).
Spouse and children (group 1) will be considered forced heirs (“tvangsarvinger”) and inherit 25% of the estate (25% the spouse, and 25% the children).
Nevertheless, the person making a will can decide that the spouse should inherit the most possible. In that case, 50% of the 25% of the children’s forced inheritance should increase the spouse’s share.
The testator can also decide in a will to limit the forced inheritance share of the children to 1.000.000 DKK, i.e., children cannot inherit more than 1.000.000 DKK each, if the forced inheritance share is higher than 1.000.000 DKK, cf. sect. 5, para. 2 AL.
Estate administered in Denmark
The starting point in Denmark is that the estate of a deceased person shall be administered in the country where the dead was resident at the death time. However, sometimes it is possible for the heirs to agree on administering the estate in Denmark, if the connection with Denmark and the estate is strong enough – although this will require special permission from the Danish Ministry of Justice, cf. sect. 2 DSL.
If the estate is administered in Denmark, the Danish authorities will be most prone to apply Danish law to the inheritance (i.e., Danish Inheritance Act, or “AL”), to distribute the assets among the heirs. If a person made an express choice of law in favor of his/her national inheritance law (other than the Danish law), this would require a concrete assessment of the particular case and the private international law.
Under the Administration of Estates Act (“Dødsboskifteloven,” “DSL”), the estate is administered by the Probate Court (“Skifteretten”) of the jurisdiction where the deceased had her/his last known address, cf. sect. 2 of DSL. Usually, the priest or the officiator informs the Probate Court about the event of death.
Depending on the estate’s value, heirs’ agreement, and/or whether the testator made a will, the estate can be administered differently. The Probate Court, based on the case circumstances, will decide on how the estate should be administered.
These are some examples of the different forms for estate administration:
If the estate’s value is not higher than 46.000 DKK (2020), the heirs can inherit after the deceased against payment of the funeral’s costs (“boudlæg”), cf. sect. 18-21 DSL.
If the deceased did not make a will, the heirs would administer themselves the estate if all the heirs agree on the administration, and the Probate Court authorizes it (“private skifte”). However, the heirs will typically give a Danish attorney to a power of attorney to administer the estate on their behalf, pay inheritance tax, and the like, cf. sect. 25-32 DSL.
If the heirs cannot agree on the estate’s administration, the Probate Court will appoint a “bobestyrer” to administer the estate. A “bobestyrer” will usually be a Danish lawyer specialist in inheritance law and estate administration.
If the deceased has made a will and named a particular person to administer the estate (e.g., her/his lawyer), the estate should be administered by such person (“bobestyrerbehandling”), cf. sect. 36-40 DSL.
Should the estate be finally administered by a “bobestyrer,” the “bobestyrer” will have general administration and disposal powers over the estate. The “bobestyrer” should ask and listen to the heirs regarding essential questions of the administration of the estate (e.g., division of the assets, selling the assets to a third person, etc.), and use the best endeavors to comply with the heirs’ wishes. If any of the heirs’ whishes was inappropriate or prejudicial for the other(s) heir(s), “bobestyrer” could override the heir’s prejudicial wish/decision, cf. sect. 53 DSL. The “bobestyrer” will be authorized to decide on behalf of the heirs and oblige the estate (as a legal subject) through her/his decision, cf. sect. 42 DSL.
Estates that are administered in a country different from Denmark will be considered limited tax liable in Denmark if the estate contains assets deriving/coming from Denmark, cf. sect. 1, para. 3 DBSL. However, Denmark may only tax the estate for such investments, as long as there is no double taxation agreement between Denmark and the country where the estate is being administered, preventing Denmark from taxation.
Estates that are totally or partially administered in Denmark will be considered tax fully liable in Denmark, cf. sect. 1 DBSL. This includes both “Danish estates” (estates from citizens with residence in Denmark) and “referred estates” (estates from Danish citizens, or citizens with a special connection with Denmark and with assets in Denmark, or with help in Denmark that is not taken under the administration of the estate in another country), cf. sect. 2, para. 1 and 2 DSL.
In both cases (“Danish estates” and “referred estates”), the estate will be fully taxed liable in Denmark, for the entire estate that is administered in Denmark, cf. sect. 9 BAL.