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Estate planning: recent developments

Friday 04/01/2019
Estate planning

Over the last few months, we have regularly reported on the important changes in estate planning and inheritance planning. Below is an update of some of those changes.

The care proxy: secure your estate for later

The classic example is a person who, due to a physical or mental limitation (e.g. coma, dementia), is – temporarily or permanently – unable to manage their assets properly. The question then arises who is authorised to manage that person’s estate – the spouse or partner, children, a trusted representative? In the past, one required the intervention of a justice of the peace who would then appoint an administrator to manage the estate of the incapacitated person.

A law introduced some years ago created the possibility of making legally enforceable arrangements that enter into force the moment one loses the ability to manage one’s own estate properly. In principle, court intervention can thus be avoided. The related arrangements are included in an agent contract (the care proxy) in which the future legally incompetent person (the mandator) appoints one or more future trusted representatives (agents).

The care proxy offers plenty of freedom when it comes to what it can contain. For instance, it may cover both movable and immovable goods. The mandator then decides whether or not the agent is authorised to perform acts of disposition, such as selling property or – very important – making donations. Furthermore, in choosing an agent, the mandator is not restricted to their own (close) relatives, but instead may appoint third parties also. Appointing agents and, specifically, the (limitations of) their authorities is tailored to specific needs and conditions; the succession of the agents must also be established accurately. A care proxy is a very useful instrument for estate management. It allows the mandator to remain in control, yet arrange at an early stage by whom and how their assets will be managed if ever they should lose decisional competence. In addition, the care proxy offers interesting opportunities for (further) estate and inheritance planning, in particular thanks to the option of donations. Since no court intervention is required, it guarantees the desired discretion as well as the certainty that the estate is managed in accordance with the wishes of the incapable person.

Consequences of the annulment of the position of the Flemish Tax Authorities regarding split acquisition/split registration of bare ownership and usufruct

As we reported earlier, the Council of State recently quashed the position of VLABEL (the Flemish Tax Authorities) on split acquisitions, which was later broadened to include split registration of bare ownership and usufruct. VLABEL’s position necessitated families to adjust their planning if they had contributed a securities or shares portfolio into a civil-law partnership, the shares of which had been donated under reservation of usufruct. An often-used technique was to exchange the usufruct against an (either or not optional) annuity. That way, the recipient of the donation acquired full ownership of the shares, while respecting the annuity for the benefit of the donor at the latter’s request.

The technique was usually applied for practical reasons, without truly confirming the underlying wishes and objectives of the parties. The judgement of the Council of State now offers the option to review this planning technique. Through private deed the usufruct may be reacquired by the donor, thus eliminating the need to hold on to the (either or not optional) annuity.

If you are in a situation where the usufruct of donated shares has been converted in the past, please don’t hesitate to contact us to help you undo the exchange and restore the initial situation.

Contact one of our experts
Jo Roseleth
Jo Roseleth
Managing Partner Tax & Legal Services