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Estate Tax Planning

Is there an inheritance tax in Georgia?

Generally, no for close relatives (I and II class heirs). However, inheritance received by distant relatives or non-relatives is treated as taxable income (usually 20%).

Do I pay tax on property inherited from my parents?

No. Property inherited from parents is fully exempt from income tax in Georgia, regardless of its value.

Does the heir inherit tax debts?

Yes, the heir inherits the deceased's tax liabilities, but liability is limited to the value of the inherited assets.

What if I am a foreigner inheriting property in Georgia?

You are subject to the same Georgian tax laws as citizens. However, you must also check the tax laws of your home country to avoid double taxation.

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Estate Tax Planning: Financial Security for Future Generations

Inheritance involves not only emotional weight but often significant financial and legal obligations. Although Georgia's tax legislation is quite liberal regarding inheritance, there are specific nuances that, if overlooked, can impose an unexpected tax burden on heirs. Estate Tax Planning is a strategic process aimed at minimizing or completely eliminating taxes arising from the transfer of assets through legal means. This is particularly relevant for those planning to leave property to distant relatives, non-relatives, or who own assets across multiple jurisdictions.

Proper estate planning ensures that your accumulated wealth is transferred to your chosen beneficiaries in maximum volume and is not diminished by state taxes. This process involves not only drafting a will but also structuring assets during your lifetime, utilizing gifting mechanisms, and effectively managing tax exemptions. Legal.ge offers access to qualified tax lawyers and inheritance law specialists who will help protect your family's financial future.

What Does Estate Tax Planning Cover?

Specialists on Legal.ge offer comprehensive services covering the following issues:

  • Tax Liability Analysis: Determining which class of heirs is exempt from income tax and who will have to pay.
  • Gifting vs. Inheritance: Developing a strategy — whether it is better to gift property during one's lifetime or leave it by will, from a tax efficiency perspective.
  • International Taxation Issues: If the testator or heir has assets or residency in another country, applying mechanisms to avoid double taxation.
  • Debt Planning: Managing the tax debts of the testator so they do not become a heavy burden for the heirs.
  • Tax Filing: Preparing and submitting necessary declarations to the Revenue Service after receiving the inheritance.
  • Business Asset Transfer: Structuring the transfer of company shares to ensure business continuity and minimize tax risks.

Common Scenarios and Real-World Examples

Estate tax planning is needed in various life situations:

  • Gifting Distant Relatives: A testator wants to leave an apartment to a nephew or cousin. Under Georgian law, III and IV class heirs (and non-relatives) are taxed with income tax. A lawyer helps find the optimal path.
  • Heir Living Abroad: An heir lives in Europe or the USA. Even if they might not pay tax in Georgia, their country of residence might tax the received inheritance. Cross-border planning is required.
  • Large Real Estate Portfolio: An heir receives multiple apartments and commercial spaces. They incur property tax liabilities. Planning involves forecasting and managing this obligation.
  • Unregistered Marriage: Partners live together without signing a marriage act. Legally, they are not each other's heirs, and receiving property by will might be taxed as receiving income from "other natural persons."

Georgian Legal Framework

Inheritance taxation is regulated by the Tax Code of Georgia and the Civil Code:

According to the Tax Code, property received as a gift or inheritance by I and II class heirs (children, spouse, parents, siblings, grandparents, grandchildren) is exempt from income tax. This is a crucial exemption.

However, if property is received by III or IV class heirs (e.g., uncle, aunt, cousin) or a person who is not a relative, the value of the received property is subject to income tax (usually 20%), if its value exceeds the minimum threshold set by the Tax Code (1,000 GEL or 150,000 GEL, depending on the case).

Property tax should also be considered, which is imposed on the heir from the moment of registration of ownership rights if their family's annual income exceeds 40,000 GEL.

Step-by-Step Service Process

Working with a specialist on Legal.ge involves the following steps:

  1. Audit: Examining your assets and the circle of potential heirs.
  2. Risk Assessment: Determining what taxes might arise under the current scenario.
  3. Strategy Development: Proposing alternative ways (e.g., sale-purchase, gifting, will, usufruct).
  4. Document Preparation: Drafting contracts, wills, or other legal documents.
  5. Execution: Notarizing documents and registering them in the Public Registry.

Why Choose Legal.ge?

Tax legislation is complex and often changes. A mistake could cost your heirs up to 20% of the property's value. Legal.ge gives you access to experts who thoroughly know Georgian tax and inheritance law. With our help, you can legally reduce taxes and ensure the safe transfer of your property to future generations. Plan today for a peaceful tomorrow.

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