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Check your family planning now: The reformed inheritance law changes a lot!

 
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Check your family planning now: The reformed inheritance law changes a lot!

Hilde Van den Keybus, Patricia Stas

Soon much in inheritance law will be changing. For example, the reserves have been adapted, the rules on the valuation of donations are changing, and certain inheritance agreements may be concluded. These changes offer more opportunities to, for example, cohabitating couples and blended families. On 1 September 2017, the act reforming civil inheritance law was published in the Belgian State Gazette. Read more here.

 

The new provisions will enter into force on 1 September 2018. All inheritances that devolve after that date are in principle subject to the new rules. However, that does not mean that you can do nothing in the meantime. Indeed, as explained below, the reform also has implications for certain past donations and it is best to act in time (before 1 September 2018) in order to be eligible for transitional measures.

 

We will briefly discuss a number important changes below.

 

The reserve for the descendants, the surviving spouse and the ascendants

 

At present, the reserve for descendants varies according to the number of surviving children. The more children, the smaller the part that may be freely allocated by the testator. In the new inheritance act, the reserve for children is always 50% of the estate, regardless of the number of descendants.

 

The surviving spouse’s reserve is retained, which is the usufruct on the family house and household effects or usufruct on 50% of the estate. According to the new inheritance act, this usufruct must first be exercised on the available share (so that the children receive full ownership of their reserve).

 

If a person dies without leaving children, his or her (grand) parents currently have a reserve of ¼ on the mother’s side and ¼ on the father’s side. The new inheritance act eliminates this reserve on the part of ascendants. It is thus possible to completely deprive them of their inheritance right, for example through a donation to the cohabiting partner. However, if the ascendants of the (childless) testator become poor at or due to his/her death, they are entitled to maintenance.

 

The valuation of donations

 

In order to calculate whether or not a reserve is affected, the testator’s “notional estate” will be formed at the time of death. This estate consists of both the assets at the time of death and all the donations made by the testator during his or her lifetime.

 

Currently, the rule is that these donations are valued at the time of death. This can cause problems with goods such as shares or real estate that may have increased significantly in value since the date of the donation.

 

The new inheritance act seeks to remedy this by valuing donations based on their value on the day of the donation, indexed until the day of death. However, exceptions apply in the case of donations subject to usufruct. If the donor retains lifetime usufruct, the donated good in principle will still be valued on the day of death.

 

This has an important consequence for donated shares of family companies with retention of usufruct under the Flemish Region’s preferential scheme:

 

As already mentioned above, the current rule requires valuation on the date of death. However, for shares of family companies donated under the preferential scheme, there is a specific exception clause: the value of these shares will be “frozen” on the date of donation regardless of whether the donation is in full or in bare ownership.

 

However, the legislature did not include this specific provision in the new inheritance act. Therefore, if you donated shares of a family company with retention of usufruct, from September 2018, these shares in principle will be valued on the date of death.

 

It is clear that this can result in very undesirable consequences and family disputes, especially if the children were treated unequally. Fortunately, the legislator has provided several solutions.

 

First and foremost, the donor – as a transitional measure – can opt for the continued application of the current rules. For this purpose, the donor must make a declaration before a notary public by 1 September 2018. This choice, however, results in all donations remaining subject to the “old” inheritance law.

 

Another solution is the conclusion of a selective inheritance agreement (see below). This can specify that the value is established on the date of donation. In which case, the agreement of the donor and of all heirs are required (including the heirs who may not be involved in the donation). If an heir does not agree, the valuation contained in the inheritance agreement will not apply to him/her.

 

One should therefore carefully examine the entire dossier of the donor, as well as the legal aspects and family sensitivities, to determine whether the old inheritance act or the new inheritance act is the best choice.

 

The option of concluding inheritance agreements

 

At present, with a few limited exceptions, agreements concerning a future inheritance are void and invalid. This is experienced by many as a handicap, and here again the legislator has accommodated by allowing certain inheritance agreements. These agreements must be made before a notary public, subject to the statutory waiting periods.

 

a. Selective inheritance agreement

 

A selective inheritance agreement is an agreement that can be concluded with all or some family members with regard to certain specific law-related matters, such as:

  • The valuation of a donation;

  • Waiver of a claim for contribution or abatement.

 

If all forced heirs agree to a selective inheritance agreement in respect of a particular donation, there may be no dispute about the valuation of that donation upon devolving the estate, nor may there be any claim for contribution or abatement.

 

b. Global/Family inheritance agreement

A global inheritance agreement can only be drawn up by a parent or both parents together with all their (probable) heirs in a straight descending line. Thus for example, a global inheritance agreement between childless brothers is not possible. The agreement establishes the existence of a balance between the heirs, taking into account:

  • The donations made prior to the agreement;

  • The donations made in the agreement; and

  • The situation of the heirs.

 

A global inheritance agreement may for example stipulate that certain benefits granted to a child (e.g. paying expensive study or other maintenance costs) are made equivalent to donations.

 

By signing a global inheritance agreement, the heirs agree that they have been treated equally (up to that moment) and may no longer revoke this upon devolution of the estate (no longer possible to claim a contribution or abatement).

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The above overview, of course, covers only a few of the many changes in the new inheritance act. Feel free to contact us if you require further information or have questions about your family planning.