Inheritance law has remained unchanged since Napoleon! But now it's changing: after two centuries of inaction, the federal government has made changes to inheritance procedures, and these changes will enter into force from 1 September 2018. However, to be able to apply these changes, you need to make a will or change your existing will depending on which new provisions you would like to use.
Two major changes
- Half of your assets can be left to people other than your children (however many you have).
- In the case of gifts, the value of assets assigned will be calculated differently.
What's not changing
The federal government inheritance reform means you can bequeath a larger proportion of your assets to people who are not direct relatives. If you take advantage of this freedom, bear in mind that inheritance tax - which falls within the competence of the Region - is not changing. Legacies and gifts made to people other than your children or parents will therefore be taxed according to the rules in force.
How does this work in practice?
1. You have not made a will
Nothing will change for you. On your death, your assets will be shared according to the laws currently in force. Your children inherit your assets equally in bare ownership. If you are married, your spouse inherits the usufruct on your assets.
2. You have made a will
You have children
Currently, if you would like to bequeath part of your assets to persons or entities other than your children, this proportion is limited depending on how many children you have: shares must be equal between all of them. So if you have one child, you dispose freely of one half of your assets. With two children, a third, three children, a quarter and so on (the other shares falling to your children).
If you die after 1 September 2018, however many children you have, you can freely dispose of half of your assets (the other half being shared equally among your children).
You do not have any children
If your parents are still alive after your death and if you were living with your partner, your partner can inherit all of your assets if you express your wish for this to happen. The new inheritance measures therefore mean that you can do away with the statutory proportion for parents. NB: if your parents are in a precarious situation, they may claim a maintenance allowance.
If you would like to take advantage of the new measures in force from 1 September 2018, you need to alter your will. You can also anticipate the changes and specify your wishes, according to whether you die before or after 1 September 2018. It is therefore possible to envisage two different allocations in the same will.
When you make gifts during your lifetime, your assets are fictitiously reconstructed after your death, so as to divide the shares among your heirs fairly.
At the moment, the value of movable property is fixed at the time of its gifting, whereas for real property, the valuation is done upon death. If real estate has gone up in value, this increase in value will therefore be taken into account for the distribution of your assets. The beneficiary of a real estate gift might therefore be required to distribute the capital gain made in equal shares among their siblings.
From 1 September 2018, the value of all gifts, movable and real estate, will be established upon death (with indexation between the time of the gift and the time of the death). NB: this new situation could also have negative effects. Particularly if you bequeath your business to your children. If they markedly increase the value of the business, they will doubtless consider it unfair to have to pay an index on the increase in value they themselves have generated! In this case, it will perhaps be better to opt in your will to continue to apply the old rules. But remember that if you opt for this, this will apply for all your gifts. The best solution therefore will have to be found on a case-by-case basis, for each specific situation.
A new solution possible is to conclude an inheritance agreement: this new method, which enters into force on 1 September 2018, will aim, after a meeting and the consent of all concerned, to adjust the balance of the various gifts so as to avoid any dispute after your death.
What does passing on your estate cost?
Inheritance tax is a regional issue. The rules in force in the region of the deceased therefore are the rules that apply. These rules vary, depending on the relationship and estate total: the closer the relationship or the longer the marriage, the higher the rate.
In Brussels, for the time being, no new provision is envisaged to follow up the federal reform. Therefore, the rates in force remain applicable. These vary from 3 to 30% of the amount inherited by direct heirs and spouses or legal cohabitees. The rate for a de facto cohabitee, comparable to someone outside the family, may be up to 80% of the amount inherited (from €175,000 upwards). To simplify the situation of blended families, step-children have however been comparable to children for tax purposes since 2017. They will therefore pay the same rate as half-siblings. NB: this benefit is not automatic however: for your step-children to benefit from your estate under the same conditions as your children, you will need to make a will in their favour, respecting the equal shares of each of them.
Brussels also has specific provisions. : the spouse is fully exempt from inheritance tax on their share of the family home and direct heirs benefit from advantageous rates. Also, an exemption is envisaged on the first tranche of 15,000 for the spouse and direct heirs. Children also benefit from an increased exemption of €2,500 per year up to the age of 21.
Tax on gifts
Just as for inheritance, gifts are taxed depending on Region, amount and beneficiary. But a distinction is also made between movable property and real estate. The rate varies from 3 to 7% for movable property. For real estate, direct relatives and the spouse will pay between 3 and 27%, depending on the price of the asset. For a person outside the family, the rate will be up to 40%.