After your death, your assets will go to your beneficiaries. Your beneficiaries will have to pay inheritance tax on their share of the estate. If you have no will, then legal succession law will apply. In many cases, this basically means that the spouse and children will inherit equal shares, whereby the usufruct of the children’s shares goes to the spouse. The children will acquire a claim on the spouse. The spouse will be entitled to a high exemption. However, the exemption for the children is limited.
Legislation can work in your favour, but a good will can still help to save taxation after death. Sometimes the choice is made for a rescheduling, as opposed to, a saving of inheritance taxation. A possible reason for this is that funds are tied up, in a house or investments for example. It can be fiscally beneficial to allow grandchildren to inherit by, say, including their legacies in the will. A grandchild can inherit a sum of 20,731 EUR from their grandparents tax-free. When you have a will, it is a good idea to check if it is still up-to-date and appropriate to your current situation and wishes. If you do not have a will, why not consider drawing up one?
Use the endowment exemptions
You can limit the levying of inheritance tax by transferring (part of) your assets to your children during your lifetime. You can make optimal use of the existing exemptions by spreading out endowments over that time. Endowments to your children are exempt from endowment taxation up to 5,363 EUR per child. For children between 18 and 40, a once-off increased exemption of 25,731 is applicable. This increased exemption can be increased to 53,062 EUR if the endowment is linked to an expensive study by the child. If your child has made use of an increased exemption before January 1, 2010, an additional endowment of up to a maximum of 27,781 EUR for study or accommodation is exempt. Endowments to grandchildren or others are exempt up to 2,147 EUR.
Endowment exemption for one’s own residence
If you making an endowment that is related to the financing of the transferee’s own residence, then a very generous exemption of 100,800 EUR is applicable. In order to make use of this exemption, there must not be any family connection between the giver and the transferee. The sum of 100,800 EUR is decreased with earlier-applied increased exemptions, insofar as it concerns endowments from parents to children for their own residence or studies. In certain circumstances, it is possible to add an earlier endowment to children for their own residence tax-free.
Limit the levying of tax in Box 3
An individual’s assets, not coming under box 1 or box 2, come under box 3. Company capital and one’s own residence fall under box 1, while shares of significant importance come under box 2. Debts are deducted from assets in box 3. However, this does not apply for tax liabilities. Only tax inheritance liabilities can be classified as debt in box 3.
You can limit the levying of tax in box 3 by paying your tax liabilities before the turn of the year. If you expect that you will have to pay (more) taxation, it is a good idea to ask the Tax Authorities for a provisional assessment, or to file a return and to pay the assessment before the cut-off date. If you have made the request not later than eight weeks before the end of the year, but the Tax Authorities have not yet replied, or replied too late, to your request, then you cannot yet classify the amount to be paid as debt in box 3.
Make use of exemptions
There are various exemptions in box 3, for works of art and scientific objects, and green investments for example. It can be attractive to turn taxable assets into exempt assets (in time). If you invest green, then are you not alone saving on taxation in box 3, but you also benefit from an extra levy deduction in box 1 to the value of 0,7% of the value of the exempt investments. For green investments, an exemption up to a maximum of 57,845 EUR (115,690 EUR for fiscal partners) is applicable.