Gifting your assets worry-free: the best way to do it

Ann Westen   |  

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Ann Westen

Ann is part of the Tax & Legal team and specializes in, among other things, succession.

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Gifting costs money.We talked earlier about movable gifts. Today, Ann Westen, our expert in estate and inheritance planning, guides you through the regulations with three essential rules.

Rule 1: Know the difference between gifting movable and immovable property

Gifting costs money. The cost of gifting movable property (money and other liquid assets) differs from the cost of gifting immovable property (commonly referred to as real estate). A flat rate tax of 3% applies to movable property. This means that this rate is independent of the size of the amount. For immovable property a progressive tax applies: 3% on the lowest bracket, up to 27% on the highest bracket. The more you gift the higher the applicable rate. 

Important to know: The flat rate of 3% does not apply to a gift via a bank. In other words, if you transfer €100,000 to a child’s bank account, you do not have to pay anything on it. But if you die within 3 years, your child will have to pay inheritance tax on the amount given. Incidentally, a bank gift can be offered for registration at any time (before the donor dies). This way you still pay 3%.

From the cheese route to the salami technique: In the past, gifting in the Netherlands used to be free and Belgians went there to gift their money. We called that the cheese route. Due to a change in the law in 2020, it became irrelevant. As a result, the cheese route and the accompanying tax advantage disappeared. However the salami technique, i.e. the gifting of immovable property in tranches every three years, is still widely used. If you gift a small amount every three years (not more than €150,000 per donor per beneficiary), you will always stay within the lowest rate of 3%. 

Rule 2: Remember that the inheritance tax is almost always higher than the gift tax

When your loved one dies, it is best to keep some of his or her capital. Inheritance tax is also subject to a progressive tax of 3% for the lowest bracket and up to 27% for the highest bracket. In the case of movable property you always pay 3% when gifting versus a rate of up to 27% upon inheritance. The rate for gifting immovable property can also go up to 27% but the rates on the lower brackets are much higher than for inheritance. Moreover, with the salami technique, gifts can be made again every three years for the value of €150,000 per donor and per beneficiary at 3%. So, we can conclude that the inheritance tax is usually a lot higher than the gift tax.

Rule 3: Think about gifting an advance or gifting outside of the inheritance

Gifts to children are not always made for each child at the same time. Moreover, you can choose to favour a child definitively or you can make sure that the child has to bring the gift back into the inheritance later and share with their siblings. Gifting an advance on the inheritance means  that the gift must be taken into consideration later when the inheritance is divided among the heirs. A gift outside inheritance is a definitive favour and is explicitly written down as such. In other words, the gift of an advance on inheritance has to be taken into account when the donor dies, a gift outside inheritance does not.

Our Bofidi experts will be pleased to help you

Do you have specific questions on this topic? Are you planning to make a gift yourself? Then do not hesitate to contact us. Our team of Bofidi experts will be pleased to help you.