Do you have an old will lying around? Did you know that a will always remains valid and is not adapted to new legal rules? The new Gift and Inheritance Tax Act is coming. Perhaps this is the time for you to revise your will.
January 2010 is the intended effective date of the revised law. State Secretary De Jager presents the new law as a tax reduction. Taxes on inheritance and donations will be significantly reduced, exemptions will increase and transferring a company during your lifetime will soon become easier and cheaper.
From 2010: three rate groups
Part of the taxable acquisition
Rate group 1 (partners and children)
Rate group 1A (grandchildren)
Rate group 2 (other acquirers
0 – 125 000
€125 000 – higher
In the event of inheritance, the exemption for partners increases to 600,000 and for children and grandchildren to 19,000. For other beneficiaries and great-grandchildren, the exemption will be 2000. NB: In the new revised law it is no longer possible to avoid tax, as was still possible under the old inheritance law.
Change a will?
It is an illusion to think that with a will you have arranged everything properly forever. You should check once every five years whether the will is still up to date, for example because the law has been changed or because you are divorced and you want to leave it to your new partner. Your notary can tell you whether it is necessary to change your will.
From 2010, cohabiting partners are only entitled to exemption from inheritance tax if they live together at one address for six months or longer and have a notarial cohabitation contract. If you or your partner die within those six months, the exemption does not apply and you or your partner must pay 30-40% tax on the inheritance. By drawing up a cohabitation contract you can ensure that you are treated the same as married couples under the Gift and Inheritance Tax Act.
By including the hard exclusion clause, you prevent your son-in-law or daughter from walking away with part of what you left to your own children. The gift or inheritance will then not fall into the marital community in the event of either divorce or death. With the soft variant, your gifts and inheritance do not fall into the marital community in the event of divorce, but in the event of death. You then respect your child’s preferences and do not restrict your son or daughter from leaving his/her assets to the partner as advantageously as possible.
People who have their own business often marry under a prenuptial agreement to prevent their partner from being financially liable for the company, for example in the event of bankruptcy. A large difference in assets, children from a previous marriage or to cover divorce risks can also be a reason to opt for a prenuptial agreement. Switching from a prenuptial agreement to community of property (e.g. when selling the company) can be attractive. If the richest spouse dies earlier, the partner has to pay less inheritance tax. However, if the less wealthy partner dies before the wealthier spouse, there is a risk in community of property that he will, as it were, inherit part of his own assets and have to pay inheritance tax on his own money. In any case, the tax authorities do not consider the transition to community of property as a donation.
Have you had a charity will drawn up in the past with the aim of saving taxes and benefiting the charity? For example, when cousins were the closest relatives in an inheritance, they paid the highest rate of inheritance tax (41-68%). Taxes could be saved with the charity will. The charity was then appointed sole heir with the obligation to give the nephews and/or nieces a legacy free of right. On balance, the (tax) benefit then went to charity and the nieces and nephews received the same amount as before. As of January 1, 2006, such a will no longer offers tax benefits. The favorable calculation free of duties and costs has been deleted and the charity is completely exempt from inheritance tax. It may be wise to discuss with the notary whether you need to amend your charity will if you have had such a will drawn up in the past.
When making a change, take notary costs into account. To save on this, you can request quotes here and there and negotiate the price. If possible, agree on an all-in price and have it confirmed in writing. If notaries make a reservation about the price, ask about any additional costs and have them put in black and white.