Contemplating death is probably not something you do in your everyday life. Indeed, you may not want to think about death itself even for a brief moment. I can assure you that protecting your loved ones against unnecessary tax burdens should, however, be something to always keep in mind, as they may arise after your death.
In this article, I explain why it is crucial to minimalize tax burdens and how a Dutch notary can help you in this regard.
Inheritance tax in the Netherlands
In the Netherlands, inheritance tax is payable over the value of the estate if the deceased was (deemed to be) a Dutch resident upon death. The estate also encapsulates property located abroad. Such assets may be subject to double or perhaps even triple taxation due to non-Dutch tax law also being applicable. There are several countries that have established agreements with the Netherlands to avoid this.
In the Netherlands, the applicable tax rate depends on your relationship with the deceased and the exact value of the assets acquired by you as beneficiary. It varies between 10 and 40%. One must also keep in mind, though, that there are tax exemptions that apply to Dutch inheritance tax, the height of which is also dependent on your relationship with the deceased. In 2023, partners of Dutch residents are entitled to a tax-free allowance of €723,526, whereas children are entitled to an exemption of €22,918, for instance.
When comparing Dutch inheritance tax regulations with inheritance tax laws of other countries, the conclusion is usually that inheritance tax in the Netherlands is quite high.
What can you do to keep inheritance tax at a minimum?
How can you save inheritance tax?
Below, I list a few options to save inheritance tax and with which a Dutch notary can help you.
1. Donate your assets to your children
In case your children inherit from you, they will have to pay 10% to 20% inheritance tax. By donating assets to your children while you and they are still alive, you can (partly) save inheritance tax. As with inheritance tax, there are exemptions that apply to gift tax, which you can invoke when donating assets to your children on a tax-free basis.
2. Check your (pre- or post-)nuptial agreement
If you are married under a nuptial agreement, it is sensible to have it reviewed by a notary. Nuptial agreements do not designate your heirs, but they do affect the total size of your estate and, thus, the inheritance tax to be paid upon death. Adjusting your nuptial agreement can sometimes save inheritance tax at death.
For example, by stipulating in your nuptial agreement that at the end of your marriage in the event of your death, there will be a settlement such that each partner is entitled to half the value of the total assets present. Including such a clause may be attractive if the assets mainly belong to one of the partners. If the marriage ends due to the death of the ”richer” partner, this settlement reduces that partner's assets and his/her estate. As a result, less inheritance tax is paid.
3. Draw up your last will
In a will, you can include provisions that lead to saving inheritance tax. You can postpone the payment of inheritance tax until your partner dies as well. You may also choose to save inheritance tax at the time of your partner's death by paying tax when you die.
The answer to the question which type of will is right for you depends on your personal situation, the size of your assets and your personal wishes. Furthermore, if you have grandchildren, it may be interesting to include them in your will. This is because grandchildren can also receive part of your inheritance tax-free.
Contact us for expert legal advice.
In conclusion, it is wise to leave matters relating to your estate planning in safe hands. This does not merely apply to the very wealthy. For instance, the mere possession of a house or assets located abroad would necessitate proper estate planning.
Contact us to discuss which measures should be taken by you to minimalize inheritance tax and, therefore, protect your loved ones after death.
AUTHOR: Joep Ertem LL.M.
Deputy civil law notary at Westport Notarissen
Rotterdam
He can be contacted at:
Tel: +31(0) 6 82 05 77 80
E-mail: j.ertem@westportnotarissen.nl
