In the event of death, the heirs of the deceased receive his or her estate. But the tax authorities are always there to claim their share. The rule is as follows: the greater the inheritance, the higher the inheritance taxes. The degree of kinship will also determine the amount of the inheritance taxes which you will have to pay to the tax authorities. However, there are different ways to limit or even avoid inheritance taxes.
GIFT BY HAND OR GIFT BY BANK DEPOSIT
As its name indicates, a gift by hand consists in giving money in person. With a gift by bank deposit, the money is paid to the account. In both cases, the three-year rule applies: there are no inheritance taxes if the donor is alive for at least three years after the gift.
It is possible to register a gift with a notary. You will therefore avoid the three-year rule (see above), but will have to pay gift tax. The amount varies according to the region, as this is a regional matter.
On 1 January 2018, the amount of the gift tax decreased in Wallonia.
For a gift of movable assets, the registration fees amount to 3.3% for a gift to someone in the direct lineage or between spouses and legal cohabitants, and to 5.5% for all others. For a gift of immovable assets, the rate also depends on the relationship between the donor and the beneficiary, as well as on the size of the gift. In Wallonia, a reduced rate applies when the family home is left to someone in the direct lineage, or to the spouse or legal cohabitant.
In the Brussels-Capital Region, the gift tax for immovable assets was lowered and simplified on 1 January 2016. The rates for the direct lineage now range from 3% (up to €150,000) to 27% (over €450,000), and for the others, from 10 to 40%. For movable assets, the rate is 3% for a gift to someone in the direct lineage or between spouses, and 7% for a gift to another person.
For a gift of movable assets, the following rates apply in the Flemish Region:
- 3% for gifts to someone in the direct lineage, between spouses and between legal cohabitants;
- 7% for gifts to other people.
For a gift of immovable assets, the rate is determined by the relationship between the donor and the beneficiary and by the size of the gift.
GIFT WITH USUFRUCT OR LIFETIME RIGHT
Parents may give property to their children and maintain the use of it. They therefore have a lifetime right to live there or to receive rental income from it. By analogy, this is also possible for movable assets such as a sum of money. The donors therefore have a lifetime right to the interest on this capital.
Another way to avoid inheritance tax consists in donation insurance or estate insurance. In this case, your children take out the insurance on your life: if you die within three years after the gift, a capital is paid corresponding to the inheritance or gift tax.
If you have a marriage contract, you might not benefit from all of the possibilities in terms of inheritance. For many people, a marriage contract includes a clause which stipulates that 'the surviving spouse receives the property'. According to this regime, all of the estate belongs to the partner in the case of death. This type of transfer of an estate is not very attractive, especially in terms of taxes. A better clause for you might be the optional allocation clause. Thanks to this formula, the surviving spouse has many more possibilities. For example, he or she could inherit property left in usufruct. Another possibility consists in claiming full ownership or only part ownership.
The new matrimonial law of the federal government has brought many modifications with the aim, among others, to protect the spouse with less means. This new law has not changed anything regarding inheritance tax, which is a regional matter. The Flemish Region has, however, approved a reform of inheritance tax, which enters into force on 1 September 2018. For further information: Registration fees in Flanders: what you need to know