Inheritance law reform bill approved

On 20 July 2017, the Federal Parliament definitively approved the bill to amend the inheritance law. As a result, most of the rules of the inheritance law – which date back to 1804 – have been modernised and adapted to current social needs.

1       Modification of the reserve rules

One of the main objectives of the new inheritance law is to expand the freedom of the deceased to dispose of his or her wealth by way of donation or testament. In light of this, it was decided to change the rules relating to the reserve.

The reserve is the part of the estate over which the deceased cannot freely dispose and which is attributed to certain preferred heirs. For example, the law provides for a minimum share in the inheritance for the children of the deceased. Presently, if there is a single child the reserve amounts to one-half, with two children it is two-thirds, and with three or more children it is three-fourths of the hereditary mass. The ascendants (parents, grandparents and great-grandparents) are entitled to a reserve share in the inheritance, but only in so far as the deceased has died without children. The surviving spouse is also entitled to a reserve share in the inheritance, i.e. the usufruct of the family home and the household goods contained therein, or the usufruct on one-half of the estate.

Under the new regulation, the reserved inheritance claims are modified as follows:

–          the reserve of the children is limited to 50% of the hereditary mass, regardless of the number of children entitled to a part of the estate. This reserve share in the inheritance is divided equally over all the children;

–          the reserve of the ascendants is abolished. This is replaced by a maintenance payment at the expense of the estate of the deceased who died without children, yet only in the event of established need on the part of the ascendant(s); and

–          the reserve of the surviving spouse is maintained. Where under the current rules the reserve usufruct of the surviving spouse often extended over the reserve of the children, in the new regulation it is provided that the reserve usufruct of the surviving spouse must be exercised in priority over the freely available part. This rule is introduced as compensation for the reduction of the reserve of the children, so that they obtain their reserve as much as possible in full ownership.

 

2       Possibility of concluding inheritance contracts

Today it is prohibited for a person to conclude an inheritance contract with his children concerning which goods he wishes to have definitively allotted to them after his death.”

The new law now provides that parents before their death can conclude with all of their heirs in direct descending line a binding contract about the allocation and distribution of the future estate. This contract must be drawn up in a “balanced” manner. However, it is still unclear how this will be assessed in practice.

 

3       Modifications with regard to donations

A number of radical changes are also provided for with regard to donations and the way they must be compensated in the estate of the deceased:

–          if during your lifetime you donate to one of your children, the principle remains in effect that, at the end of the line, you must treat all of your children equally. Such donations are thus always deemed to have been made as an advance on inheritance. If you wish to favour the child involved, this must be expressly stated in the deed of donation (donation outside of inheritance share);

–          if during your life you donate to a different heir, it is presumed that you did wish to favour this person and this donation is deemed to have been made outside the share. If this is not the case, then you must in the deed of donation expressly indicate that the donation is made as an advance on inheritance;

–          under the current regulation, the rules for the valuation of donations are often complex and unclear. The legislature wishes to fix this and now provides that the valuation of all donations shall henceforth take place on the basis of the value on the day of the donation, indexed until the day of death; and

–          if donations must be returned or reduced, henceforth this will only still take place in value. This entails that the donee who received too much no longer has to dispose of the donated goods themselves, but that a compensation will take place with the other heirs (either by receiving a lower amount, or by receiving a surplus amount).

 

4       Entry into effect of the new rules

The new rules will enter into effect one year after they are published in the Belgian Official Journal. It is expected that the approved law will be published in the Belgian Official Journal in mid-August, so that the new rules will apply to inheritances that devolve as of mid-August 2018.

Nevertheless, a transitional regulation is provided for donations that have already been made. As soon as the law has appeared in the Belgian Official Journal, you have one year in order to make a declaration to the Notary Public if you wish for the current return [‘inbreng’] and reduction [‘inkorting’] rules to continue to apply in full. This choice will apply to all donations that you have made: it is not possible to apply the new rules for one donation, but not for the others.

If you make no declaration within the aforementioned period of one year, then all donations made shall, at the time of death, be subject in full to the new rules of return and reduction.

 

5       Impact on succession planning

The new rules have a far-reaching impact on succession planning.

For already-implemented succession plannings it is important to have a screening performed of your planning in good time, in order to check whether the new rules run contrary to the objectives of your planning. The new rules concerning the reserve and the possibility of concluding an inheritance contract might offer perspectives for refining your existing planning.

The new rules offer many possibilities for new succession plannings as well.

Don´t hesitate to contact us for a more detailed explanation about these new rules and the concrete consequences for your succession planning.

 

Frank De Langhe and Nicolas Lauwers