Father Withdrew 10 Million TWD Before Death—Does That Avoid Inheritance Tax? Tax Authority Will Investigate 'Where the Money Went'

Many people believe that since inheritance is calculated after death, withdrawing all money from bank accounts beforehand—leaving a zero balance at the time of death—means this amount won't appear in the inheritance tax declaration. However, withdrawing money from a bank account does not mean the property has 'disappeared.' Especially when a decedent, while critically ill and unable to manage their own affairs, suddenly makes large withdrawals or sells stocks, if the heirs cannot prove where the funds went, these amounts may still be legally included in the total taxable estate. The Taipei Tax Office of Taiwan's Ministry of Finance once released a real case: a decedent sold stocks worth 10 million TWD during hospitalization, but because family members could not explain the use of 8 million TWD, that amount was ultimately included in the inheritance tax assessment and subject to penalties.

However, even if the father's total assets were truly only 10 million TWD, being included in the estate does not necessarily mean inheritance tax must be paid. The Northern Region Tax Office announced that for 2026, the tax-free threshold per inheritance case is 13.33 million TWD, with additional deductions potentially available for spouse, children, parents, and funeral expenses. Therefore, whether tax is actually owed depends on the decedent’s total estate, not just this 10 million TWD.

Does converting 10 million TWD into cash exclude it from inheritance?

The answer does not depend on the remaining bank balance, but on whether the property still existed at the time of death. According to the Ministry of Finance's Tax Portal, all real estate, personal property, and other rights with economic value left by the decedent at death must be combined and declared for inheritance tax. This explicitly includes land, houses, cash, gold, stocks, and bank deposits.

In other words, if the father withdrew all 10 million TWD from the bank, but the cash remained in a home safe or was held by family members at the time of death, the money does not cease to be his property simply because it changed from 'deposit' to 'cash.' If it still belonged to the father at death, it generally remains reportable as part of the estate.

However, if the father had full capacity and genuinely used the money for personal living expenses, medical care, or nursing costs—and those assets no longer exist at death—the situation differs. If the property was instead transferred free of charge to others, it may trigger gift tax or fall under the 'deemed inheritance' rule for gifts to specific relatives within two years of death.

Large withdrawals during serious illness—if families can't explain the purpose—may be reclassified as inheritance

Most importantly, large financial movements occurring when an elderly person is critically ill and unable to manage their finances require special attention.

Article 13 of the Enforcement Rules of the Inheritance and Gift Tax Act states that if a decedent incurs debt, sells property, or withdraws deposits during a period of critical illness when they are unable to manage affairs, and the heirs cannot prove the use of the loan proceeds, sale price, or withdrawn funds, these amounts should still be included in the taxable estate.

This rule has a crucial prerequisite: 'during the period of critical illness when unable to manage affairs.' It does not mean that every withdrawal made before death requires heirs to later justify its use to the tax authority.

On January 30, 2026, the Taipei Tax Office stated in a press release that during inheritance tax audits, if the tax authority finds asset sales, abnormal large-scale, or frequent withdrawals shortly before death, they may further inquire with medical institutions about the decedent’s physical and mental condition at the time. If it is confirmed that the person was unconscious, cognitively impaired, or incapable of managing their affairs, and the heirs cannot explain the fund flows, the relevant amounts may be deemed taxable inheritance.

Tax authority reveals real case: 10 million TWD from stock sale, 8 million unexplained and reclassified as inheritance

The Taipei Tax Office once disclosed an actual audit case.

The tax authority found that decedent Jia-Jun, during hospitalization one month before death, sold all shares in listed and OTC companies, receiving a total of 10 million TWD. However, when heirs filed the inheritance tax return, they only reported 500,000 TWD in bank deposits, drawing the tax office’s attention.

The tax authority then verified with the hospital where Jia-Jun was treated and discovered that at the time of the stock sale, he was already in a coma and unconscious, lacking the ability to manage his finances.

The family told the tax authority that the 10 million TWD from the stock sale was used to pay for Jia-Jun’s medical expenses and nutritional supplements. However, they could only provide documentation for 2 million TWD of related medical costs, failing to explain the remaining 8 million TWD.

Therefore, the tax authority ultimately included the unexplained 8 million TWD into the total taxable estate and imposed penalties.

One common misunderstanding about this case: it is not that 'since the final account balance was only 500,000 TWD, the missing 9.5 million was fully reclaimed,' but rather that out of the 10 million TWD from the stock sale, the family could prove the use of 2 million TWD, leaving 8 million unexplained—thus, only the 8 million was included in the estate. The 500,000 TWD was the amount of bank deposits originally declared by the heirs.

What if instead of withdrawing cash, the 10 million TWD was gifted to children beforehand?

Another common practice is transferring money to a spouse or child during one’s lifetime. This also cannot simply be assumed to 'remove it from inheritance' once ownership is transferred.

Current Article 15 of the Inheritance and Gift Tax Act stipulates that if a decedent gifts property to their spouse, legal heirs, or spouses of such heirs within two years of death, those assets are generally treated as part of the decedent’s estate and included in the total taxable amount.

The Ministry of Finance’s Tax Portal directly states that property gifted within two years of death to spouses, children, grandchildren, parents, siblings, grandparents, and spouses of these relatives falls within the scope requiring consolidated inheritance tax reporting.

Therefore, if the father directly gifted 10 million TWD to his son within two years of death, it cannot be considered entirely unrelated to the father’s estate just because the money is now in the son’s bank account.

It should be noted that on July 30, 2026, the Executive Yuan passed a partial amendment draft of the Inheritance and Gift Tax Act and submitted it to the Legislative Yuan for review. On August 19, the Finance Committee of the Legislative Yuan reviewed the draft amendments. However, as of the time of writing, the amendment has not completed its third reading or official promulgation, so current regulations remain in effect.

Does including 10 million TWD in the estate mean 1 million TWD in inheritance tax must be paid?

Not necessarily.

'Including in the total estate' and 'actually owing inheritance tax' are two different matters.

The Northern Region Tax Office announced on May 21, 2026, that the 2026 inheritance tax exemption threshold is 13.33 million TWD. If the decedent has a spouse, an additional deduction of 5.53 million TWD applies; each direct descendant may deduct 560,000 TWD; each parent 1.38 million TWD; and funeral expenses are deductible up to 1.38 million TWD—actual eligibility depends on individual circumstances.

Thus, assuming the father’s total estate is indeed only 10 million TWD, with no other special circumstances, the 13.33 million TWD exemption alone exceeds this amount, so inheritance tax typically would not arise from this 10 million TWD alone.

However, in reality, estates usually include more than just bank deposits. If the father also owns real estate, land, stocks, or funds, and the originally declared estate was already close to the exemption threshold or within the taxable range, discovering hundreds of thousands—or even 10 million TWD—of unexplained funds could significantly increase the tax burden.

The 2026 applicable inheritance tax brackets are: 10% on net taxable estate up to 56.21 million TWD; 15% on amounts exceeding 56.21 million TWD up to 112.42 million TWD; and 20% on amounts exceeding 112.42 million TWD. The National Taxation Bureau announced that these brackets remain unchanged for 2026.

The biggest risk isn't 'withdrawing money'—it's being completely unable to explain where it went

Therefore, if an elderly family member is hospitalized due to serious illness and children assist with financial management, any large withdrawals or asset sales should be accompanied by preserved proof of fund usage.

The Taipei Tax Office reminds that invoices, receipts, and other supporting documents should be properly kept. If fund usage cannot be proven, and the transaction occurred during a period of serious illness and inability to manage affairs, it may be included in the inheritance declaration as per regulations.

If inheritance tax has already been filed but there are omissions or underreporting, the Ministry of Finance’s Tax Portal states that in addition to collecting the underpaid tax, penalties of up to twice the underreported tax amount may generally apply. However, current regulations include certain exemptions for small amounts or voluntary corrections, which must be assessed case by case.

Therefore, the idea that 'emptying the bank account before death avoids inheritance tax' is not that simple.

What truly matters is whether the money still exists at the time of death and whether it still belongs to the father. If it was withdrawn during a period of serious illness when the father could not manage affairs, it also depends on whether the family can reasonably prove where the money went. Simply converting deposits into cash and hiding it, or moving large assets when the elder can no longer manage finances—without providing proof of fund usage—does not allow one to avoid inheritance tax simply by 'emptying the bank account.'

Source: Taipei Tax Office, Ministry of Finance, January 30, 2026, 'Key to Taxing Property Sold During Critical Illness of Decedent – Explained.' National Law Database, Enforcement Rules of the Inheritance and Gift Tax Act, Article 13. National Law Database, Inheritance and Gift Tax Act, Article 15. Northern Region Tax Office, May 21, 2026, '2026 Inheritance Tax Exemption and Deduction Amounts.' Ministry of Finance