Distribution

When you own something together and it is no longer wanted, you can agree that one person takes over the other's share. This is called division. After a death, the estate often needs to be divided. Also after the break-up of a marriage, registered partnership or cohabitation, division is often required.

For a division, the same formalities must be observed which must be complied with for a delivery. In the case of bank accounts and receivables, this is a deed, which may also be private. With things, there is generally no deed because they are handed over. In the case of real estate or the shares in a private limited company, however, a notarial deed is required.

What is involved in a division?

First of all, it is important to determine the value. This can be done by mutual agreement or by experts who are called in. Next, it is important to determine whether obligations also need to be taken over. When dividing immovable property, you quite often see that mortgage debt has to be taken over or paid off.

The assumption of a debt can only take place if the creditor cooperates. The creditor, often a bank, will assess this as if it were a new application for financing. If it is an owner-occupied property, all sorts of income tax issues then come into play immediately. This is because the part of the financing that is taken over is a new financing and the new tax rules apply to it. It is also important to take a good look at the situation regarding the owner-occupied home reserve. Get good advice on the (new) income tax rules that apply when taking over the loan or taking out a new loan.

When dividing a home, it is sometimes forgotten to also allocate the life insurance or bank savings account linked to the financing. It also frequently happens that the beneficiary is not changed. Then, upon death, the deceased's ex-partner may still have a claim to the benefit.

When, in a distribution, the value of what one gets is higher than what the other gets, there is an oversharing. This difference will have to be paid. If this is not possible at that time, it can be agreed that this amount will be owed, and paid at a later date. In some cases, it may be convenient to then require additional security in the form of mortgage or pledge.

The division of immovable property is exempt from transfer tax in many cases. Nevertheless, there are situations where this is not the case; therefore, get informed in good time, preferably before the divorce or death.

For more information on division and its tax consequences, please contact us. We will be happy to help.