Two-stage making and two-stage wills are cheaper

What is a two-step will? A two-stage will 2023 or the turbo version of a will is often advantageous and mainly has tax benefits. The two-step will or two-step will prevents the surviving parent from having to pay inheritance tax and inheritance tax on the children’s share. But one day inheritance tax will have to be paid on the inheritance. The two-stage making and two-stage will can certainly be a good solution. Let the notary calculate for you whether a two-step will is also beneficial in your case. Save inheritance tax. See the calculation example for illustration.

The surviving spouse and legal inheritance law

According to inheritance law, if no will has been drawn up, the surviving partner inherits all assets of the estate. The exemption for the surviving partner in the event of inheritance or inheritance amounts to more than 600,000 euros. If the inheritance amounts to more than 600,000 euros, the surviving spouse would have to pay inheritance tax. The following amounts and percentages must be paid in inheritance tax on the excess:

Inheritance tax 2022 and 2023

The inheritance tax rates for 2022 and 2023 are:

inheritance tax 2022:

heritage

inheritance tax 2022

up to a maximum of 130,425

10%

from 130,425

13,043 plus 20% on the excess

inheritance tax 2023:

heritage

inheritance tax 2023

up to a maximum of 138,642

10%

from 138,642

13,864 plus 20% of the excess

These rates also apply to children who inherit from a parent, but with an exemption of approximately 23,000 euros (2023). If a child inherits 41,000 euros from a parent, 10 percent tax must be paid on approximately 18,000 euros, or 1,800 euros. But in practice, that money is not always present or freely available. Don’t be surprised and read on about the options to do something about this.

Have a paper debt

In reality, the surviving spouse not only inherits the property, but is also assigned a debt to his children. In order to protect the surviving spouse, the legislator has decided that the child shares in the inheritance are not immediately claimable by the children, but are constituted by a paper debt from the surviving spouse to his children. In short, the children inherit a non-payable claim on the surviving spouse, while the surviving spouse can continue to live in the house and pay the children’s inheritance tax.

Paying inheritance tax and inheritance tax, example

This also means that the tax authorities will treat the situation clearly differently than initially expected. The tax authorities split the inheritance into two parts for tax reasons:

  • Part A is the claim of the children against the surviving spouse.
  • Part B is the inheritance minus part A.

Tax must be paid on both A and B. Inheritance tax must be paid on part A, taking into account the exemption per child of almost 23,000 euros in 2023 (22,918 euros in 2023) and on part B taking into account the exemption of more than 723,625 euros (2023). In practice, this means that inheritance tax must be paid primarily on their share of the inheritance due to the low exemption for children. This despite the large exemption that applies to the surviving spouse. The children’s inheritance tax on the claim that is not immediately payable is paid by the surviving spouse and deducted from the children’s claim. This is especially annoying for the surviving spouse if there are insufficient liquid assets or they are needed for other purposes. The money can also be tied up in your own home, in investments, savings deposits with a longer term or otherwise.

Two-stage making and two-stage will

A two-step will can be used in many situations, but we see it most often when there are children and it is expected that there will be a surviving partner. In the case of a two-stage will or two-stage will, the surviving spouse is then appointed as the sole heir. The children have no claim against the surviving spouse. The children are named in the same will as heirs of everything left behind by the survivor of the estate. The assets of the first parent to die only accrue to the children once the surviving parent has also died. The first heir is also called the encumbered, the next heirs the expectants. As the name suggests, the two-step will contains two steps:

Stage 1 two-stage will:

Step 1 is that the entire inheritance passes to the surviving spouse. The surviving parent retains the inheritance and may dispose of it or draw it up in the meantime. It is essential for inheritance tax that the surviving spouse is deemed to have inherited everything and that no inheritance tax has to be paid by the children, since they have been disinherited in the first instance.

Stage 2 two-stage will:

Step 2 comes into effect upon the death of the surviving spouse. As soon as the surviving parent dies, it is as if the children inherit twice. They inherit the remaining part of the first deceased separately and the part of the surviving survivor separately. This way they can also use their exemption twice.

Is two-stage making and two-stage will more beneficial

A two-step will and two-step will (partly) prevent the surviving spouse from suddenly being faced with expenses for which the resources may not be available. But one day the inheritance will have to be settled, whether in one or two steps. It is therefore not said that a two-stage will will always be cheaper.

Calculation example for two-stage will 2023

Suppose a family with two children that has a capital of 600,000 euros and is married in community of property. Suppose the mother dies. The estate to be distributed then amounts to 300,000 euros. Also suppose that the statutory interest rate is lower than 6%. The amounts below are rounded amounts. Scenario 1 without a will Without a will, everyone receives 100,000 euros from the inheritance (each child 100,000 euros and the father 100,000 euros). The surviving spouse does not have to pay inheritance tax for himself, but twice 7,700 euros for his children, or 10 percent per child on rounded off 77,000 euros. That’s a total of 15,400 euros. If the surviving spouse dies and the assets remain the same, the children will jointly inherit another 400,000 euros, namely the 100,000 euros that the father inherited plus his assets of 300,000 euros. This means another €21,535 in inheritance tax per child, namely 10% on €138,642 (first bracket limit) and 20% on €38,356 because €23,000 per child is exempt from inheritance tax. In total, 43,070 euros plus the previous 15,400 is a total inheritance tax of 58,470 euros Scenario 2 with a two-stage will With a two-stage will, no tax is initially paid on the 300,000 euros that the surviving spouse inherits. Then the surviving spouse dies and the assets appear to have been maintained. In that case, the children inherit in two steps, first the 300,000 euros from the first deceased and then another 300,000 euros from the now deceased surviving survivor. Taking into account the exemptions, they pay a rounded amount of 13,600 euros per child on both inheritances, or a total of 54,400 euros. This is 4,070 euros less than in scenario 1 (all rounded amounts).

Two-stage making and usufruct

The defiscalization scheme has been expanded since 2012. All usufruct situations for the benefit of the surviving partner arising from a testator’s will are now detaxed. This basically means that the child does not include the surviving usufruct in box 3, but the surviving usufructuary does, up to the full value. The surviving spouse will therefore pay wealth tax to the extent that the assets exceed the exemption for assets in box 3. How heavily this weighs and is to the detriment of a two-stage making, depends largely on how long the surviving spouse can enjoy the usufruct.

Turbo two-stage will

The turbo two-stage will is another new discovery that combines the two-stage will with the benefits of the statutory scheme. It is arranged in such a way that the surviving parent again does not pay inheritance tax for the children, but the children do have a tax benefit that increases with the agreed interest. It is still unclear to what extent this interest will be regarded as a donation by the tax authorities.

Final two-stage will 2023

Whether a two-step will is beneficial for you depends on the size of the inheritance, how old you will become and the extent to which you can make full use of the inheritance tax exemption. In any case, it is very worthwhile to check this out. Assumptions must also be made: if the surviving spouse continues to enjoy life for many years after the death of the first deceased, this will have consequences for the inheritance and any interest to be paid to the children in the event of a surviving will or legal distribution, where the surviving spouse inherits and the children have a claim on the surviving spouse.

read more

  • Less inheritance tax for surviving spouse: filling legacy, filling legacy