After publishing an article based on the Swedish Investingsparkskonto, I received a question about what would happen to your account when you die? In the article I wrote that the account would be passed onto your estate, but what does that actually mean? Well, I thought that it was worth writing about as it is something that everyone should know more about. Here I discuss this the Swedish Inheritance Law as well as the importance of creating a Will.
The Swedish Will (testamente)
What is a Will?
A Will (known as a testamente in Swedish) is a legal document that specifies your wishes of the distribution of your assets after your death. Reasons for writing a Will vary, but usually come down to a person wanting their belongings to be passed onto a specific loved one or charity. It is not necessary to create a Will, and if you don’t, your assets will be divided up as per the inheritance law (I discuss this further down).
Creating A Will
A Will specifies your wishes for after you pass away. There is no legislation that says you have to go to a lawyer to get a legal will, but there are some requirements to make it into a formal document. Writing a Will does not have to be complicated. It is mainly important that the document sets out clear wishes to reduce the risk of any disputes. According to the provisions of the law, a will is valid immediately after it has been drawn up and witnessed, it does not need to be stamped or registered.
It is always important that you do your own research into writing a Will. This article was written based on non-formal experience and does not constitute any legal consultation.
Even though it’s not required, I do encourage you to contact a lawyer about creating your Will.
It is required that a number of so-called statutory formal requirements are met. If one or more are not fulfilled, the will is invalid:
- The Will must an original written document, a copy does not apply.
- A person must be at least 18 years old. People who have reached the age of 16 are eligible, but Will only applies to income or property they have gained themselves.
- The will must be written, dated and signed by the testator (the legal term for the person to whom the will relates)
- The will must be witnessed and signed by two people who are present at the same time as the Will is signed.
Additionally, it can be good (but not required) to include some extra information:
- a statement from one of the witnesses to certify that the person writing the will was in full understanding when the will was written, and what date it took place
- name clarifications and social security numbers of the witnesses
A direct heir (i.e., children, grandchildren, great grandchildren) always has the right to claim their Legal Right (laglotten). The Legal Right is half of the estate. So, if you have two children and leave SEK 100,000 in assets, it is therefore only possible to bequeath SEK 50,000 through a Will. Read further down to find out more about the Legal Right of close heirs.
Some things to think about
Here are a couple of extra things to consider when writing a Will:
- A Will should be clear, detailed and accurate so that there is no room for interpretation.
- Free disposal and full ownership of property should be defined.
- Specify whether property given away is Private
- Ensure the document is kept in a safe place such as at a lawyers office, bank vault or other secure location.
- If new documents are created, the old documents are destroyed.
But what happens if there is no Will? Does your inheritance go to the Government?
No. That’s when Swedish inheritance law kicks in.
What is Swedish Inheritance Law?
When someone passes away without a Will, there are laws that determine how the deceased inheritance (property, money etc) is split up. This is regulated by the laws in Sweden and is known as the Swedish Inheritance Law.
If the deceased was married and the spouses had joint marriage rights, i.e., one of them had matrimonial property (all property that is not private property), division of property must take place before the deceased’s assets can be divided. Housing division must also take place if a surviving cohabitant has requested it. When the division of property is complete and the deceased’s debts have been paid, the inheritance can be changed, ie the inheritance can be divided.
Private property is individual property that is acquired before marriage (i.e., through a prenuptial agreement), a gift certificate or a Will.
Here is how the inheritance law is specified for different relationship types:
Someone who was married
According to the law, married couples inherit from each other and joint children of married parents must wait for their inheritance until both parents have died. In the event of death, the surviving spouse inherits with so-called free disposal. This means that the spouse may do what he or she wants with the property during his or her lifetime – even consume it completely – but not decide on it by Will.
Children of the deceased of whom the other spouse is not the parent (orphan children), have the right to receive their inheritance immediately and do not have to wait until the stepparent has died. However, the child may waive his right to the benefit of the surviving spouse. In that case, the child is entitled to an inheritance on the death of the surviving spouse in the same way as joint heirs.
Someone who was not married
Initially, the deceased’s direct heirs (children, grandchildren etc) are the ones who will inherit. If any of the children has died (or waives their right to inherit) his or her children will inherit. Each group receives an equal number of “lots”.
For example: A person dies and leaves a son and a deceased daughter’s two children (the deceased’s grandchildren). If the inheritance amounts to SEK 100,000, the son receives SEK 50,000 and the deceased daughter’s children receive SEK 25,000 each.
If the deceased has no children, then the inheritance passes down the chain like so:
- If there are no heirs, the deceased’s parents inherit.
- If they are dead, the deceased’s siblings inherit.
- If any of the siblings have died, their children inherit.
- If there are no parents, siblings or nieces and nephews, the deceased’s grandparents or grandparents inherit.
- If they are dead, the deceased’s uncles and aunts inherit.
- The children of uncles, and aunts (i.e., the deceased’s cousins) have no right to the inheritance.
- If none of the above apply, then the inheritance goes to the General Inheritance Fund.
The Legal Right (Laglotten)
Something that may be confusing is the interaction between the legal right and the inheritance.
The Inheritance is what a deceased person leaves behind in the estate. The Legal Right is the part of an inheritance that by law must go to the deceased’s direct heirs (i.e., children, grandchildren, great grandchildren). The Legal Right is part of the heritage that the deceased may not decide on through a Will. By law, heirs are always entitled to 50% of the inheritance.
As an example, if a deceased person leaves two heirs, their legal right corresponds to 25% each of the inheritance.
The direct heirs have an absolute right for their legal share, even if the deceased has decided through a Will that the estate should go in whole or in part to another person. This means that a Will that infringes on the Legal Right is invalid. If the direct heir was left out, the Will must be actively contested by requesting an adjustment of the Will.
The Legal Right is protected by Swedish rules (which are found in the Inheritance Code) and it is not possible to prevent a heirs legal right to the inheritance. The inheritance can, on the other hand, be reduced or increased by a Will, if it does not encroach on the Legal Right.
Partners (Not Married)
Today, it is common for people to live together in a cohabitating relationship without being married. However, a cohabitant does not inherit from the other partner through inheritance law. In order for cohabitants to inherit from each other, they must write a Will.
Note: According to the Cohabitation Act, the surviving cohabitant has the right to request a division of property of the couple’s joint household and home, if the property has been purchased for joint use.
Free Disposal vs Full Ownership
Another place for contention could when defining the difference between freedom of disposal and full ownership rights.
- Freedom of Disposal (free disposal) means that the property is owned freely, but in a limited form. The owner may not write a Will that the property should be fully given to another person or given a large percentage of as as a gift to another.
- Full ownership means that the property is owned freely without restrictions. The owner may decide on the property in a Will and donate everything as a gift, if desired.
According to Swedish law, the inheritance by default has free disposal rights (but this can be changed through the Will). That means that the surviving spouse is the owner of the property, with 2 restrictions, specifically:
- the owner cannot give the property away to someone else in a Will
- the owner may not gift away a large part of the property.
The main reason behind passing inheritance on with free disposal rights is that the family of the deceased has the right to inheritance as well. It basically means that the surviving spouse cannot reduce the family’s inheritance in an unauthorized manner.
How are the Investingsparkskonto or Endowment Insurance Accounts Affected?
So back to the original question at the start of the article. Both the Investingsparksonto (ISK) and Endowment Insurance (KF) are treated differently in terms of what happens if you were to pass away. Without a Will, the ISK account automatically goes to your estate (i.e. the assets are divided up as per the inheritance law).
An Endowment Insurance is treated a little differently. As the endowment insurance account is an insurance, you can specifically choose a beneficiary when you create the account. This is a person who will receive the value of the insurance (your account value +1%) when you pass away. If you have not chosen a specific beneficiary, a general beneficiary appointment applies, (i.e., that the spouse / registered partner / cohabitant inherits in the first place, and if there is no such person inherits children, and ultimately heirs.).
Death is never an easy or nice subject to talk about, but it is extremely important that your wishes and belongings are passed onto those that you care most about. If you do have an ISK account, you can rest easy knowing that if you were to pass away, and you didn’t have a Will, your assets would be passed onto your immediate family.
When someone close to you passes, there is a lot more information about estate inventory, but that is out of the scope of this article. For reference you can read further about when a relative dies from Skatteverkets Website (in Swedish).