Saving on the Dutch inheritance tax

Do you have capital and do you want to gift that to others sooner or later? It may be beneficial to do so while still alive. You can limit the amount of inheritance tax you will have to pay. You limit the inheritance tax by using the annual exemptions in the inheritance tax.

What is an estate plan?

Every year you can gift tax-free. An estate plan is a model in which a calculation has been made about what can be gifted tax-free annually and how much inheritance tax is saved in this manner. The estate plan contains a step-by-step plan that shows how much can be gifted while alive. The plan indicates how much can be gifted and when.

Estate planning  
Estate planning concerns the role of your capital in regards to such matters as marriage, children, divorce, company succession, and death. These are all examples of important events in your life that do not just effect on you as a person, but also on legal and fiscal matters. We recommend considering the possible legal and fiscal consequences.

Other examples of estate planning are getting advice for prenuptial agreements, company succession in your family owned business or drafting a testament. 

Why an estate plan?

An estate plan has several advantages. You know how much you can gift tax-free and all other interested parties know what to expect as well. This clarity prevents possible fights and unclarities at later times.

Benefit successor

Drafting an estate plan can be beneficial for the successors. If you bequeath an inheritance the bereaved will want to pay the least amount of inheritance tax as possible. However, the successor to your estate may find it difficult to broach the subject, because it is the choice of the testator how, when and to whom the estate is bequeathed. If you, as the testator, address the issue, it may be less uncomfortable for the successor.

Insight

Drafting an estate plan will ensure there is transparency for both the successor and the testator. An estate plan helps you map the amount of (hypothetical) inheritance tax and how a part of this inheritance tax could be saved. In addition, an estate plan helps you take stock and determine how much money is available for the inheritance.

With the estate plan, the testator and successor can come up with a plan that works for both.

Gift in writing

If you are in possession of a large estate, but this is not directly available, a gift in writing can be the solution. The benefit is that you can gift tax-free annually without actually giving away the money. You give your successors an amount in writing, that your loan back directly after. You will need to pay 6% interest and this interest will need to be transferred. The successor can gift this interest back immediately, however. This can be done by a so-called cash round

Example:
Kevin is the son and only successor of Jack. Jack gives his son Kevin €5.304 annually in writing. Because Jack does not have this capital available presently because the amount is just below the annual exemption. At the time of Jack’s death, he had made four gifts in writing to Kevin of €5.304. The total inheritance amounts to €134.000. Because Jack had a debt of (€5.304*4)= €21.216 to Kevin (the gift in writing) the amount over which Kevin needs to pay taxes is (€134.000 - €21.216)= €112.784

A gift in writing will need to be notarized.

Do you have any questions regarding an estate plan or your possibilities to gift?

Do not hesitate to //info [at] lupacompany.com">contact us.