According to Estonian succession and tax laws, you can say that there are similar rules to any kind of heritage. The most important thing to remember is that in case of succession, the successor can’t choose which part of the heritage he or she wants, but has to take it all or leave it. That means, if successor accepts, the succession will acquire everything including tax obligations and arrears. Everything mentioned here applies also in case of business succession. If successor accepts succession of business he or she will get all tangible assets, all rights and obligations bound to business, including shares. Though membership of the board can’t be inherited.
According to the law the basis for succession is law (intestate succession), the testamentary intention of the bequeather expressed in a will (testate succession) or a succession contract (succession by succession contract). The right of succession by succession contract is preferred to the right of succession by will, but both of these are preferred to the right of succession by law. Succession is intestate if the bequeather has not left a valid will or succession contract. Intestate successors are the bequeather’s spouse, kids and other relatives. The local government is the intestate successor if there are no successors or if they all refused to accept the succession. If a successor is not known or there is no reliable information concerning the place of residence of the successor, the notary shall conduct calling proceedings for identification of the successor. According to Income Tax Act a succession is tax free.
In many cases it is not always clear who is successor or what exactly is the succession. In case of business succession it is important that the business will continue its activity. If no one will immediately take over the business (or other inheritance), than the court will nominate an administrator for business (or other inheritance), to whom the court may issue orders for possession, use and disposal of property. An administrator does not have the right to dispose of an immovable belonging to an estate without court authorization.
To avoid any possible inconveniences between possible successors bequeather should put together a will or succession contract. A will or succession contract will help keep succession attached instead of dividing between many successors. It is extremely important in case of many spouses and kids. If several successors have accepted the succession (co-successors), the estate is owned by the successors jointly. The obligations incumbent on an estate and the expenses incurred in connection with the estate shall be distributed among the co-successors in proportion to their share of the estate unless otherwise provided by the will or succession contract. The successors shall be solidarily liable for the performance of an obligation which is part of the estate. If it is not mentioned in the will, there is no law stating how co-successors shall divide an estate, though it is common to do an agreement between co-successors. In the case of a dispute, a court shall divide the estate at the request of a successor.
In case of misunderstandings between co-successors about disposing legal shares or how to deal with arrears, the co-successor and the acquirer of a share shall be solidarily liable for the performance of the obligations which encumber the estate. In the case of a dispute, a court shall decide what are the best actions to maintain the value of succession. Despite of dissensions between co-successors, the creditor shall get debt reimbursement from every co-successor of the legal share of the estate.
Transfer of assets as successions, can be done during bequeathers´ lifetime not only after his or her death. If this is the case, bequeather and successor have to make sure that all the necessary documents are taken cared of. Re-registration to change ownership of real estate, vehicles etc. is compulsory and additional fees come with these acts. All leasing agreements connected with business transactions shall re-register under successor’s name. All succession proceedings and documentation shall be conducted by a notary.
Of course, it is possible that successor renounces a succession. The most common reasons to renounces a succession are arrears which exceed the value of the succession. The term for renunciation is three months. The term shall commence from the moment the successor becomes aware or ought to become aware of the death of the bequeather and of his or her right of succession. If an intestate successor of a bequeather renounces a succession by a contract entered into with a bequeather, the person who would have succeeded, if the renouncer of the succession had died before the opening of the succession, is entitled to succeed.
The successor doesn’t have to worry about the income tax, because the succession is generally not a subject to income tax, business property included. But if bequeather will get any profit from assets transfer, than this profit shall be declared. All profit that is gained after succession, needs to be declared and is subject to income tax and social tax. Also, income tax needs to be paid from all profit that will be gained from selling assets (succession).