Fiscal Planning: Estate Matters (1)

Fabrice Ketoff writes:

It is probably never too early to start planning your estate. Many people only start such planning towards the end of their lives; sometimes they leave it too late.

This article is the first of two outlining general issues on estate (or inheritance) planning. It gives an idea of some of the general issues faced by foreigners based in Brussels.

Estate planning: general considerations

Two main factors for you to consider in estate planning are:

A. who do you want to favour in the distribution of your estate? For example, your surviving spouse and/or your children.

B. when do you want to transfer your assets to your heirs (before or after your death)?

This first article considers the first factor: who do you want to favour in the distribution of your estate?

Forced heirship rules

As you ponder that question, keep in mind the forced heirship rules that apply in Belgium.

In effect, these rules mean that when you are married with children your discretionary power to leave all your assets to an heir of your choice is very limited.

Under Belgian law, the surviving spouse and children are protected heirs; this means the surviving spouse will always be entitled to a life tenancy (so-called 'usufruit' in French or 'vruchtgebruik' in Dutch) and the children to a portion of the estate (in full and/or 'naked property', so-called 'nue-propri été' in French or 'naakte eigendom' in Dutch).

Belgian international private law

For foreigners resident in Brussels, the implications of estate planning are also particularly important, in the light of Belgian international private law. This is a complex matter particularly if you have real estate abroad - and you will probably need the help of an expert (notary or other adviser) to deal with your situation.

These implications can be broadly outlined as follows.

From a Belgian perspective, an individual's estate is divided between:
- real estate (property like a house or apartment);
- moveable property (all other assets, such as a share portfolio).

In Belgium, real estate is generally transferred to the individual's heirs based on the law of the situation of the real estate (the so-called 'law of situs').

By contrast, all the other moveable assets are transferred solely according to the law of residency here in Belgium.

If you have real estate outside Belgium, Belgian international private law means in general that real estate is governed by the law of situs, the international private law of the country (or tax jurisdiction) where the real estate is located. So that jurisdiction's international private law may supersede the Belgian forced heirship rules.

However international private law varies by country. Some countries have a rule that non-residents' real estate in that jurisdiction will be distributed according to the international private law of the jurisdiction where the individual is resident. So sometimes real estate outside Belgium will be referred back to Belgian law.

Such a rule of referral back to Belgian law may lead to the whole of an individual's estate being 100% subject to Belgian inheritance law, including its forced heirship rules favouring the individual's children.

Next article: Fiscal Planning: Estate Matters (2)

Author: Fabrice Ketoff
Published: 8 March 2006