Webinar ‘Expat Estate Planning’: the Questions

On 26 November, we participated in a webinar on estate planning for expatriates. This is always an interesting event to hear the questions expatriates have.

These are their questions with our answers.

Domicile and conflicts of inheritance rules

How about if I move to a Non-EU country as principal residence whereas I have assets in Belgium. Which law will be applicable for my inheritance?

If you live in another country, and you have your main residence there, the local rules will determine who inherits. 

If that is an EU Member State (except Denmark, Ireland (and the UK)), you can opt for the law of your nationality or one of your nationalities (and that must not be the law of an EU Member State).

If you live outside the EU, you will not be allowed to opt for the law of your nationality. In principle, the laws of that country will apply there, and in Belgium for your real property here, the Belgian rules will apply.

A will drawn up in accordance with the laws of that non-EU country will normally be acceptable as valid in Belgium within the limits of the Belgian forced heirship rules.

Domicile and EU officials

I’m an EU official with Maltese citizenship but tax domiciled in Belgium. Are all my assets subject to inheritance law in Belgium?

We must distinguish the inheritance law and the inheritance tax.

For the inheritance law, you re domiciled in Belgium, and the Belgian rules will apply, unless you opt for Maltese law under the EU Succession Regulation.

As for the inheritance tax, EU officials keep their tax domicile in the EU Member State from which they are recruited. If you were recruited from Malta, your tax domicile would be Malta.

I assume that you joined the EU Institutions from another EU Member State or from Belgium.  If you joined from another EU Member State, e.g. Luxembourg you would be deemed to be tax domiciled in Luxembourg, and inheritance tax would be due in Luxembourg, except for your house in Belgium.

If you joined while a Belgian resident, your tax domicile is Belgium. And when you die, your worldwide estate, including assets in Malta are liable to Belgian inheritance tax, even if no inheritance tax is due in Malta.

You cannot change that while you are working for the EU Institutions. However, when you retire, you can take up tax domicile wherever you want, including in Malta. In that case, Belgian inheritance tax would only be due on your house in Belgium if you still own it.

Planning with property in another EU Member State

If you have a will in an EU Member State (not BE) but a property in BE and another in the EU Member State, what provisions do you need to take with the notary in Belgium re inheritance and taxes due if one of spouses dies and there is a kid? what about another property that they can inherit in the future-not in Belgium.

This is a question with multiple sub questions.

  • Does the will in the other EU Member State (let’s call it X) cover property in other countries, property to be inherited?
  • Is X your nationality? If so, the will can indicate that you are opting for the law of X to govern all your assets, worldwide, and within the EU, all EU Member States have to respect that law.
  • If you live in Belgium at the time of your death, the Belgian notary/courts will deal with your estate, but apply the laws of X.
  • Are any additional procedures required? The law of X may provide that probate is needed; we do not have probate in Belgium.
  • And then there is the issue of inheritance tax in both countries.
  • Opt to give the family home in Belgium to the surviving spouse; it is free of inheritance tax. And make a bequest in cascade to limit the inheritance tax in Belgium upon the second death.
  • If no or little inheritance tax is due in the other country, there are ways of minimising the inheritance tax in Belgium by transferring it to the children.

Those are just some of the considerations …

Opt for your national law under the EU Succession Regulation

With dual nationality (BE/Brit), living in Belgium, can we still specify UK or Belgium in our will for Succession rules, or do we lose that right when becoming Belgian?

The EU Succession Regulation (EU) No 650/2012 is straightforward: you can choose the law of your nationality, and if you have multiple nationalities, you can choose between all your nationalities.

When you take up Belgian citizenship, you do not lose UK citizenship and then you can choose for either English (and Welsh), Scottish or Northern Irish law to govern your estate.

Inheritance tax between Belgium and another country ; the deceased lives in Belgium

If my daughter is living in the EU but outside Belgium when I die, does she pay tax in Belgium or in her country of residence?

Your daughter will pay inheritance tax in Belgium because you are tax domiciled in Belgium (unless you are an EU official who has maintained his tax in another EU Member State).

Certain countries (France, Germany, Ireland, Poland, Spain) charge inheritance tax not only when a tax resident dies and leaves an estate, but also when one of their residents receives an inheritance. That should not be a problem in France (because we have a double tax treaty relating to inheritance tax), Germany (because children can inherit €400,000 tax free), Ireland (children can inherit €335,000 tax free), Poland (children pay no inheritance tax), Spain (in Spain the rules depend on the communidad autonoma).

Inheritance tax between Belgium and another country ; the deceased lived outside Belgium

Hello, a friend who lives in Belgium has inherited a sum of money from her mother. Is she obliged to declare it on her Belgian tax return?

Belgium only charges inheritance tax on the worldwide estate of Belgian residents. When a non-resident dies, Belgium does not charge inheritance tax unless he has real property in Belgium.

If you live in Belgium and inherit from someone who did not live in Belgium, no Belgian inheritance tax is due.

Friend who lives in Belgium has inherited a sum of money from her mother in Ireland.  Must she declare this in her Belgian tax return?  

Only Irish Capital Acquisition Tax is due on the estate of an Irish resident. Belgium does not charge inheritance tax when the daughter inherits. The inheritance must not be declared in her income tax return.

If she wants to repatriate large sums of money, this may set off alarm bells in the anti-money laundering department of a Belgian bank.

I am dual national British Belgium; my parents are still alive when they die will I have to pay Belgian inheritance tax on the UK estate?

That depends.

I assume that your parents live in the United Kingdom. If so, Belgium only charges inheritance tax on any Belgian houses or apartments your parents may have. I guess not and, in that case, no Belgian inheritance tax will be due.

If they come and live in Belgium, then Belgian inheritance tax will be due on their assets in Belgium and in the United Kingdom.

The fact that you have Belgian citizenship does not change anything to this.

I am non-EU national; I understand that if I receive heritage from abroad, I don’t need to pay taxes (right?) but what about if I decide to bring that money to Belgium? 

Indeed, if you inherit from someone living in another country, no Belgian inheritance tax is due (I assume they did not have property in Belgium).

If you bring large sums of money to Belgium, that may set of the bank’s anti-money laundering alarms. It cannot harm to advise your bank manager in advance.

Do inheritors pay tax on U.K. pension QROPS trusts in Belgium? It is tax free for a U.K. inheritor.

As I mentioned during the webinar, occupational pensions are exempt from inheritance tax when your spouse – or your children under 21 – inherit them, but that only applies when they have been financed by your employer. This means that they are not exempt if you have set them up or when your own company has set them up.

The problem with QROPS is that when you move your pension to a QROPS, you take your pension benefits out of an employer funded pension scheme into (usually) a SIPP (a self-invested pension plan. By moving it into a QROPS, the link with your employer is severed and, therefore, my advice, in general, is that a QROPS is liable to inheritance tax when it is inherited.

This is the rule if you have a QROPS and die as a Belgian resident.

Now, something else I mentioned is that Belgium only charges inheritance tax on the worldwide estate of Belgian residents and on the Belgian real property of non-residents. A QROPS is not real property in Belgium.

If you do not live in Belgium, there will be no inheritance tax on your QROPS even if one of your heirs lives in Belgium.

Marriage contracts and inheritance

If you do not have a marriage contract and the law subscribes communal ownership, is a will overwriting communal ownership? Or is it recommended to set up a marriage contract before the will to clarify?

A will cannot overwrite community property.

If you are deemed to have community property, 50% of the community property is in your estate and you can make provisions for it in your will. You can give it to your spouse (so that he/she receives 100%), or you can leave it to your children, or to your parents. Just make sure that you do not infringe the Belgian forced heirship rules.

You cannot make provisions for 100% of the community property to give it to someone else than your spouse.

If you want / need to do that, you will have to sign a new marriage contract stating that 100% of the community is your personal property and that there is no community property anymore.

Your spouse will have to agree with the changed marriage contract.

When a spouse dies, when bank accounts are jointly held, does the spouse still have to pay inheritance tax on the amount in the bank?

When a spouse dies, the personal and the joint bank accounts of the spouses are frozen, sometimes even the bank accounts of the surviving spouse. Who they belong to – and who inherits them – has to be determined by certificate of succession which the notary will have to draw up.

If spouses have community property, half of the bank account will fall in the deceased’s estate. If spouses have no community property but only separate properties, joint bank account will be deemed to be held 50/50 and half of the bank account will fall in the deceased’s estate.

The other half of the bank accounts belongs to the surviving spouse. The deceased’s half will be inherited by the heirs, including the spouse, and they will have to pay inheritance tax on that half.

Minor children and inheritance

Question (an example): Me & my wife are in the contract of separation of Financials. I have an apartment where I live with family (wife and 1 son). If I die now, who will be the owner of this apartment and who will need to pay the inheritance tax? What happens when a minor cannot pay the inheritance tax, would he get time till he is adult and continue living in this apartment with mother? What happens if I have another house, who would be the owner? Would my wife have any right on that after my death?

If you do not have community property and you personally own the apartment, your son will inherit the apartment and your wife will inherit the usufruit, the right to live in it and to receive the rent.

She would not pay inheritance tax on the apartment as there is no inheritance tax between husband and wife on the family home.

Your son would have to pay inheritance tax on the value of the bare ownership (that depends on your wife’s age at the time of your death. If she is 66, he would pay inheritance tax on 68%, at 71, 76%, etc …

If you have another house, the same rule will apply: your wife inherits usufruit, your son bare ownership. However, the exemption for the family home does not apply to the second house.

How can young children say studying etc have such huge money/cash to pay 30% of Inheritance tax when they get property from deceased parent? If they cannot pay? They can sell it. Correct?

The inheritance tax is due by the person who inherits. The total inheritance tax due is calculated as the total of what each heir owes in inheritance tax.

Young children under 18 may have money – or they may inherit money – to pay the inheritance tax, and in that case, their guardian will have to pay the inheritance tax on their behalf.

If they do not, the house they inherit may have to be sold or mortgaged to pay off the inheritance tax. In that case, the guardian may have to apply to the justice of the peace for the authorisation to sell or mortgage the house.

Gifts and gift tax

Is there a minimum value of gift before tax declaration is necessary?

Gift tax does not work like this with minimum amounts.

Gift tax is a registration tax, a tax that is due when documents are registered with the registration office at the Ministry of Finance. The registration tax for documents that show a gift is called gift tax.

Certain documents must be registered, that is the case for rental agreements as well as for all deeds that are signed before a notary. For all other deeds and documents registration is optional, it can help to determine the exact date it was signed as the date of registration cannot be disproven.

Any deed signed before a Belgian notary must be registered and the civil code says that any document that shows a gift must be signed before a notary in an ‘authentic instrument’

When you combine these two rules, gift tax would be due whenever you make a gift.

Nevertheless, it is generally accepted that hand-to-hand gifts, indirect and disguised gifts are perfectly valid without passing before a notary.

It is, therefore, possible to make a gift without paying gift tax.

However, if you die within three years after the gift (four years in Flanders), the gift will be added to your estate and inheritance tax will be due.

I plan to use the bank transfer method of making a gift without paying gift tax using the letter templates as shown in Marc’s book edition 2018. apart from making sure that I live for 3 more years are there any other risks like BE government changing tax rules (due to trying to cover costs of COVID country debts) 

Belgium is planning to make it obligatory to register all gifts made before all notaries, not just for Belgian notaries. This closes a tax-free route for gifts before a notary in the Netherlands.

There are no plans to impose an obligation to register hand-to-hand gifts or gifts by bank transfer. There is no obligation to register a document (there is no document to register) and without a registration there can be no registration tax.

I am a Belgium resident and if my family (Non-EU) likes to support by giving money as gift towards my purchase of house in Belgium. Do I need to declare for income tax?

No, a gift of money from family members outside Belgium is not liable to Belgian income tax or gift tax.

The only thing you need to take account of is that transfers of large amounts of money to your bank account in Belgium may set of the bank’s anti-money laundering alarms. It cannot harm to advise them in advance.

I am a non-Belgian national living in Belgium, my parents live here as well. My sister lives in the Netherlands. My parents have donated a certain percentage of nude ownership of the house they live in, to me and my sister. Usufruct is with my parents. So, me and my sister are not 100% owner of the house, just about 1/3. There is an obligation of my parents to donate us a large sum of money, with which we will pay the taxes in order to obtain the ownership of the whole house. The notary advised my parents not to have a testament anymore, just the above described. Are there any hidden traps?

Let me try and see if I understand this correctly.

I am given to understand that your parents owned the family home. For estate planning purposed they gave the bare ownership to you and your sister. They keep the usufruit for themselves for the rest of their lives, but you are already the owners, but really only in name. You can, however, not do anything with the bare ownership without your parents’ agreement. It is only when they have both died that you become full owners and that you could sell the house without their agreement.

If your parents are between 61 and 65, the value of the usufruit would be 38%, and you and your sister would have about 62%, or 31% each. This is probably the explanation of the one third.

That would be the percentages if you did a split purchase with your parents.

However, if your parents give you the house and retain usufruit, gift tax will be due on the full value, but as I showed in the webinar : two parents can each give to their two children a house worth €600,000 and only pay 3% gift tax (2 x 2 x 150,000 = 600,000).

If your parents do not own anything anymore, a will is, strictly speaking not necessary.

If we got an apartment asset as a gift deed from the family in India. If we sell that asset and get cash to Belgium, what is the tax rule? (We are tax residents in Belgium)

A gift of an apartment in India is not liable to gift tax in Belgium.

When you sell it, no capital gains tax will be due in Belgium but in India.

When you bring the money to Belgium, you are well advised to warn your bank manager.

US gifts and stocks

I understand that we are allowed to receive US$ 20.000 max per year as a gift from the family (USA). As a receiver of this gift, what is the best way to bring this over to an account in Europe?

This is a US tax rule.

The Federal Estate Tax is due at 40% over the Federal Estate Tax exclusion. This is a lifetime exclusion that covers both gift tax and inheritance tax. No Federal Estate Tax is due as long as a US citizen does not give more than US$11,580,000 during his lifetime or in his will.

In other words, a US citizen cannot give US$11,580,000 during his lifetime and US$11,580,000 in his will. He must keep a tab of the gifts he makes to make sure he does not exceed the Federal Estate Tax exclusion during his lifetime.

There are also annual exclusions of US$ 15,000. As long as a US citizen does not give more than US$15,000, no gift tax is due, and he does not have to file gift tax forms.

I do not see any problems for the beneficiary of such a gift to bring the money over to an account in Europe. This should not trigger the anti-money laundering alarm bells.

Can you confirm that US inheritance tax is due on US stocks.

If you hold US stocks at the time you die, US inheritance tax (the Federal Estate Tax) is due at the full rate of 40% over the exempt threshold of US$60,000.

This because the US tax law considers that stocks and stock options in US companies are situated in the US so that the Federal Estate Tax is due.

While US nationals have an exemption of €11,580,000, the tax exemption for non-US nationals is only $60,000 (per person). See here.

There are solutions such as life insurance to hold US stocks, but these trigger the insurance premium tax in Belgium, or holding the assets via a corporate entity that is not considered transparent for US tax purposes.

Some other questions

Imagine, you have 3 siblings and you (number 4) still lives with his mother in HER house. Does the child that still lives with his mother until she dies get a privilege on buying the house. as in he gets the first chance of buying the house before the other children? 

The fact that you live in the house does not give you a privilege or a right to buy the house from the other children.

If you have been her principal carer, she my favour you in her will and give you the maximum she can (50% + the 12.5% you are entitled to (1/4 of 50%).

Alternatively, she could gift the house to all four children, you pay 3% gift tax on the first tranche of €150.000 x four children). The house can then be sold by your siblings at a reduced registration tax called ‘droit de partage’. The tax is 1% on the value of the entire house.

What is Tax Credit?

Tax credit is the deduction of tax from tax.

If you live in Belgium and you inherit a house in another country from someone who lives in Belgium, you may pay inheritance tax twice: in that other country and in Belgium. If you pay inheritance tax abroad, you may deduct the overseas inheritance tax on the house from the Belgian inheritance tax on the house.

You can credit the overseas inheritance tax against the Belgian inheritance tax.

You can, however, never deduct more than the Belgian level of inheritance tax.

If someone lives and then dies in Belgium and they are single with no children with no Will, who receives the estate? Does it automatically go down the line i.e. brothers sisters etc? Thanks

Your estate will be divided amongst your brothers and sisters (and for the ones that have predeceased you, their children).

If you do not have any brothers or sisters, nieces or nephews, the estate will be inherited by cousins.

The question is who will deal with the estate and find these cousins. You are well advised to leave a list with contact details or to make a will and appoint your beneficiaries.

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