Many people realize with alarm that in many cases inheritance tax (formerly: inheritance tax) must already be paid when the first of them both dies.
Since Jan. 1, 2003, the law has included the "legal distribution." As a result, the surviving parent no longer has to deal with the children immediately upon the death of the first deceased. Since then, the surviving parent is allocated all possessions and debts and the children receive a claim against the surviving parent in the amount of their normal inheritance share.
They cannot claim anything; they only receive a "credit note." But inheritance tax must be paid on this "voucher."
An example:
Father and mother are married in a general community of property, as it was before Jan. 1, 2018. In this general community of property, the assets of both spouses are common.
They have two children. Upon father's death, the total assets amount to
€ 300.000,00. Since the parents were married in full community of property,
€ 150,000.00 of this belongs to mother. The other € 150,000.00 constitutes the estate.
This estate is shared by mother and the two children: €50,000.00 each.
Mother receives the total € 300,000.00. The children each receive a claim against mother of
€ 50.000,00. They can -in principle- claim this amount only upon mother's death.
Mother can dispose of the total amount of € 300,000.00. She may also spend it; she does not have to keep anything for the children, if she wants to.
What is not always realized is that inheritance tax must already be paid on the children's claim. Since the children themselves receive nothing, this tax is paid by the mother. This can be quite a setback, especially if the estate does not consist of liquid assets, but of a house. In that case, the money is often "in the bricks."
The inheritance tax exemption for a spouse (also for a registered partner) is currently (2025) in principle € 804,698.00. For a child it is € 25,490.00.
If a child receives more than € 25,490.00, the rate is 10% over the first
€ 154,197.00 and 20% on the remainder.
This means that in the preceding example mother does not owe inheritance tax.
Each of the children will owe an amount of € 2,451.00 over the "credit" of € 50,000.00, so a total of € 4,902.00.
It can be. By naming the surviving partner as sole heir, it can be achieved in a number of cases that no inheritance tax is due at the first death.
In the example, mother then inherits € 150,000.00. The children receive nothing, including no claim.
Since mother has an exemption of € 804,698.00, no inheritance tax is due.
The downside
The appointment of the longest living person as sole heir also has a downside. Calculated over both deaths, there may be more inheritance tax to pay in the end.
Again the example.
Suppose mother dies after ten years and there is still € 300,000. The children then inherit
€ 150.000,00. They each owe inheritance tax on this (at current rates) € 12,451.00, so a total of € 24,902.00.
Suppose the children would each have had a claim of € 50,000.00. If a compound interest of 6% would have been calculated on this claim during those ten years, this claim would amount to € 89,542.00 at the mother's death (€ 50,000.00 + € 39,542.00 interest).
Mother's estate would then be only € 120,916.00 (€ 300,000.00 minus 2 x
€ 89.542,00). Consequently, each of the children inherits € 60,458.00.
On this each (at current rates) owes € 3,496.00 in inheritance tax, so a total of € 6,992.00 for both children.
Calculated over both deaths, there is therefore € 4,902.00 + € 6,992.00 = € 11,894.00 inheritance tax paid. This is significantly less than € 24,902.00.
Which choice is the right one ?
In general, it is impossible to say which choice is the right one. It depends on several factors, such as: how large are the assets, will the surviving spouse inherit the assets or not?
Also important is how long the surviving spouse outlives the first death.
The disadvantage of paying more inheritance tax calculated over both deaths can be mitigated by the surviving spouse by making gifts to the children.
These gifts need not actually take place but can also be made "on paper." This does require a notarized deed.
If the surviving partner is named sole heir and the children have no claim, there is a risk that not all of the assets will end up with the children. After all, the survivor could change the will and, for example, name a charity or a new partner as sole heir. The will therefore often includes a two-step disposition. This two-step disposition ensures that what the surviving person has left over from what he or she inherited from the first deceased at the time of his or her death will accrue to his or her own children.
There is also a tax benefit to this two-stage making. The effect of including a two-stage making arrangement is that the children inherit from both father and mother, and thus, for example, the inheritance tax exemption can be used twice.
Again the example.
Father at the time included a two-stage creation in his will. Suppose mother dies after ten years and there is still € 300,000.00. Of this, € 150,000.00 comes from father's estate. Under the provisions of father's will, this accrues to the children. Thus, the children now inherit € 150,000.00 from father and € 150,000.00 from mother (per child thus € 75,000.00 from father and
€ 75,000.00 from mother). Because the children inherit from both father and mother, the exemption for inheritance tax can be used twice (twice € 25,490.00).
Calculated over both deaths, there is then € 9,902.00 per child, a total of € 19,804.00 inheritance tax due instead of € 24,902.00.
Thus, the inclusion of a two-stage making leads to a saving of inheritance tax in this situation.
Conclusion
The conclusion is that in general it cannot be said whether the appointment of the surviving partner as sole heir leads to savings in inheritance tax.
It is advisable to discuss this with a family law specialist from our office.
We can then advise you which option is the most favorable for you.
pkooijman@kooijmanautar.nl
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