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Gift

Mr & Mrs Dupont are French nationals, moving their effective residence to Belgium. They become Belgian residents for inheritance tax purposes. Their common children however remain French residents. The couple is married under the matrimonial regime of separation of property. Mr Dupont has over US$30 million in liquid assets. The couple’s objective is to optimise their income and inheritance tax situation.  Their estate planning has to take into account both the succession between spouses and the succession in direct line, i.e. their children living in France. Mr Dupont could consider performing a gift to his wife.

Mr Dupont performs a gift of liquid assets to his wife (which remains revocable) in the form of an inheritance advance. The notarial deed (Belgian or foreign notary) or accompanying deed (in case of a bank gift) includes a contractual stipulation of reversion. By stipulating reversion in the deed of gift by means of an explicit clause, the husband can assure the automatic return of the donated capital in the case of death of the wife, without negative tax implications. Furthermore, the gift is subject to a charge of subscribing a unit-linked life assurance policy of the type Branch 23.

Subscription of a unit-linked life assurance policy

In order to materialise the contractual stipulation of reversion, the wife uses the assets received by way of donation for the payment of a unique assurance premium in a unit-linked life assurance policy, while designating herself as assured life with her husband as beneficiary. In order to retain control over his gift during her life, the husband accepts his designation as a beneficiary by way of endorsement to the policy. The wife can no longer freely dispose of her rights as a policyholder without the consent of her husband as beneficiary. This relates for example to the rights on withdrawal or surrender, the transfer of the policyholder rights, the revocation of the designation of the beneficiary and the designation of another beneficiary (cf. Belgian Insurance Law art. 178, 181, 183, 185 etc.).

Configuration:
  • Policyholder = wife (A)
  • Life assured = wife (A)
  • Beneficiary = husband (B)

Death of the wife

In the event of Mme Dupont’s death (life assured), the husband (beneficiary) receives the life assurance benefits without payment of inheritance tax, upon presentation of proof of:

the gift, including the contractual stipulation of reversion as well as the date of the gift;
the explicit indication in the policy terms and conditions that the life assurance has been subscribed in line with the above-mentioned gift and with the intention to guarantee the payments due in the event of an early death of the wife in application of the contractual stipulation of reversion.
The Belgian fiscal administration has explicitly confirmed that the life assurance benefits paid in application of the contractual stipulation of reversion will not be subject to inheritance tax (Decision nr. E.E./101.887 of 22 February 2007).

Death of the husband

In the event of death of the husband (beneficiary), the wife (policyholder) may exercise her insurance policyholder rights without payment of inheritance tax, because no life assurance benefits are paid.


Return of the initial value of the gift to the estate of the husband by the surviving wife

Insofar as the husband performed the gift of liquidities to his wife as an inheritance advance, the surviving spouse is obliged to return the initial value of the gift to the estate of the husband. To this end, the wife exercises her right of withdrawal in order to obtain the necessary funds. The returned amount is included in the civil succession for the division of the inheritance of the husband between the widow in Belgium and the children in France. According to Belgian civil law on succession, the estate of the husband will be divided as follows:
  • Usufruct: widow
  • Bare ownership: children
In the event that the gift has been subject to gift tax (3% – 3,3%) or  the gift took place more than three years preceding the death of the husband, the returned amount is not included in the taxable base for the inheritance tax. Indeed, only gifts that have not been registered in Belgium (foreign notary or bank gift) and that took place within a three-year period prior to the donor’s death will be subject to inheritance tax.

Death of the surviving wife

Upon the death of the surviving wife, no inheritance tax will be due on the expiring usufruct in either Belgium or in France. The children will in this case become full owners without payment of any inheritance tax.