Conjoint legacy

Reduce your inheritance tax bill and support a good cause

Conjoint legacy

Reduce your inheritance tax bill and support a good cause

Two in one

Use a conjoint legacy to reduce inheritance tax while supporting a charity at the same time.

Revocable

Include a conjoint legacy in your will and alter it whenever you see fit. It is only triggered in the event of your death.

Reverse conjoint legacy

Allow your relatives rather than the charity to decide on the division or sale of the goods in your estate.

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What is a conjoint legacy?

A ‘conjoint legacy’ (‘duolegaat’ or ‘legs en duo’) is a way of relieving the heavy tax burden for your relatives in the event of your death, while simultaneously supporting a charity close to your heart.

Why choose a conjoint legacy?

Filantropie

What if you were to die? Besides the emotional pain this would cause your relatives, it could saddle them with a hefty bill, as they would have to pay inheritance tax on what you leave them in your will. The rate of inheritance tax can swiftly rise from 25% to 55%.

A conjoint legacy enables you to reduce the inheritance tax payable by your relatives while simultaneously supporting a good cause. If you opt for a conjoint legacy, part of your estate goes to the charity, while enabling your siblings, other relatives and/or third parties to retain more of their inheritance.

A conjoint legacy is included in a will and so is only triggered on the testator’s death. You can change or revoke your will any time you like should your wishes change (e.g. add or remove legatees or include a different charity). You therefore remain the full owner of your assets for as long as you live.

For whom is a conjoint legacy interesting?

The conjoint legacy is particularly attractive for people without direct descendants and/or a cohabiting partner, whose only heirs are siblings, other relatives or third parties, all of whom face high rates of inheritance tax.

How does a classic conjoint legacy work?

The conjoint legacy is basically a dual bequest. The people you choose to benefit in this way (i.e. your special legatees) do not have to handle the processing of the inheritance, including notifying the tax authorities. All this administration is done by a charity (the general legatee). In summary, it works like this:

  1. In their will, the testator makes a bequest (an object, an amount of money, etc.) to both their relatives (special legatees) and a charity (general legatee).
  2. The charity only has to pay a low rate of inheritance tax (8.5%) on the bequest it receives.
  3. In addition to the 8.5% tax on its own bequest, the charity is also required to pay the inheritance tax on the bequest to be received by the special legatees.
  4. And as the final requirement, the charity has to pay out a net amount (free of inheritance tax) to the special legatees.

Simulated calculation of inheritance tax with a conjoint legacy

The example below shows a bequest from you to four cousins, both with and without a conjoint legacy. We simulate here what your relatives and the charity would retain.

  Bequest without conjoint legacy Bequest
with conjoint legacy
Estate
€ 500,000 € 500,000
Bequest to the four cousins
€ 500,000
shared between the four cousins
€ 300,000 (= 60%)
Bequest to the charity
€ 0 € 200,000 (= 40%)
Inheritance tax on bequest to four cousins
€ 260,500 (= € 500,000 at 25%/45%/55%)

€ 150,500 (= € 300,000 at 25%/45%/55%)

Payable by the charity

Inheritance tax on bequest to charity
€ 0

€ 17,000 (= € 200,000 à 8,5%)

Payable by the charity

How much do the four cousins retain?
€ 239,500 (= € 500,000 – € 260,500) or € 59,875 per cousin € 300,000 (= net amount free of inheritance tax) or € 75,000 per cousin
How much does the charity retain?
€ 0 € 32,500 (= € 200,000 - € 150,500 - € 17,000)

What is a reverse conjoint legacy?

The classic conjoint legacy can sometimes have undesirable consequences.

It allows the charity to sell all the assets in your estate and to do so as it sees fit. A second consequence is that the charity is not always sure in advance of the precise net amount it will retain. In practice, this can mean that your relatives have to sit and watch as the charity – which is obliged to pay out a net amount – sells items of sentimental value (jewellery, for instance), or that it is forced to renounce the legacy (if it will not be left with sufficient money).

It is sometimes desirable, therefore, for the testator to designate the relatives as the general legatee, with the instruction to pay a certain amount to the charity. The charity is then required to pay the relatives’ inheritance tax (in addition to the inheritance tax for which the charity itself is liable).

In this way, the relatives can decide themselves on the division or sale of the goods in the estate. It is also more straightforward for the charity if it simply receives a sum of money.

Take a look at the possibilities offered by a conjoint legacy

There are numerous aspects to drawing up a will with a conjoint legacy. Conjoint legacies are closely linked, moreover, to philanthropy. Would you like more information on one of these two forms of estate planning? Your private banker will be happy to tell you more. Or make an appointment for a first exploratory meeting, with no obligation whatsoever.

Contact KBC Private Banking

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