We already knew that changes in the Flemish inheritance and gift tax were imminent, and the new rules will enter into force on 1 July. They will affect the dual legacy, charities and the friends legacy, among other things.
Renewed Flemish Tax Codex
The decree amending the Flemish Tax Code was approved by the Flemish Parliament on 19 March 2021. This decree was published in the Official Gazette on 7 April 2021 and will enter into force on 1 July 2021. The dual legacy will be abolished. In return, there will be a reduced rate for supporting good causes/charities and a reduced rate if you include friends in your will. This reform applies to deaths and donations from 1 July 2021. These new features are part of a broader reform of inheritance law and inheritance tax that has been underway for some time.
Abolition of the dual legacy
With a dual legacy, you can both support a charity and leave something to family or friends by means of a will. The dual legacy is a scheme in which you designate several beneficiaries in your will: a friend or family member and a good cause/charity. The charity inherits a part of your assets on condition that it pays all the inheritance taxes, including those of the other beneficiaries.
An excessive application of this technique has now led to an adjustment. The charity often ended up with very little, which was not the intention. The tax planning technique of the dual legacy will therefore disappear from 1 July 2021. The altruistic purpose is restored and strengthened, and the emphasis is less on tax planning.
Tip: Did you include a dual legacy in your will? Then be sure to have it evaluated, so you can make adjustments if necessary.
No longer any gift or inheritance tax for charities
The abolition of the duo legacy does not leave charities out in the cold. From now on, a gift and inheritance tax rate of 0% will apply to donations and legacies for the benefit of a charity. This rate reduction only applies to so-called 'pure' charities. These are public benefit foundations and non-profit organisations.
The current rates of 5.5% gift tax and 8.5% inheritance tax are maintained for donations or legacies to private foundations.
The legacy to friends
A compensation for the abolition of the duo-legacy is the new regulation of the legacy to friends. From now on, you can leave part of your estate through your will to (usually distant) relatives or friends at a rate of 3% instead of 25%. This is the same rate that applies to acquisitions in a direct line and between partners. You can bequeath up to 15,000 euro of your estate in this way. The maximum tax saving is 3,300 euro per estate, and not per recipient.
Do you still have questions about this, or would you like to have your wealth planning evaluated? Our Estate Planning team is ready to assist you. Please feel free to contact them.