Legal Definitions - succession duty

Succession duty refers to a tax levied by a government on the transfer of property or wealth from a deceased person to their heirs or beneficiaries. Unlike an estate tax, which is typically imposed on the total value of the deceased person's estate before it is distributed, succession duty is usually a tax on the individual recipient's right to receive the inheritance, calculated based on the value of the assets they inherit.

Here are some examples to illustrate the concept of succession duty:

• Example 1: Inheriting a Family Home

  After her father passed away, Maria inherited his primary residence, which had a significant market value. In a jurisdiction that imposes succession duty, Maria might be required to pay a percentage of the home's appraised value to the government. This payment is the succession duty, levied directly on her as the beneficiary for the privilege of receiving the inherited property.

• Example 2: Receiving Financial Assets

  When his grandmother died, David was named as the beneficiary of a substantial investment portfolio consisting of stocks and bonds. Before David could fully access or take ownership of these financial assets, the government of the region where his grandmother resided imposed a succession duty. This tax was calculated based on the total value of the investment portfolio David inherited, and he had to pay it as a condition of receiving the funds.

• Example 3: Charitable Bequest

  A wealthy philanthropist left a significant sum of money in their will to a local university for a new scholarship fund. In some jurisdictions, even charitable organizations might be subject to succession duty on large bequests, although often at a reduced rate or with specific exemptions. If no exemption applied, the university would need to pay a succession duty on the inherited funds, effectively reducing the net amount available for the scholarship fund, as it is a tax on the transfer of wealth to the beneficiary.