Protect Your Legacy By Minimizing Your Hungary Inheritance Tax Now

Protecting your loved ones’ financial future is the most important part of estate planning. However, in Hungary, inheritance tax can take a large chunk of the inheritance you leave behind.

Understanding the tax implications of inheritance money and taking the necessary steps to minimize the tax burden on your family is essential.

Hungary’s Inheritance Tax System

Hungary follows a tiered inheritance tax system, and the inheritance process is governed by book seven of the civil code. Hungary’s inheritance law impacts two succession types. The first one is testacy, which includes a will. The second one is intestacy, where there is no will. or an existing will is declared void.

A flat rate of 18% applies to all inherited assets except for real estate. This is referred to as the general inheritance tax rate.

If you leave residential property for your heirs, they will benefit from a reduced tax rate of 9%. Moreover, the surviving spouse and direct descendants are exempt from inheritance tax.

An additional tax, estate transfer tax, applies to real estate. The rate is 2% or 4%, depending on the property value. However, the maximum tax amount cannot exceed HUF 200 million per property.

Minimizing Inheritance Tax

While your direct descendants and spouse are exempt from inheritance tax, you can optimize the value of your legacy for your other beneficiaries.

For instance, you can gift a portion of your assets while alive. This will reduce your taxable estate. Property subject to gift duty includes immovable property in Hungary and movable property (if the transfer happens in Hungary). It also includes rights related to movable property and vehicles registered in the country.

Movable property worth less than HUF 150,000 is not taxable. The gift must not be documented in a contract. It is important to consult a tax advisor to ensure your gift strategy complies with tax regulations. There is a three-year time limit, so only gifts made three years before death will be eligible for tax exemption.

Alternatively, you can potentially rely on life insurance to create a tax-free benefit for other beneficiaries. The death benefit payout of a life insurance policy is not part of your taxable estate. This means your beneficiaries will receive the full payout amount.

You could consider adding a beneficiary as a joint owner with the right of survivorship. You would typically do this with bank accounts or real estate that automatically transfer ownership after your death. This strategy could minimize inheritance tax, but you must understand the potential legal implications.

Lastly, you could donate to registered Hungary charities. Consider establishing a charitable trust to distribute assets to charities to reduce inheritance tax.

Additional Factors to Consider with Hungarian Inheritance Tax

Double taxation treaties may apply if you have assets or beneficiaries located outside of Hungary. Again, it is crucial to consult a tax advisor to ensure your estate planning complies with all tax regulations.

Furthermore, you must review and update your estate plan whenever your life circumstances change. These changes include marriages, births, or the death of a primary beneficiary.

Securing Your Loved Ones’ Future

Strategic inheritance tax planning will allow you to secure your loved ones’ future. Your legacy will positively impact their lives, and they will carry it on in your name.


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