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#Bankgift do's en don'ts #Donation #Donation tax #Pacte adjoint (side agreement) #Inheritance tax

Some do’s and don’ts when making a bank donation

Thursday 23/05/2019
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The bank donation is still a very popular way of donating money by bank transfer. This is not surprising: if it is carried out according to the rules of the game, the bank donation is a valid donation, without (too much) red tape and without incurring gift tax. However, there are a few rules that threaten to spoil the game if they are not followed correctly. Hence some tips that you should keep in mind when considering a bank donation.

A few general points

A donation that has not been made before a notary is, in principle, null and void and is, therefore, considered non-existent. There are several exceptions to this rule: after all, there are also gifts that can be made without any formalities, and the bank donation is one of them. It is a legally valid alternative to the traditional notarial donation, at least in so far as it is done according to the highest standards.

Problems can arise when the donor draws up a document relating to this gift and violates a few rules in the process. The donor's intentions may be honourable: he wants to confirm that the bank transfer is a gift (and not a loan, for example). Furthermore, he wants to receive confirmation that the donee accepts the money and he may want to make some arrangements with the donee regarding the bank donation, and so on. If this is not done, the donee may later be confronted with heirs who do not recognise that the transfer has been a gift and could, therefore, demand reimbursement, or the donor may find that verbal agreements are not complied with.

The pacte adjoint (side agreement) must follow the gift already made

The document that relates to a gift already made is called a pacte adjoint. This is proof that confirms the gift made between the donor and donee. The transfer therefore precedes the pacte adjoint.

The purpose of the pacte adjoint is therefore not to make a donation, because the donation has already been made. It is, therefore, required that the pacte adjoint respects this chronology and is also drawn up grammatically in this sense. It is therefore unacceptable for a formula such as “I hereby bequeath …” to be included. Using a present tense in the pacte adjoint to refer to the gift (which should have already come to pass at the time of the pacte adjoint) may nullify the deed as proof. The bank transfer may have taken place, but the beneficiary will not be able to prove that this was a gift.

The following practical question can be asked: “Is it possible to make a bank donation and conclude the pacte adjoint a few hours later, on the same day? " This is possible, but practitioners are rather reluctant to use this method and state that (in view of the previous chronology) it is best to take a few days between the bank donation and the signing of the pacte adjoint.

The date of the transfer is clear, as it appears from the bank documents. Of course, the date of a private document is not fixed. A practical solution could be for this document to be sent, without an envelope, to the beneficiary by registered mail after having been signed by both parties. Thanks to the postmark, the document is provided with a date that is difficult to dispute.

Make a bank transfer, specifying the words “gift” or “donation”?

In the past, it was stated that mentioning the words "gift" or "donation" in the communication of the transfer was absolutely unacceptable. Once again, according to some, an invalid donation could have occurred. Some recent case laws (e.g. of the Antwerp and Ghent Courts of Appeal) has not accepted this argument. They have ruled that such a mention in no way invalidates the donation and actually proves that it did indeed constitute a donation.

This does not mean, in our opinion, that from now on you can add the word 'donation' to a transfer with piece of mind. The discussion is still ongoing and the opinions of the legal scholars seem to be divided. It therefore strikes us as preferable, for the time being, not to add a note at the time of the transfer and to draw up a pacte adjoint afterwards.

A unilateral declaration is still possible for registration and gift tax purposes

It can happen that the donor falls seriously ill within three years of the transfer and no document was drawn up. If the donor were to die within three years of the transfer, without a gift tax document having been registered, the donation is subject to inheritance tax, which is likely to be higher.

Is it still possible to register the gift tax with a view to paying it, even if the donor is no longer able to sign documents?  The answer is yes! The donee can draw up a unilateral declaration in which he refers to the money he has received and acknowledges that this was a gift he has accepted. When he presents this for registration, the gift tax will be levied and the gift will still avoid inheritance tax.

Conclusion

A bank donation is still a good way to donate money. Provided, of course, that the rules of the game are respected. So be sure to respect the correct order: first transfer the money and only then draw up a document about the donation made. The mentioning of "gift" or "donation" and the like at the time of transfer is still not recommended. Since we notice that the validity of a bank donation is increasingly called into question, the assistance of a professional advisor certainly offers added value!

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Jo Roseleth
Jo Roseleth
Managing Partner Tax & Legal Services