Me grandpa or me grandma will

An "I-once" clause means the provision in a will in which the testator (=the one who makes the will) names his children as heirs and bequeaths an amount to each of his grandchildren, giving those grandchildren a claim against their father or mother (child of the testator).

In determining the amount to be bequeathed, one can assume:

• a fixed amount;
• an amount equal to the exemption that a grandchild has when acquiring from a grandfather or grandmother;
• an amount such that the grandchild's acquisition is taxed at just a lower rate than the acquisition of his father or mother.

It is usually stipulated that the grandchildren cannot claim the amount until after the death of their own parents.

As a result, the grandchildren's inheritances become taxed with inheritance tax and on the amount of the claims they received from their parents, who can deduct the same amounts from their inheritance as debt for inheritance tax purposes.

The tax advantage is that less tax is paid upon the grandparents' death and one generation is partially skipped for tax purposes.

Some examples can clarify the operation of the I-Parent clause.

Situation: grandfather (widower) is 82 years old, 1 child (son) aged 50, 2 grandchildren. Assets: €500,000.

Example 1

Inheritance tax calculation:

If no "me-ona will" would have been made, the son's inheritance share amounts to € 500,000.

On this, based on inheritance tax rates 2021, € 82,868 is due.

The top of this inheritance falls into the 20% bracket for inheritance tax purposes.

Assuming that the son also has € 500,000 in equity and dies 20 years later, his children will owe € 83,426.40 in inheritance tax on the net € 417,132 (€ 500,000 -/- € 82,868).

Example 2

If the tax-free amount had been bequeathed to each of the grandchildren, the son would have received € 457,436 (€ 500,000 -/- 2 x € 21,282), on which € 74,355 in inheritance tax is owed upon grandfather's death. The grandchildren owe nothing. A savings of €8,513.

Because it can be stipulated that the grandchildren can only claim their claim upon the death of their parents, son keeps full disposal of € 425,645 (€ 500,000 -/- € 74,355). He may even spend it all.

Assuming that the son also has €500,000 in equity and then dies 20 years later, his children may deduct their claims from the €425,645. These claims at that time amount to € 72,338 per child. This results in a savings of € 28,935.20 upon son's death.

Example 3

If the tax-optimal amount had been bequeathed to each of the grandchildren, upon the death of grandfather, son would receive € 199,934 (€ 500,000 -/- 2 x € 150,033), on which € 22,855 in inheritance tax is due. The grandchildren together owe € 46,350 (2 x € 23,175) in inheritance tax. A savings of €13,663.

Because it can be stipulated that the grandchildren can only claim their claim upon the death of their parents, son retains full disposal of € 430,795 (€ 500,000 -/- € 22,855 -/- € 46,350). He may even spend it all.

Assuming that the son also has €500,000 in equity and then dies 20 years later, his children may deduct their claims from the € 430,795. These claims at that time amount to € 431,193 per child. This results in a savings of € 86,159 upon the death of son in this case.

Example 4

If grandfather's estate were €1,500,000, the savings at grandfather's death are no different than in examples 2 and 3. On the son's death, however, if the tax-optimal amount had been bequeathed to each of the grandchildren, the savings become much greater.

It is then € 172,477.

Grandfather and grandmother

When both grandfather and grandmother include a clause as described above in the will, the savings per grandchild are doubled.

However, there are also some disadvantages to the "me-and-grandpa construction," namely:

1. Only grandchildren already born can benefit from this construction.
   
2. The children should realize that the size of their own estate is reduced because the grandchildren have a large claim arising from the grandparents' wills.
   
3. If a grandchild dies before his own parents, the "I-grandpa" claim falls into that grandchild's estate.
   
4. The grandchildren may pay Box 3 taxes on the claim against their parents. In return, however, the parents may deduct the debt in Box 3. Which, on balance, can also lead to benefits.
   
5. If a grandchild goes bankrupt, that grandchild's creditors can recover on the claim.
   
6. In the event of any second marriage of a child, which marriage would be entered into after the death of the grandfather and grandmother, the child in question brings a large debt into the marriage, after all, his own children have a claim against him in the amount of the face value.