Do I pay inheritance tax because of a contract?
Sometimes you can receive something after the death of someone on the basis of a contract, ie not because of the death itself through legal inheritance or through will. For example, person A can agree with person B to transfer 20,000 euros to B's account, with the instruction that B then transfer this money to specific people after A's death. Another example: person X pays a large premium to an insurer in order to be able to give a nice sum of money to the persons designated by X after the death of X. In such situations we speak of a clause for the benefit of third parties.
No or no inheritance tax?
You might think, this is interesting not to have to pay inheritance tax, but this is not included in the Flemish government. After all, the Flemish Tax Codex contains Article 2.7.1.0.6 which stipulates that such stipulations for the benefit of third parties can be equated with bequests, on which inheritance tax is due. So there is a fiction at play here, people pretend it is about legacies.
When will that fiction play?
This concerns a contract in which it is stipulated that there is an advantage for a specific non-contracting party (third party) and in which a contracting party undertakes to do something for a non-contracting party (third party). We are talking here about an advantage or benefit that the third party obtains on the basis of the contract and not because he is an heir. The fiction also plays a role when the clause is based on an 'economic extension' (eg the employer) of the deceased.
The timing also plays a role: the fiction only works for things awarded at the time of death, in the period of three years before the death or after the death. The fiction only comes into play when we are talking about sums, annuities, or values. This means that this fiction does not apply to goods in kind (eg precious metals such as gold or silver).
When does the fiction not play?
When you pay someone to perform a feat, the fiction doesn't play out. This means that, among other things, outstanding balance insurance does not fall under this fiction. Of course, this fiction will not lead to inheritance tax if you have already paid gift tax. The fiction won't play into a survivor's pension either. Group insurance (employer pays part of your wages to an insurer to supplement your statutory pension) also does not fall under this fiction. Furthermore, if there is a so-called accession (eg after termination of the right of superficies) or if another business law provision is involved, this fiction does not apply. Nor does the fiction continue when the paying contracting party is given a so-called 'discretionary power', eg. the co-contracting party may choose who receives how much and when.
Any questions?
Please do not hesitate to contact the tax specialists!