Estate planning, or inheritance planning, is sometimes described as a set of measures to ensure that assets pass to heirs in the best possible way. Tax optimization, saving inheritance tax (formerly known as "inheritance tax"), will often be the main objective, but it is usually not an end in itself.
What is important is that the assets end up where you want them to and in the way that suits you best.
Below you will find some options for achieving that.
I. Donation
A. General.
One can donate to children because one enjoys actually giving something to the children. It is also possible to gift with the intention of having less inheritance tax owed by the children after death.
B. Gift with repayment.
Many people want to donate to the children, but they also find it an unpleasant thought to "undress themselves while they are alive." After all, one does not know what might happen next. One method of donating but not having to pay out this amount yet is to donate "on paper" with a loan back. By law, such a gift must be made by notarized deed. One must go to the notary. He draws up a deed in which the parents agree with their children that the parents will donate an amount of money to each of the children, which the parents will immediately borrow back.
This deed can stipulate that the loan can only be claimed after the death of the surviving parent or as soon as he or she goes into a nursing home, for example.
However, interest must be paid on the amount acknowledged as owed to the children.
This interest must actually be paid annually to the children.
Since the amendment of the Inheritance Tax Act on January 1, 2010, this interest must be at least 6%.
be at least 6%.
No income tax has to be paid on the amount of interest actually received. However, the claim that a child receives on the parent(s) is included in box 3 for income tax purposes (capital gains tax). In Box 3, this claim falls into the "other assets" category, for which a flat rate of return of 5.88% (2025) applies. If the assets in box 3 remain below the (total) tax-free assets (in 2025: € 57,684.00 per person), no capital gains tax is due. The parent(s) can include the debt to the child in box 3 as a debt. How much income tax ultimately has to be paid by the child and/or parents is different for each situation.
C. Gift tax rates and exemptions.
The gift tax rate (formerly called "gift tax") is the same as the inheritance tax rate.
single exemption for child 18-40 years, spending free:
€ 32.195,00
increased exemption child 18-40 years for study:
€ 67.064,00
other:
€ 2.690,00
The increased exemption for a child or recipient between the ages of 18-40 for a private home has been completely abolished since January 1, 2024.
People often think that no more may be donated to a (grand)child than the amount exempted for gift tax. Nothing could be further from the truth. You may donate as much as you want.
However, the consequence is that if you donate more than the exemption, gift tax is due. It may be advantageous to gift at a low rate during the donor's lifetime in order to save inheritance tax at a high rate when the time comes.
Example:
Father, widower, has assets of €700,000.00. He has two children.
If father were to do nothing, the children would each inherit € 350,000.00 and on this would total
If father would gift € 100,000.00 "on paper" to each child twice (in two different calendar years), a total of € 37,312.00 in gift tax (rate 2025) would be due on these gifts.
Father would then leave € 300,000.00. The children would owe a total of € 24,902.00 in inheritance tax on this. These gifts therefore yield a total savings in inheritance tax of € 36,748.00.
Since January 1, 2003, different legislation regarding inheritance law has been in force. Part of this legislation is the legal distribution. Under this legal distribution, the surviving spouse automatically becomes the sole beneficiary of the deceased spouse's estate. The surviving spouse can independently dispose of the estate without the cooperation of the children. The children receive a claim against the surviving parent in the amount of their inheritance share. They can only claim the amount of the claim when the surviving parent dies or in the event that the surviving parent is declared bankrupt or is subject to the legal debt restructuring scheme.
The amount of the children's claim is increased annually "on paper" by a percentage corresponding to that of the legal interest rate, insofar as this percentage is higher than six. For example, if the legal interest rate is 7%, as it was in 2024, then the interest to be reimbursed is 1%.
Currently, the statutory interest rate is again 6% (2025). Therefore, there is no interest payable in 2025.
By will, you can make additions to this legal distribution. For example, the times when a child can claim his claim can be extended. Furthermore, the interest rate of the claim can be adjusted.
B. Usufruct-testament
This form of will can possibly be used in the following situations:
If there is a second or further marriage, while there are one or more children from a previous marriage;
in the presence of an asset, certain components of which are likely to increase significantly in value, or in the case of company assets.
In this will, the surviving parent does not receive the disposal of the assets as such but only their usufruct. Certain powers may be granted to the usufructuary; it is possible to stipulate that the usufructuary not only has the right to the income from the assets, but also the possibility to withdraw from the assets, either in full or in part. In the latter case, the usufructuary can then act almost as an owner.
C. Me/parent will
For inheritances from approximately € 1,500,000.00 onwards, it may be useful to draw up a will which includes the so-called "I parent clause". This clause means that a limited right of usufruct is established on such a part of the estate, that on the acquisition of the surviving parent, taking into account the exemption for inheritance tax, an equal percentage of inheritance tax is levied as on the acquisitions of the children.
D. Estate planning will
A combination of the forms of will mentioned above is possible and may even be highly desirable in certain situations. In a combination will, also called an estate planning will, the surviving parent is given the authority to choose between one of the above-mentioned wills after the death of the other parent. This choice will depend in part on the tax consequences of each of these constructions at that time.
E. Surviving sole heir
In case a large part of the assets are "stuck" in a house and the estate is smaller than
700,000.00, it may be desirable to appoint the surviving partner as sole heir. After all, under the legal distribution (see A.) for example, upon the death of the first of the two parents, inheritance tax is already due on the claims the children receive against the surviving partner. This inheritance tax must be paid by the surviving parent. This can be onerous if the assets are largely tied up in the house.
By naming the surviving person as sole heir (and effectively disinheriting the children), then -in connection with the exemption- no inheritance tax is due at the first death. The inclusion of a two-step inheritance ensures, among other things, that the assets of the first deceased will still go to the children.
III. Modification of prenuptial agreement
If a couple is married under full exclusion of any community of property, without any settlement clause and the assets of both spouses are very different, it may make sense to change this to a full community of property where the total assets are in common, or to amend the prenuptial agreement such that, for example, settlement takes place on a fifty/fifty basis should the marriage be terminated by death.
Example:
Husband and wife are married with exclusion of any community of property, without any settlement clause. There are no children.
The husband's assets amount to € 1,000,000.00; the wife's assets are virtually negligible. The husband dies. The wife inherits all of the husband's assets. If the husband's maximum exemption of € 804,698.00 (rate 2025) applies, she will owe inheritance tax of € 23,640.00 on her inheritance.
With a settlement clause or a full community of property, the wife is entitled to half of the value of both spouses' assets. The other half (€500,000.00) then constitutes the estate to which she is entitled as sole heir.
Under the exemption of € 804,698.00, she pays no inheritance tax on this.
The savings therefore amount to € 23,640.00.
Even if there is a married couple with children, changing the prenuptial agreement (final settlement clause or creating a community of property) can be attractive.
However, this modification is less advisable if, according to statistics, the wealthiest spouse has a greater chance of living than the less wealthy spouse.
IV. Power of attorney to prevent administration or receivership.
It can be useful to give a power of attorney by notarial deed to someone in whom one has full confidence and this for the situation when one himself is no longer able to look after his financial interests due to his physical or mental condition.
The power of attorney may stipulate that it can only be used from the moment a doctor issues a written statement that the principal is no longer able to properly look after his interests and declare his will.
The power of attorney may be given that gifts may be made from the principal's assets to children or further descendants.
If a person is no longer able to look after their interests and no power of attorney has been issued, in many cases an administration order or receivership must be applied for.
The administrator or guardian will generally not readily obtain permission from the district judge to make gifts. However, if a power of attorney has been provided, donations can go forward.
A power of attorney, as described above, can be recorded in a"living will."
In a living will, you determine what should happen if you are still alive, but are not able (anymore) to look after your own interests due to physical or mental causes or prolonged absence, for example.
For a business owner, it is very important to start thinking about succession well before he probably wants to stop his business. Will there be a successor from within the family? Or someone from within the business itself? Or should a possible successor be brought in from outside?
As part of the termination process, consideration can be given to:
Periodic consultation with a tax advisor or notary makes sense. And in general, this applies to anyone who has access to any assets. Further information on each of the topics discussed above can be obtained from our office, both in writing and orally.
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