Everything you need to know about estate planning in Norway
In Norway, like many other countries, understanding the details of estate planning is crucial to safeguard your legacy and provide for your family and loved ones.
Whether you're a Norwegian resident or foreigner who has made the country your home, estate planning is vital to securing your family's financial well-being and ensuring your assets are distributed according to your wishes in the event of your death.
From understanding the legal instruments available to you to exploring the tax implications of your decisions, you must arm yourself with the knowledge and tools necessary to ensure this process doesn't become a legal and logistical headache for your family.
Disclaimer: While The Local has interviewed Norwegian legal experts, it's important to analyse your tax position based on your individual circumstances. Norway is bound by several tax treaties with various countries. Therefore, one may encounter deviations from the general principles and the Norwegian Tax Act, and each case should ideally be assessed individually.
READ ALSO: What happens when a foreigner in Norway dies?
Basic considerations: Tax residency
Christian Reegård Dalby, a lawyer and partner at BDO Advokater, and Axel M. Hansson, a lawyer and partner at Hansson Law, believe there are several basic considerations that people who want to start dealing with estate planning in Norway should make.
As a natural starting point, they say one should always determine whether they're considered either a tax resident or obliged to pay taxes in the country due to having assets in the country.
You are considered a tax-resident if you either stay in the country for more than 183 days during any 12-month period or for more than 270 days during any 36-month period.
In a situation where a person who is a tax resident in Norway is also considered a tax resident in another country, the question of tax residence must be resolved according to the tax treaty between Norway and that country.
Still, even if one doesn't stay in Norway long enough to become a tax resident, they may be liable for income and wealth that has its source in Norway, according to Dalby and Hansson.
This applies, for example, to property owned in Norway, where you are liable for the wealth of the property and any income related to the property, including rental income and gains from the sale of the property.
Norwegian inheritance law: What foreigners should know
According to The Norwegian Inheritance Act, the spouse and children are considered primary heirs. If the deceased had neither a spouse nor children, their parents would stand to inherit, and thereafter, their children (the deceased's brothers and sisters), Dalby and Hansson said.
The main rule is that the deceased's spouse may choose to take over the deceased's estate without dividing it for as long as they live.
This is called "uskiftet bo" in Norwegian, and it means that the estate is not divided until the last spouse passes away. There are exceptions to this rule, most importantly in the case where the spouses do not have the same heirs, that is, children with another partner.
Couples that live together but are not married, to a certain extent, have similar rights if certain conditions are met.
In addition to this, according to the two lawyers, one might also decide how the estate should be divided by a last will of testament. There are limitations to this as both the spouse and children are entitled to inheritance to some extent, and the last will of testament regarding the assets in Norway should be written in Norwegian.
It is important to note that, for gifts received while the gift giver was alive, the process is not regulated by the Inheritance Act, and as a main rule, there are no limits to what may be given away or any need to consider your heirs right to inheritance, according to Dalby and Hansson.
André M. Carlsen and Morten Fjermeros, partners at the law office Bull & Co Advokatfirma, told The Local that if the deceased was a resident of Norway at the time of their death, the division of the estate must typically be handled in accordance with Norwegian inheritance law.
"Consequently, there is no guarantee that a previously prepared foreign will be used as the basis for dividing the deceased's estate. Therefore, foreigners who move to Norway should consider the need to prepare a Norwegian will, which takes into account, for example, the provisions in the Norwegian Inheritance Act regarding the decedent's children and spouse's mandatory inheritance.
"In addition, testators (people who have made a will) residing in Norway who own assets abroad should take certain steps to ensure comprehensive and valid solutions," Carlsen and Fjermeros said.
Selling a primary residence in Norway is tax-free - under certain conditions. Pictured is Bod in Møre og Romsdal county in western Norway. Photo by Lavi Cella on Unsplash
Norwegian wealth tax
Wealth tax considerations are another important aspect of estate planning in Norway. Wealth tax in the country is payable on wealth exceeding 1.7 million kroner per 2023 rules, Dalby of BDO Advokaten told The Local.
The tax is paid on net worth, which is the value of your wealth and assets after deducting all debts. A mortgage, for example, would negativley affect your net wealth.
The tax rate for 2023 is 1 percent. If you have taxable assets over 20 million kroner, the wealth tax rate is 1.1 percent for 2023. There are different rules for married couples.
"Wealth tax is calculated based on the values you own at year-end. An increase in the value of a property during a year will, therefore, affect the wealth tax for that year. The person who is the actual owner of the residential property at the end of the income year is responsible for any wealth tax for that income year," Dalby said.
The lawyer explained that, when calculating wealth tax for residential properties, the values are generally determined based on the property's market value.
A full overview of the wealth tax rules is available on the website of the Norwegian Tax Administration.
Norway will collect wealth tax unless there is an agreement as part of a tax treaty with another country to prevent double taxation. As most other countries don't collect wealth tax, few such treaties apply.
"For certain countries such as Spain, France, and Switzerland, it will be different because their wealth tax has different threshold amounts than in Norway. If wealth tax is paid to another country in addition to Norway, you may be entitled to a deduction in Norwegian wealth tax through the credit method.
"Some treaties apply the allocation method to avoid double taxation. This means that the property is not subject to wealth tax in Norway, and you do not receive a deduction for any tax paid abroad," he said.
Carlsen and Fjermeros of Bull & Co Advokatfirma added that only tax residents of Norway as of January 1st in the year for which the tax is assessed are obliged to pay wealth tax to Norway on all assets they own in Norway and abroad.
Real estate-related tax obligations and example scenarios
Taxation on income and gains from real estate will also depend on any potential tax treaties. Tax treaties generally grant the state where the income was generated the right to tax, Dalby told The Local.
"In Norwegian law, the continuity principle applies to inheritance and gift transfers (rollover of tax positions). This means that the recipient assumes the historical acquisition value of transferred assets in a later gain assessment, as well as other tax positions related to what has been transferred.
"The acquisition value is usually the property's purchase price and is used to determine whether there is a future gain on the sale of the property.
"The capital gains tax rate in Norway is 22 percent. The gain is calculated by subtracting the property's acquisition value from its exit value (usually the selling price). Note that there is an important exception to the continuity principle, where the acquisition value for residential property is set at the market value at the time of acquisition," he said.
However, for the exception to apply, the deceased or gift giver must meet the conditions for tax-free sale at the time of the transfer.
Selling a primary residence in Norway is tax-free if two conditions are met:
1. Ownership period: If the owner has owned the property for more than one year when the sale occurs or is agreed upon.
2. Residence period: If the owner has used the entire property as their own residence for at least one of the last two years before the sale.
A common situation that occurs regularly is the transfer of real estate from parents to children, which usually takes place free of charge in Norway.
"It is when the children sell the property that there is a significant risk that the gain will be substantial because the children have 'inherited' the acquisition value from their parents.
"If the recipient of the property intends to use it as their own residence and meets the conditions for a tax-free sale, there will not be any issue. If the intention is solely to resell the property, it will be important whether the deceased met the conditions for a tax-free sale," Dalby said.
He also shared two example scenarios to help people better grasp how the Norwegian rules work.
Scenario A: The deceased purchased a property in 1990 for 500,000 kroner. The property was rented out until the deceased died in 2023. Therefore, the conditions for a tax-free sale were not met at the time of death, and the acquisition value is set at what the deceased purchased the property for. An heir takes over the property with the intention of selling it. At this point, the property is sold for 2 million kroner. In this case, the heir does not meet the conditions for a tax-free sale. Therefore, the heir will be taxed at 22 percent on the gain of 1.5 million kroner.
Scenario B: The deceased lived in the property until their death in 2023. The deceased could have sold tax-free at the time of death. The acquisition value is set at the market value at the time of acquisition, which in this case is 2 million kroner. Therefore, there will be no "gain" when selling.
Dalby warned that the continuity rule only applies in cases where the deceased was taxable in Norway. If a taxpayer receives an inheritance or gift from a foreign taxpayer and the assets are brought into the Norwegian tax jurisdiction, the acquisition value is generally set at the market value at the time of acquisition.
If the deceased was a tax resident of Norway, the decedent's estate will also have a duty to pay tax to Norway. Photo by Kelly Sikkema on Unsplash
Which country is responsible for taxing your estate after death if you're not Norwegian?
Carlsen and Fjermeros explained that, under Norwegian law, the main rule is that a deceased's estate is a separate taxpayer.
"If the deceased was a tax resident of Norway, the deceased's estate will also have a duty to pay tax to Norway. If the deceased had just moved to Norway and had not yet attained tax resident status in Norway or recently moved from Norway and therefore was still a tax resident of Norway, a specific evaluation must be made to determine if the deceased's estate has a duty to pay tax to Norway," they said.
Tips for people who want to plan their estate effectively
Both Dalby and Hansson believe that settling the estate in Norway can be quite straightforward and simple.
"At the time of death, the courts will issue a certificate ("skifteattest") that states which persons are entitled to act on behalf of the deceased. This is a key document for settling the estate.
"A transfer of real estate from the deceased to the heirs is done by sending the deed to the central registration office. For the transfer of real estate from the deceased to heirs by law, no document fee will be charged.
"If you, however, inherit the property before the time of death, for example, through an advance on inheritance or a gift, you must pay the document fee upon registration," the two legal experts said.
Norway abolished its inheritance tax in 2014, so tax on inheritance no longer needs to be paid. With the abolition of this tax, the Norwegian state introduced other rules for inheritance and gift transfers, including the continuity principle and the exception explained beforehand.
Carlsen and Fjermeros restated that while Norway does not assess inheritance tax, and, therefore, there is no tax liability on gifts or inheritance, the general rule is that the gift recipient or heir adopts the donor's or decedent's acquisition value.
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Whether you're a Norwegian resident or foreigner who has made the country your home, estate planning is vital to securing your family's financial well-being and ensuring your assets are distributed according to your wishes in the event of your death.
From understanding the legal instruments available to you to exploring the tax implications of your decisions, you must arm yourself with the knowledge and tools necessary to ensure this process doesn't become a legal and logistical headache for your family.
Disclaimer: While The Local has interviewed Norwegian legal experts, it's important to analyse your tax position based on your individual circumstances. Norway is bound by several tax treaties with various countries. Therefore, one may encounter deviations from the general principles and the Norwegian Tax Act, and each case should ideally be assessed individually.
READ ALSO: What happens when a foreigner in Norway dies?
Basic considerations: Tax residency
Christian Reegård Dalby, a lawyer and partner at BDO Advokater, and Axel M. Hansson, a lawyer and partner at Hansson Law, believe there are several basic considerations that people who want to start dealing with estate planning in Norway should make.
As a natural starting point, they say one should always determine whether they're considered either a tax resident or obliged to pay taxes in the country due to having assets in the country.
You are considered a tax-resident if you either stay in the country for more than 183 days during any 12-month period or for more than 270 days during any 36-month period.
In a situation where a person who is a tax resident in Norway is also considered a tax resident in another country, the question of tax residence must be resolved according to the tax treaty between Norway and that country.
Still, even if one doesn't stay in Norway long enough to become a tax resident, they may be liable for income and wealth that has its source in Norway, according to Dalby and Hansson.
This applies, for example, to property owned in Norway, where you are liable for the wealth of the property and any income related to the property, including rental income and gains from the sale of the property.
Norwegian inheritance law: What foreigners should know
According to The Norwegian Inheritance Act, the spouse and children are considered primary heirs. If the deceased had neither a spouse nor children, their parents would stand to inherit, and thereafter, their children (the deceased's brothers and sisters), Dalby and Hansson said.
The main rule is that the deceased's spouse may choose to take over the deceased's estate without dividing it for as long as they live.
This is called "uskiftet bo" in Norwegian, and it means that the estate is not divided until the last spouse passes away. There are exceptions to this rule, most importantly in the case where the spouses do not have the same heirs, that is, children with another partner.
Couples that live together but are not married, to a certain extent, have similar rights if certain conditions are met.
In addition to this, according to the two lawyers, one might also decide how the estate should be divided by a last will of testament. There are limitations to this as both the spouse and children are entitled to inheritance to some extent, and the last will of testament regarding the assets in Norway should be written in Norwegian.
It is important to note that, for gifts received while the gift giver was alive, the process is not regulated by the Inheritance Act, and as a main rule, there are no limits to what may be given away or any need to consider your heirs right to inheritance, according to Dalby and Hansson.
André M. Carlsen and Morten Fjermeros, partners at the law office Bull & Co Advokatfirma, told The Local that if the deceased was a resident of Norway at the time of their death, the division of the estate must typically be handled in accordance with Norwegian inheritance law.
"Consequently, there is no guarantee that a previously prepared foreign will be used as the basis for dividing the deceased's estate. Therefore, foreigners who move to Norway should consider the need to prepare a Norwegian will, which takes into account, for example, the provisions in the Norwegian Inheritance Act regarding the decedent's children and spouse's mandatory inheritance.
"In addition, testators (people who have made a will) residing in Norway who own assets abroad should take certain steps to ensure comprehensive and valid solutions," Carlsen and Fjermeros said.
Norwegian wealth tax
Wealth tax considerations are another important aspect of estate planning in Norway. Wealth tax in the country is payable on wealth exceeding 1.7 million kroner per 2023 rules, Dalby of BDO Advokaten told The Local.
The tax is paid on net worth, which is the value of your wealth and assets after deducting all debts. A mortgage, for example, would negativley affect your net wealth.
The tax rate for 2023 is 1 percent. If you have taxable assets over 20 million kroner, the wealth tax rate is 1.1 percent for 2023. There are different rules for married couples.
"Wealth tax is calculated based on the values you own at year-end. An increase in the value of a property during a year will, therefore, affect the wealth tax for that year. The person who is the actual owner of the residential property at the end of the income year is responsible for any wealth tax for that income year," Dalby said.
The lawyer explained that, when calculating wealth tax for residential properties, the values are generally determined based on the property's market value.
A full overview of the wealth tax rules is available on the website of the Norwegian Tax Administration.
Norway will collect wealth tax unless there is an agreement as part of a tax treaty with another country to prevent double taxation. As most other countries don't collect wealth tax, few such treaties apply.
"For certain countries such as Spain, France, and Switzerland, it will be different because their wealth tax has different threshold amounts than in Norway. If wealth tax is paid to another country in addition to Norway, you may be entitled to a deduction in Norwegian wealth tax through the credit method.
"Some treaties apply the allocation method to avoid double taxation. This means that the property is not subject to wealth tax in Norway, and you do not receive a deduction for any tax paid abroad," he said.
Carlsen and Fjermeros of Bull & Co Advokatfirma added that only tax residents of Norway as of January 1st in the year for which the tax is assessed are obliged to pay wealth tax to Norway on all assets they own in Norway and abroad.
Real estate-related tax obligations and example scenarios
Taxation on income and gains from real estate will also depend on any potential tax treaties. Tax treaties generally grant the state where the income was generated the right to tax, Dalby told The Local.
"In Norwegian law, the continuity principle applies to inheritance and gift transfers (rollover of tax positions). This means that the recipient assumes the historical acquisition value of transferred assets in a later gain assessment, as well as other tax positions related to what has been transferred.
"The acquisition value is usually the property's purchase price and is used to determine whether there is a future gain on the sale of the property.
"The capital gains tax rate in Norway is 22 percent. The gain is calculated by subtracting the property's acquisition value from its exit value (usually the selling price). Note that there is an important exception to the continuity principle, where the acquisition value for residential property is set at the market value at the time of acquisition," he said.
However, for the exception to apply, the deceased or gift giver must meet the conditions for tax-free sale at the time of the transfer.
Selling a primary residence in Norway is tax-free if two conditions are met:
1. Ownership period: If the owner has owned the property for more than one year when the sale occurs or is agreed upon.
2. Residence period: If the owner has used the entire property as their own residence for at least one of the last two years before the sale.
A common situation that occurs regularly is the transfer of real estate from parents to children, which usually takes place free of charge in Norway.
"It is when the children sell the property that there is a significant risk that the gain will be substantial because the children have 'inherited' the acquisition value from their parents.
"If the recipient of the property intends to use it as their own residence and meets the conditions for a tax-free sale, there will not be any issue. If the intention is solely to resell the property, it will be important whether the deceased met the conditions for a tax-free sale," Dalby said.
He also shared two example scenarios to help people better grasp how the Norwegian rules work.
Scenario A: The deceased purchased a property in 1990 for 500,000 kroner. The property was rented out until the deceased died in 2023. Therefore, the conditions for a tax-free sale were not met at the time of death, and the acquisition value is set at what the deceased purchased the property for. An heir takes over the property with the intention of selling it. At this point, the property is sold for 2 million kroner. In this case, the heir does not meet the conditions for a tax-free sale. Therefore, the heir will be taxed at 22 percent on the gain of 1.5 million kroner.
Scenario B: The deceased lived in the property until their death in 2023. The deceased could have sold tax-free at the time of death. The acquisition value is set at the market value at the time of acquisition, which in this case is 2 million kroner. Therefore, there will be no "gain" when selling.
Dalby warned that the continuity rule only applies in cases where the deceased was taxable in Norway. If a taxpayer receives an inheritance or gift from a foreign taxpayer and the assets are brought into the Norwegian tax jurisdiction, the acquisition value is generally set at the market value at the time of acquisition.
Which country is responsible for taxing your estate after death if you're not Norwegian?
Carlsen and Fjermeros explained that, under Norwegian law, the main rule is that a deceased's estate is a separate taxpayer.
"If the deceased was a tax resident of Norway, the deceased's estate will also have a duty to pay tax to Norway. If the deceased had just moved to Norway and had not yet attained tax resident status in Norway or recently moved from Norway and therefore was still a tax resident of Norway, a specific evaluation must be made to determine if the deceased's estate has a duty to pay tax to Norway," they said.
Tips for people who want to plan their estate effectively
Both Dalby and Hansson believe that settling the estate in Norway can be quite straightforward and simple.
"At the time of death, the courts will issue a certificate ("skifteattest") that states which persons are entitled to act on behalf of the deceased. This is a key document for settling the estate.
"A transfer of real estate from the deceased to the heirs is done by sending the deed to the central registration office. For the transfer of real estate from the deceased to heirs by law, no document fee will be charged.
"If you, however, inherit the property before the time of death, for example, through an advance on inheritance or a gift, you must pay the document fee upon registration," the two legal experts said.
Norway abolished its inheritance tax in 2014, so tax on inheritance no longer needs to be paid. With the abolition of this tax, the Norwegian state introduced other rules for inheritance and gift transfers, including the continuity principle and the exception explained beforehand.
Carlsen and Fjermeros restated that while Norway does not assess inheritance tax, and, therefore, there is no tax liability on gifts or inheritance, the general rule is that the gift recipient or heir adopts the donor's or decedent's acquisition value.
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