How Much Inheritance Can Each Successor Receive in the Case of Subrogation Inheritance?

In our previous article, we shared the concept of renouncing inheritance. In this article, we will discuss the concept of subrogation inheritance and related tax regulations.

Subrogation inheritance and renouncing inheritance are two completely different situations. Under civil law, subrogation inheritance occurs when the successor passes away before the decedent or when the successor loses the right to inherit due to specific reasons. In such cases, the successor's direct lineal descendants inherit in their place.

For instance, suppose a grandfather passed away in 2024, while the eldest son(X) had already passed away in 2001. Initially, the grandfather's successors would have been the eldest son(X) and the younger son(Y). However, since the eldest son passed away before the grandfather, the eldest son’s rightful share will be inherited by his direct lineal descendants, A and B, through subrogation. In this case, the grandfather's successors are now the younger son(Y), A, and B. The younger son(Y) will receive half (1/2) of the grandfather’s inheritance, while A and B will each receive one-fourth (1/4) of the inheritance (originally, the eldest son's share of 1/2 is equally divided between A and B).

Tax Regulations Regarding Subrogation Inheritance

Under the Inheritance and Gift Tax Act, in the case of subrogation inheritance, the deductible inheritance amount is not restricted to the amount deductible before the subrogation occurred. Continuing from the previous example, if the eldest son(X) were still alive, the deductible inheritance amount from the grandfather’s estate would be NT$1.12 million (NT$560,000 2 people: X and Y). However, since X has passed away, and his children, A and B, have inherited in his place, the deductible inheritance amount is NT$1.68 million (NT$560,000 3 people: A, B, and Y).

Renouncing Inheritance Does Not Necessarily Benefit the Next Generation

Continuing the previous example, suppose Y renounces his inheritance after the grandfather’s passing. In that case, Y’s direct lineal descendant (son C) will not receive a share of the grandfather’s inheritance. Since Y has renounced his inheritance, his rightful share would have been inherited by the eldest son (X). However, because X had already passed away, his children, A and B, inherited in his place and they did not renounce their inheritance. Therefore, in this scenario, the Y’s share will be inherited by A and B rather than the Y’s son, C. In other words, A and B will equally split the grandfather’s inheritance. Conversely, if Y, A, and B all renounce their inheritance, then the grandfather’s entire estate will be inherited by C.

Tax Regulations in Case of Renouncing Inheritance

Since Y renounced his inheritance, his original deductible inheritance amount can no longer be used. In this case, only A and B remain as the successors, so the total deductible inheritance amount is NT$1.12 million (NT$560,000 * 2 people: A and B). If A, B, and Y all renounce their inheritance, making C the sole successor, the deductible inheritance amount will be only NT$560,000 (for one person, C).

Subrogation Inheritance Is Limited to Direct Lineal Descendants

Continuing from the previous example, suppose X had no children and left only a spouse. In this case, after the grandfather’s passing, since the spouse is not a direct lineal descendant of X, she does not have the right to inherit the grandfather’s estate. In this scenario, the Y becomes the sole successor, inheriting the entire estate of the grandfather. Under tax regulations, since there is only one successor, the deductible inheritance amount is limited to NT$560,000.

When a family member passes away before the decedent, subrogation inheritance occurs. If a successor also wishes to renounce their inheritance, it is crucial to pay special attention to the order of succession and the distribution of shares under civil law. Additionally, tax regulations regarding the calculation of deductible inheritance amounts must be considered. If inheritance issues arise, it is advisable to consult a professional accountant for legal guidance to protect one’s inheritance rights.