If you don't make provision for what happens to your property when you die, the state will do it for you and specify who your heirs are and what they stand to inherit from you. Within the European Union, that's the inheritance law of your last usual residence1.
What is inheritance planning?
Inheritance planning lets you take steps while you're still alive to ensure that your assets are passed on to your loved ones according to your wishes. Doing this before you die lets you
- Protect or privilege the position of certain next of kin
- Leave (at least part of) your assets to people other than your legal heirs
- Lighten your heirs' inheritance tax bill
- Transfer assets before you die to give heirs their inheritance early
Here, we look into the statutory provisions and how you can plan your inheritance in Belgium.
Your legal relationship to your partner is key
How you and your partner choose to live with each other in the eyes of the law is key to determining what one of you will inherit from the other.
- De facto cohabitees do not inherit from each other according to the law
- Legal cohabitees inherit usufruct of the home and its contents from the partner who dies first
- Married couples are legally each other's 'residuary legatee'2
A marriage contract enables you to privilege your spouse, such as when you
- Include certain personal belongings as joint assets
- Specify that the surviving spouse receives more than half or even all of any joint assets (where the surviving spouse takes everything under what's known as a survivorship clause), though this can be costly when it comes to inheritance tax
- Add optional clauses to your marriage contract, giving the surviving spouse the choice of whether to take full ownership or just usufruct of all or part of the joint assets (the benefit being that the survivor has the option of deciding on this when their partner dies, based on the circumstances at that time such as their age, health condition and relationship with any children from the marriage)
A marriage contract also lets you protect children from a previous relationship.
Such changes have an effect on the distribution of assets on death. And certain changes can lead to higher inheritance tax bills, so it's important to weigh everything up and get legal advice before taking a decision.
A will allows you to leave part of your assets to a beneficiary of your choosing, though you cannot bequeath the portion set aside by law for your residuary legatees2. If someone has left you something in their will, you'll only receive it after that person has died. A will can always be revoked. Beneficiaries under a will have to pay inheritance tax on bequests.
Making a gift is a way of transferring assets to a chosen loved one while you are still alive. This is also a situation where you need to take account of the portion of your estate set aside by law for your residuary legatees2.
A person who receives something gifted to them is known as a donee.
In practice, many people gift property whilst retaining a life rent (or 'usufruct'). The gifter retains beneficial ownership of the gifted property during their lifetime (e.g., interest or rental income) and also keeps control over the asset (the donee cannot dispose of it without the life tenant's consent).
Gifts of immovable property
If you want to gift immovable property to someone, you'll need the help of a notary-public. This involves drawing up and registering a deed of gift and paying gift tax to the relevant local authority. Gift tax in Flanders was lowered on 1 July 2015, increasing the attraction of gifting immovable property.
Gifts of movable property
You can gift movable property in a number of different ways
Through a Belgian notary-public
You pay gift tax and inheritance tax does not apply if the donor dies.
By means of an inter vivos gift via a bank or through a foreign notary-public
An inter vivos gift via a bank is where you transfer money or securities from your bank account to the donee's. The existence and terms of gifts of this type must be attested by a signed side agreement know as a 'pacte adjoint'.
You don't pay any gift tax. Inheritance tax is only payable on gifts if
- The donor dies within three years of making the gift
- The gifter resides in the Flemish Region at the time of death and went to a foreign notary public to make a gift of moveables under retention of a life rent after 1 June 2016. Regardless of how much time elapses between the gift and death, inheritance tax will always be due.
When you register the documents accompanying an inter vivos gift via a bank or a deed of gift executed before by a foreign notary-public, you'll have to pay gift tax. In such cases, there's no inheritance tax to pay if the donor dies.
Life insurance is another way of making someone a beneficiary while you're still alive or if you die, whilst still taking account of the portion of your estate legally set aside for your residuary legatees2. For instance, you may want to name your grandchildren as beneficiaries. Because they're taxed separately at the rate for direct-line relatives, they'll have less inheritance tax to pay in total as the tax charge is spread over several heirs.
When the insured event occurs (you die or your insurance policy matures), your insurance company pays a capital sum to the beneficiaries named in your policy. You can technically surrender a life insurance policy or change beneficiaries named under your policy at any time, provided the insured event has not occurred.
A contractual beneficiary clause under a life insurance policy takes precedence over what is stipulated in a marriage contract or will. This is because the insurance pay-out goes straight to the beneficiaries under the clause without passing into the deceased's estate. You can avoid this happening by naming your estate as the beneficiary, in which case the capital sum will be paid along with the rest of the deceased policyholder's estate. Inheritance tax is payable on such benefits.
Inheritance planning through life insurance can be done by means of gauranteed-interest savings insurance (class 21) or unit-linked life insurance (class 23).
Note that the policyholder2 should ideally also be the insured person3 to avoid the insurance getting frozen where the policyholder dies but the insured person is still living.
Tontine or accretion clauses
Unmarried couples who live together can benefit each other by means of a tontine or accretion clause. Be sure to get professional advice for this.
1 These rules apply throughout the EU, except in Denmark, the United Kingdom and Ireland
2 Residuary legatees are the deceased's descendants, blood relatives in the ascending line (if there are no descendants) and surviving spouse. They are entitled to a certain portion of your estate, which is called the 'reserve'. If one spouse dies, the survivor gets half of any joint assets and inherits usufruct rights in respect of the entire estate (i.e. the other half of any joint assets and the deceased spouse's personal assets). If there are no children, the surviving spouse acquires full ownership of all joint assets. Your matrimonial property regime defines which are shared assets.
3 The person who takes out the insurance and pays the premiums
4 Life insurance is taken out on the life of the insured person. it is insurance that pays out a sum of money either on the death of the insured person or after a set period.
Return on pension savings
Is it better to opt for a pension savings fund or pension savings insurance plan?
Getting started with pension savings
As soon as you start work and are 18 or over, you can start saving for your pension. And that's a very good idea, too, because starting early has lots of benefits.
A personal loan lets you spread your (unexpected) costs. Repay the same amount each month at a top-value rate.