Advantages of Family Succession in Brazil – a comparison to Russia

After the death of a person, a process must start to allow the transfer of that person’s property to those who are entitled to receive them, who are the heirs or beneficiaries of the inheritance.

This process, however, may be different depending on the country where the death took place because each place has its own laws and specificities.

In this article, we are going to establish a comparison between the proceeding of family succession in Brazil and in Russia, as well as highlight the advantages which Brazil offers for the succession process started in its territory.

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Author: Lucas Gomes Furtado

How much is the inheritance tax rate in Brazil and in Russia?

Generally, after the death of a relative, the heirs or beneficiaries who will inherit their estate are also responsible for the payment of inheritance tax. 

This usually happens in several countries around the world, and each of them has its own specific rules regarding the payment and charging of this tax.

In Brazil, the inheritance tax is named ITCMD (Imposto sobre transmissão causa mortis e doação) and must be paid whenever there is the transfer of goods or transfer of rights, in case of death or donation.

In our country, each federative state determines its inheritance tax rate and how it will charge it, but the percentage must not be higher than 8% of the market value of the property.

This means that, according to Brazilian law, there cannot be an inheritance tax rate higher than 8% in relation to the value of the property transmitted to the heirs after death.

In Russia, since 2006, no specific tax has been charged on inheritance, but it is possible that heirs be charged other types of taxes by the Russian government.

As an example, receiving assets such as vehicles, company shares, or properties from someone who is not your relative could result in having to pay taxes which may reach 15% on the value of the asset.

Therefore, if the decedent left the property in a will for someone who was not related to them, the payment of the tax must be made. If the person who received the property is not a resident of Russia, the rate may be as high as 30%.

How does the division of property work in Russia?

Just as it happens in Brazil, Russian law has determined an order of preference in regard to the heirs who have the right to inherit property from a deceased person.

Therefore, within Russian territory, there are seven categories of heirs that must be followed in order for the succession of property to occur. They are:

first category: the spouse, parents, and children of the deceased (or the children’s children, if the children are deceased);

1. second category: siblings (including half-siblings), as well as paternal and maternal grandparents of the deceased;
2. third category: uncles and aunts of the deceased (or their children, if they are deceased);
3. fourth category: great-grandparents of the deceased;
4. fifth category: grandnephews, grandnieces, granduncles, and grandaunts of the deceased;
5. sixth category: more distant relatives;
6. seventh category: stepchildren and stepparents of the deceased. 

Thus, according to Russian laws, at least 50% of the deceased’s estate must be left for first-category heirs, irrespective of the deceased’s original intent.

This means that a Russian citizen can leave only up to 50% of their inheritance to other people, as the other half belongs to first-category heirs, exactly how it also happens in Brazil.

Russian legislation is quite similar to Brazilian legislation in this aspect, which also guarantees that at least 50% of all the estate must be divided among the necessary heirs – descendants, ascendants, and the surviving spouse.

Also, the existence of heirs from a preferential category prevents relatives from other categories from becoming heirs.

Therefore, whenever there is no will, the division of property in Russia must happen among first-category heirs in equal shares, taking into consideration that grandchildren may inherit by representation if their parents are deceased.

If there is no surviving spouse, children/grandchildren, or parents, the estate will be divided among the second category heirs, or in other words, the deceased’s siblings, and grandparents.

This process repeats itself if there are no surviving second-category heirs, in which case the third-category heirs will inherit all the property, and if they are no longer alive, the fourth-category heirs will.

Finally, if there are no surviving relatives up to the sixth category, the estate will be left for relatives by affinity, such as the stepchildren and stepparents of the deceased.

Besides, one curious fact about Russian law is that all heirs must necessarily accept the inheritance, within six months from the day of death, for them to be able to inherit the share of property they are entitled to.

To do that, they must fill out an application of inheritance or request a certificate of right to inherit to a local notary office because only then they will have access to the proceeding of the division of the deceased’s property.

Are there any obstacles or prohibitions to inheriting in Russia?

As happens in many countries around the world, Russia has also established some limitations regarding the right to inherit in specific situations, which are usually related to the conduct of the heirs.

Similarly to Brazilian law, Russian law provides cases where an heir may be considered unworthy of inheriting, as long as there is proof of their acts in court, or they may be disinherited by the estate owner.

Hence, heirs who have attempted on the deceased’s or other heirs’ life, or who have committed another serious crime against them, are not entitled to receive inheritance.

Likewise, heirs who have tried to prevent the estate owner from making a will, who have influenced them on their choices, or who have attempted to modify the content of the document, are also not going to inherit.

Another existing situation that prevents an heir from inheriting is when parents have their parental rights terminated regarding a child in court, and they will not be able to inherit if this child dies.

Finally, the Russian legislation also prevents the children of heirs who were previously considered unworthy from representing them in the succession process, which means that, if a child must not inherit, their own children (the deceased’s grandchildren) will not be able to inherit in their name either.

What are the advantages of starting a family succession in Brazil?

In comparison to Russia, Brazil offers certain advantages for whoever decides to start their family succession here.

After all, as it was mentioned before, in Brazil there is only one way to charge inheritance tax, and the tax rate is limited to 8% on the market value of the property.

Even though Russia has abolished inheritance tax in its territory, it is common for heirs to pay other types of taxes depending on each specific case.

Thus, in these situations, heirs may pay taxes whose total amount equals or may even be higher than the Brazilian inheritance tax rate limit.

Therefore, it is clear that the costs for the heirs to be able to access their inheritance in Brazil are often lower than in other countries.

Besides that, in Brazil, it is also possible for the estate owner to get a private pension plan, which may influence the potential division of their property after death.

That is because the private pension plan holder can define how the division of this money will happen after their death by naming any person they want as a beneficiary to receive them.

According to Brazilian law, most federative states do not charge ITCMD on the amount of money left in private pension plans because it is not part of the inheritance and does not need to be included in the inventory proceeding.

In other words, this amount of money related to private pensions can be received by the beneficiaries irrespective of the course and the conclusion of the inventory proceeding.

Another interesting possibility to be considered is the creation of a holding company by the owner of the estate.

In this kind of company, it’s possible to plan the management of property and/or other companies by the company partners.

There, particular goods belonging to natural people will be gathered and start belonging to the holding company, although still managed by the partners.

An advantage of holding companies is having more safety and better planning of the property that belongs to it, which will also be divided according to the owner of the estate’s wishes, after their death.

Another positive aspect of this kind of company is related to the taxation on the holding, which is usually considerably lower than what the law determines on natural people.

In both scenarios, a holding company allows for a less expensive, less bureaucratic, and more simplified way to conduct the succession family process, as everything has been planned in advance.

Thus, bringing property from other countries to Brazil with the intention of planning a family succession may be an attractive decision for whoever owns property abroad, given these benefits of Brazilian legislation.