Introduction

Understanding the intricacies of inheritance law and succession planning in Sweden is essential for high net worth individuals and expatriates, especially when navigating cross-border estates. The Swedish legal framework, influenced by both domestic laws and EU regulations, presents a structured approach to asset distribution, balancing the wishes of the deceased with the rights of heirs.

This guide provides a comprehensive overview of key aspects of estate planning in Sweden, including the formalities of wills, probate procedures, the role of trusts and foundations, and tax considerations. It serves as a valuable resource for those seeking to ensure their assets are managed and distributed according to their wishes, while complying with Swedish legal requirements.

Will and Inheritance Law in Sweden

Will Formalities under Swedish Legislation

In Sweden, creating a valid will requires adherence to specific legal formalities to ensure the testator’s intentions are enforceable. These formalities are designed to prevent disputes and ensure clarity in the distribution of the estate.

Key requirements for a valid will in Sweden include:

• Written Form: The will must be in writing. Handwritten wills are acceptable if entirely written by the testator’s hand and signed at the end.
• Witnesses: The will must be signed in the presence of two witnesses, who also sign the document. Witnesses cannot be beneficiaries under the will to avoid conflicts of interest.
• Emergency Provisions: In urgent situations, a will can be made orally before two witnesses or as a handwritten document without witnesses. However, such wills are only valid for a limited time if a regular will cannot be made afterward.
• Capacity: The testator must be at least 18 years old and have the legal capacity to make decisions.

If an heir contests the will, they must do so within six months of receiving a certified copy. After this period, if no legal action is taken, the will is considered valid.

Enforceability of Foreign Wills and EU Succession Regulation

Foreign wills are recognised in Sweden under the EU Successions Regulation (650/2012), which applies to deaths on or after August 17, 2015.

For a will to be enforceable in Sweden:

• It must comply with the law of the country where it was made, the testator’s nationality, or where the testator was domiciled or resident at the time of death.
• For immovable property, the will must comply with the law of the country where the property is located.

The capacity to make a will is governed by the law applicable under the regulation, typically the law of the testator’s habitual residence.

To prove the validity of a foreign will, the European Certificate of Succession can be used. These regulations ensure cross-border estates are handled effectively, respecting the testator’s wishes while complying with both Swedish and EU laws.

Estate Administration and Probate Procedures

Swedish National Administration and Estate Inventory

When someone dies in Sweden, their estate is managed by a legal entity known as “dödsbo.” This entity handles the deceased’s assets and liabilities through a relatively straightforward probate process that involves several key steps:

1. Estate Inventory (Bouppteckning):
   The first step is creating a document called “bouppteckning,” which must be completed within three months of death and registered with the Swedish Tax Agency. This comprehensive inventory includes:
   • A detailed list of all assets (property, bank accounts, investments)
   • A list of all debts (loans, unpaid bills)
   • Information about heirs and beneficiaries
2. Role of the Executor:
   The executor, or “bouppteckningsförrättare,” manages the estate and may be:
   • A family member
   • An heir
   • A court-appointed administrator
   Their responsibility is to ensure the estate is distributed according to Swedish law and the deceased’s will, if applicable.
3. Distribution of Assets:
   After completing the estate inventory, assets are distributed to the heirs. This process requires:
   • Agreement among multiple heirs on how assets will be divided
   • Payment of all debts before distribution occurs
4. Role of the Court:
   The court may become involved in more complex situations by:
   • Appointing an administrator for complex estates or when disputes arise
   • Ensuring fair handling of the estate in accordance with Swedish law

Intestate Succession and Forced Heirship Rules

In Sweden, intestate succession rules govern how an estate is distributed when there is no valid will. These rules prioritise direct heirs, such as children and the surviving spouse.

1. Intestate Succession Rules:
   The distribution hierarchy follows a clear order:
   • Children inherit the estate if the deceased has any
   • The surviving spouse inherits if there are no children
   • More distant relatives (parents, siblings, nieces, nephews) inherit if there are no direct heirs
   • The Swedish state receives the estate if no heirs exist
2. Forced Heirship Rules:
   Sweden’s legal system ensures certain heirs receive minimum shares:
   • Children are entitled to half of what they would have received without a will, preventing disinheritance
   • The surviving spouse has an absolute right to receive four times the basic amount specified under the National Insurance Scheme
3. Time Limits for Contesting a Will:
   Heirs must act within a specific timeframe if they wish to challenge a will:
   • Contests must be filed within six months of receiving a certified copy
   • After this period expires, the will is considered legally valid
4. Impact of Gifts:
   Lifetime gifts from the deceased may affect inheritance distribution:
   • Gifts may be deducted from an heir’s share
   • This primarily applies to direct heirs when gifts are considered advances on inheritance

These rules work together to ensure fair estate distribution while protecting the rights of all heirs. Understanding these legal provisions is essential for effective estate planning in Sweden.

Trusts and Foundations in Swedish Estate Planning

Limitations of Anglo-Saxon Trusts under Swedish Law

Swedish law does not recognise the concept of trusts as understood in Anglo-Saxon legal systems like the UK or US. This creates significant challenges for individuals accustomed to using trusts for estate planning in other jurisdictions, particularly with Swedish assets.

Swedish authorities maintain a notably sceptical view of trust arrangements, which manifests in several practical challenges:

• Placing real estate in Sweden into a trust can lead to difficulties with property registration authorities (Lantmäteriet)
• Legal explanations may be required whenever verifying ownership of trust-held assets in Sweden
• Trust arrangements may face unfavourable tax consequences when evaluated against similar Swedish legal entities
• Questions about substantive validity under Swedish law may arise depending on specific circumstances

Due to these legal and practical challenges, trusts are generally not recommended when planning for assets within Sweden.

Establishing Foundations and Alternative Structures

Foundations (stiftelse) serve as the primary legally recognised alternative to trusts in Swedish estate planning. A foundation operates as a distinct legal entity with no owners, established through irrevocable asset transfers for specific, long-term purposes.

Creation requires:

• Asset transfer to the entity
• Management by a board of directors
• Compliance with rules set in its statutes or charter (stadgar)

Swedish law recognises three main foundation categories:

• Family foundations (familjestiftelser): Benefiting specific families
• Charitable foundations (välgörenhetsstiftelser): Promoting public benefit purposes
• Other foundations: Including enterprise foundations (rörelsedrivande stiftelser) for business activities

Tax treatment varies by foundation type:

• Family foundations: Subject to 20.6% corporate income tax
• Charitable foundations: Generally tax-exempt if meeting specific requirements
• Other foundations: Usually subject to standard corporate income tax rate
• Beneficiaries of family foundations may face employment-like tax rates on distributions

Foundations provide a structured, legally robust asset management solution within Swedish law. However, establishment requires careful planning and compliance with:

• Foundations Act (Stiftelselagen 1994:1220)
• Specific tax regulations
• Professional legal and tax guidance

Taxation and Wealth Management for International Estates

Residency, Domicile and Swedish Tax Obligations

In Sweden, an individual’s tax obligations are primarily determined by their residency status. Residents are subject to unlimited tax liability, meaning they must pay taxes on their worldwide income, including income from Swedish and foreign sources. Non-residents, however, are subject to limited tax liability, paying taxes only on income sourced in Sweden, such as income from property or employment in the country.

The concept of domicile is not as significant in Sweden as residency. Nevertheless, it can still play a role in determining tax obligations, particularly in international cases. When determining residency status, the Swedish Tax Agency considers various factors including:

• Length of stay: Spending more than 183 days in a 12-month period generally establishes residency.
• Employment: Having a job in Sweden can lead to residency status.
• Family ties: Living with family members in Sweden can influence residency determination.
• Ownership of property: Owning a home in Sweden may be considered in residency assessments.

Absence of Inheritance Tax and Other Tax Considerations

Sweden abolished inheritance and gift taxes in 2005, which has significantly simplified the tax landscape for estates. However, other taxes may still apply to inherited assets:

• Capital Gains Tax: If inherited assets, such as real estate or securities, are sold, capital gains tax may be incurred. The tax rate is typically 30%.
• Income Tax: Income generated by inherited assets, such as rental income or dividends, is subject to standard income tax rates, which range from 30% to 55%.
• Wealth Tax: Sweden does not impose an annual wealth tax on individuals, simplifying tax management for high net worth individuals.

Strategies for managing wealth in Sweden include utilising wills and foundations to structure asset distribution effectively, considering investments that minimise tax liabilities (such as those with favourable capital gains treatment), and navigating tax implications for cross-border estates, especially for individuals with assets in multiple countries.

Understanding these tax considerations is crucial for effective estate planning in Sweden, ensuring compliance and optimising tax outcomes.

Conclusion

Understanding the intricacies of inheritance law and succession planning in Sweden is essential for high net worth individuals and expatriates, especially when navigating cross-border estates. This guide has covered key aspects of estate planning in Sweden, including the formalities of wills, probate procedures, the role of trusts and foundations, and tax considerations. It serves as a valuable resource for those seeking to ensure their assets are managed and distributed according to their wishes, while complying with Swedish legal requirements.

If you have questions or need assistance with international estate planning in Sweden, contact PBL Legal. Our experts provide specialised services tailored to your needs, ensuring your estate is planned efficiently and in accordance with both local and international laws.

Frequently Asked Questions