A surcharge of 50,000 euros in tax-free donations to be given every 15 years to each of his children … There is no doubt that the planned reform will speed up all direct line transmissions. And reduce the total bill to be paid on death, even if what sometimes happens is to favor a single member of the same sibling. Detailed explanations.
The expected reform
The donation benefit should therefore increase from 100,000 euros per. donor and pr. children to 150,000 euros. And would logically also be used in case of inheritance. However, nothing has been said about how long this allowance will be reconstituted, even if, in order to avoid a sharp fall in tax revenues, it should remain at 15 years. But any shortening to 10 years (deadline valid before 17 August 2012) or even to 6 years (the deadline applied this time before 31 July 2011) would, of course, reduce the bill even more. “Parents who have already made a donation for less than 15 years will be just as concerned: they will benefit from a balance of 50,000 euros in tax-free donation, ie the difference between the old ceiling and the new”, emphasizes Marion Calmette , hereditary engineer at SG Private Banking.
To note: the possibility to donate, also every 15 years, up to 31,865 euros in monetary amounts should remain in force. However, this only applies if the child is an adult and the donor is not over 80 years old. In total, therefore, it would be 181,865 euros that a parent could transfer to his child every 15 years. And a total of 727,460 euros in the case of a couple with two children.
>> Our service – Test our life insurance comparator
How to treat all recipients fairly
This new benefit will significantly reduce the bill for early transfers provided equally between children. As our table shows, established for an inheritance of 900,000 euros to be divided between two children (and without taking advantage of the opportunity to give 31,865 euros in money), the banknote will already at death be reduced by 10,000 euros per. child, even if the donor has not prepared anything.
However, if the parent knew how to predict his inheritance, by accepting two joint donations over a period of at least 30 years before the death, the overall score will simply be deleted. For a tax of more than 28,000 euros per. recipient, in the current scheme. It must be said that with the new allowance it is a cumulative surcharge of 150,000 euros in donations, which will have been transferred, in three installments, without tax. The interest in doing it early, and in passing it on in one’s lifetime, will therefore be strengthened.
Attention, these tax considerations would not prevent disagreement if the recipients of equal donations at your death had different fortunes. All donations must actually be reported to the estate, for their present value at the time of death. So that a child who was given an apartment whose price would have been valued could have to compensate a brother or sister who at that time had been given a stock exchange portfolio of similar value, but who would then have devalued. The risk is therefore that this child’s hereditary reserve will be affected.
If it is still possible to ask the children before a notary to waive any subsequent “reduction action”, it is best to proceed to a notary with a gift sharing. This will make it possible to definitively freeze the value of the goods appearing on the deed, regardless of their subsequent variation.
Several variations are possible, such as joint donation or shared donation with usufruct reserve. If it does not have to be egalitarian, it also has the advantage of allowing the reinstatement of previous bonuses (a sharing fee of 2.5% must be paid). The tax deductions used are the same as for a simple donation. The only additional cost that can be expected is the notary’s fee, on a sliding scale, which amounts to almost 1% for goods whose value is greater than 60,000 euros.
How to favor a particular recipient?
As our table shows, the multiplier effect of the new benefit will also come into play if you want to favor one of your children to the detriment of one or more. Still for an inheritance to be transferred at 900,000 euros, the beneficiary child will thus see his tax slip melt by 10,000 euros, regardless of whether the inheritance was foreseen, via two donations during the donor’s lifetime or not. As for the child who has not been privileged, he will at least have the satisfaction of seeing his tax bill reduced significantly, by 10,000 euros if nothing was foreseen, and by almost 20,000 euros if it had been prepared.
Attention however, to correctly calculate the amount of donations or inheritance. “Otherwise, the risk is to start the hereditary reserve for the other children, who could then claim their culprits at the time of the inheritance,” recalls Benoît Berchébru, director of the cultural heritage engineer at Nortia. But do not hesitate to use the available part, this part of the inheritance, which you are free to dispose of. It is not trivial as it reaches a third in the presence of two children, as in our example, and still a quarter for three children and more. The total share of your wealth that the same child will be able to receive without looting the others will therefore be 66% if the family has two children, and even 50% if it has three.
This distribution can obviously be done by death, by will. But most of the time it is early that you want to help one of your children, for their studies or their beginning in working life. In such a case, it will be necessary to make a donation during his lifetime, excluding the inheritance. This can even be done irrevocably, provided it is specified to a notary.
(1) Marie, two children, has a total fortune of 900,000 euros. She seeks to treat her two children fairly. In the event that she foresaw her inheritance, she gave them twice the same donation, optimizing the tax deductions (100,000 euros without reform, 150,000 euros if the reform is adopted), with a tax reminder period of 15 years. So she does it early, if possible before her 50th birthday.
(2) Marie, two children, has a total fortune of 900,000 euros. She seeks to favor one of her children, without, however, affecting the inheritance of the other (one-third of the estate’s assets). In case she foresaw her inheritance, she gave them a donation twice, which optimized the tax deductions (100,000 euros before the reform, 150,000 euros if the reform is adopted), with a tax reminder period of 15 years. So she does it early, if possible before her 50th birthday.
PCS. 3. Marie has drawn up a will in which she expresses a wish to allocate only the available portion of her property to one of her children at the time of inheritance.
(4) Marie favors her first child by making a donation outside the inheritance.
>> Solutions to maintain your standard of living. This is the front page of the latest issue of Capital. Access this edition in seconds from 4.65 euros.
Receive our latest news
Each week, the most important articles should accompany yours Personal finance.