Chancellor seeks review of tax on inherited property sales

Estonia’s Chancellor of Justice has asked the Finance Ministry to review whether heirs should receive different tax treatment when they sell inherited property to repay the deceased person’s debts, ERR reports. The request follows a case in which a surviving spouse faced an estimated €15,000 income-tax bill despite intending to use the sale proceeds to repay a loan.

The person who contacted the Chancellor had bought a property jointly with their spouse, with each owning half as separate property. After the spouse died, the surviving spouse and their minor child inherited the deceased’s share.

An inventory showed that the estate’s liabilities exceeded the value of its assets by about €57,000. The loan was also secured by the surviving spouse’s separate home, where they live with the child.

When the surviving spouse sought to sell the inherited property quickly to repay the loan, they learned that the deceased spouse’s share of the property’s acquisition cost would not be transferred to the heir for tax purposes. The Tax and Customs Board also did not take into account loan payments made by the surviving spouse while their spouse was in a coma. The board’s illustrative calculation put the potential income-tax bill at about €15,000.

The Chancellor’s office said the case raises questions about whether the tax treatment is consistent with constitutional protections for property, the proportionality of the tax burden and equal treatment. It has asked the Finance Ministry whether the goal could be achieved in a way that places less of a burden on heirs, particularly when inherited debts exceed the value of the estate and the property is sold to meet those debts.

Chancellor’s adviser Evelin Lopman also asked whether the law should provide an exception in such cases, subject to additional documentary evidence from the heir. She highlighted a difference in the treatment of assets: according to tax authority guidance, a surviving spouse selling securities that belonged to the spouses’ joint property can take into account their full acquisition cost, while a different approach applies to inherited real estate.

The Chancellor’s office has asked the ministry whether it considers a change to the rules necessary. The ministry has just over a month to respond.