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Thwarting the taxman by rejecting an inheritance: is it possible?

Monday 25/02/2019
Signing documents

In inheritance law, multiple heirs can have a statutory inheritance claim. As such, they are entitled to a minimum share of the inheritance. Since the new inheritance law, it is possible to freely dispose of half of one's assets. This is called the available part. If the available part is exceeded by donations, the statutory heirs may request the reduction. Through the reduction, the statutory heirs claim back their share of the inheritance to the extent that the available part has been exceeded. This means that the statutory heirs still receive the inheritance to which they are entitled.

Article 921 of the Civil Code stipulates that only the statutory heirs themselves can request this reduction. Only they, and no one else, can request this in principle. The judgement of the Court of Appeal of Brussels of 12 April 2018 nuances this.

The facts

The case involved a taxpayer with a significant outstanding tax debt, which he was unable to pay.

At some point, the taxpayer's mother died after having appointed her grandchildren, the children of the taxpayer, as general legatees. This endowment far exceeded the statutory reserve of the taxpayer (the son).

The taxpayer decided to reject the inheritance of his mother and could therefore no longer request the reduction; in any case, rejecting the inheritance meant that he was no longer an heir. The purpose of this rejection was clearly to ensure that the tax authorities could not use the inheritance to pay off the debts.

The Court of Appeal

Of course, the tax authorities did not leave it at that. They demanded before the Court of Appeal that the rejection of the inheritance by the taxpayer should be non-opposable. If a rejection is non-opposable, the tax authorities can claim the reduction on behalf of the taxpayer.

To this end, the tax authorities use the so-called "Paulian claim" from Articles 1167 and 788 of the Civil Code. Pursuant to these articles, the tax authorities may be authorised to accept the inheritance on behalf of the taxpayer, provided that the rejection by the taxpayer was intended to disadvantage creditors. The Court of Appeal considered this intention as proven and allowed the tax authorities to accept the inheritance on behalf of the taxpayer. The tax authorities could then easily claim the reduction against the endowed grandchildren on the basis of article 1166 of the Civil Code.

The result was that the grandchildren had to hand over part of the inheritance they had received from their deceased grandmother to the tax authorities.

This judgement should not come as a surprise. In the past, the Court of First Instance of Hasselt also ruled that the tax authorities can invoke Article 788 of the Civil Code to accept an inheritance that was previously rejected by the taxpayer.

It is only the tax authorities who can use this "weapon"?

No, the rejection of an inheritance which is done with the aim of disadvantaging the creditors can be overturned, regardless of who the disadvantaged creditors are! They do however need to go to court in this regard.

The moral of the story is that it is not possible to simply disadvantage creditors by rejecting an inheritance. This is only possible if the person rejecting the inheritance can give good reasons for the rejection. In other words, it is a matter of thinking carefully in advance and arguing why the inheritance is being rejected.

Contact one of our experts

Jo Roseleth

Jo Roseleth

Managing Partner Tax & Legal Services