Reduced Flemish inheritance taxes on friends inheritance
Mid 2021, Flanders introduced the friends inheritance. This technique allows you
to transfer a part of your inheritance to non-family members or distant
relatives without the tax authorities taking the biggest part.
Bear in mind the legal heirs
When you draft a will because you want to favour certain persons, you should
primarily take into account the legal thresholds on disinheriting your closest
relatives the so-called legal heirs. In case you have no legal heirs, or when you remain within the boundaries, you almost determine what you want in your will.
The rate of the inheritance tax depends on:
the amount; and
the family relationship.
Partners and children
Between spouses and with respect to children/grandchildren and
parents/grandparents, the rates are the lowest: from 3% up to 27%, but a number
of other rules apply mitigating the inheritance tax.
Brothers and sisters
Between brothers and sisters, the rates are as follows:
as from 0,01€ up to and including 35.000€: 25%;
as from 35.000,01€ up to and including 75.000€: 30%; and
as from 75.000,01€: 55%.
Example
These rates are applicable on the net acquisition of every brother or
sister separately.
Sister A receives 30.000€ and sister B too. In both cases
the rate is 25%.
So A and B pay each 7.500€ inheritance tax (so together
15.000€).
Other relatives
In case of gifts to third parties and relatives, further away than brothers and
sisters, the rates are the following:
as from 0,01€ up to and including 35.000€: 25%;
as from 35.000,01€ up to and including 75.000€: 45%; and
as from 75.000,01€: 55%.
If you dont see the difference, take a look at the rate in the middle. But
there is also another difference: these rates apply to the total net acquisition
of all heirs.
Example
Nephew C and nephew D both receive 30.000€
The inheritance tax
amounts to:
35.000€ at 25% = 8.750€; and
25.000€ at 45% =
11.250€
Total inheritance tax on 60.000€ = 20.000€
Since C and D both
receive the same, they will each pay 10.000€ taxes.
Friends inheritance
The friends inheritance is only possible for deceases as from 1 July 2021.
It
is only possible for gifts to friends and distant relatives and is only
granted if the testator has in a will assigned one or more private individuals
which can apply for the reduction.
Friends and distance relatives mean
brothers and sisters and further away, and third parties.
You should also
unambiguously and precisely indicate to whom you make your friends inheritance.
These can be several persons at the same time, or just one single person.
Reduction for one friend
In fact the result of a friends inheritance is a reduced rate of 3% on maximum
15.000€.
Example
You foresee a gift of 15.000€ to a friend.
Without the friends
inheritance the inheritance tax amounts to 3.750€ (15.000€ x 25%)
Thanks to
the friends inheritance your friend will pay 450€ inheritance tax (15.000€ x
3%).
Imagine that you give 25.000€ to that friend, he will still pay 450€ on the
first 15.000€. On the remaining 10.000€ the standard rates apply (10.000€ x 25%
= 2.500€).
The saving can never be higher than 3.300€.
In case the inherited amount is less than 15.000€, the reduction is surely also
lower.
Reduction for several friends
In case you have indicated several persons, the reduction of 3% applies to
maximum 15.000€, for everyone together.
Example 1
Lets take the above example of sisters A and B
Together they
paid 15.000€
If they are indicated in the will for a friends inheritance,
they will together receive a reduction of 3.300€. The total tax then amounts to
11.700€ (5.850€ per sister).
Example 2
The same story for our nephews C and D. Together they owed
20.000€
They also will receive a 3.300€ reduction in case of a friends
heritance; remains 16.7000€ or 8.350€ per nephew.
Be precise
You should indicate in the will who will benefit from the friends inheritance.
There should be not authentic will, also your own written will qualify.
You should clearly indicated that this or that person will receive a gift from
you which you consider as a friends inheritance. The tax authorities will not
automatically apply the reduction if you foresee a gift to a friend or brother
or sister!
In your will you can even indicate that you want to provide one friend with a
friends inheritance and another one not.
Example
Lets again take the nephews C and D. In case you only give a friends
inheritance to nephew C of 30.000€ and a normal gift of 30.000€ to D, the
inheritance tax is calculated as follows. The total inheritance tax amounts to
20.000€, of which 10.000€ for each nephew. But nephew C obtains a reduction of
3.300€ (and it the end pays 6.700€), while D should pay the full amount of
10.000€.
So, there are a number of possibilities. Ascertain yourself of the
possibilities, since a small error in the wording may cost you (or better: your
heirs) 3.300€.