What's the best way to gift?
Would you like to gift money or securities to your children, grandchildren or someone else without involving a notary public? You can, but you should know that a standard transfer won't be sufficient.
Why draw up a pacte adjoint?
You avoid future disputes:
- The pacte adjoint serves as proof that the gift was freely given (‘animus donandi’). This means that neither the giver, nor any other heirs, nor the tax authorities can later claim that it was actually a loan.
- If you are the giver's child and will later receive inheritance from them, this document proves whether the gift is an advance on your inheritance or if you are receiving something extra.
- If you gift to your child, for example, it will prove that you only gave the gift to your child and not to their partner. A standard transfer can be unclear in this regard. If things go wrong in your child's relationship, the document then serves as proof. It is always advisable for your child (and partner) to look into how their cohabitation or marriage affects their proprietary rights.
The pacte adjoint confirms that the recipient has accepted the gift and allows you to attach certain conditions to the gift. This might include a reversion clause if the recipient of the gift dies before the one who gave it.
Can you just write something in the reference of your transfer ('Gift')? Unfortunately not.
According to the applicable jurisprudence and legal doctrine, this would be considered an invalid gift as the proper formalities would not have been observed. In order to avoid any debate, do not include anything in the reference of your transfer and only draw up the pacte adjoint on the day after the transfer.
An informal present or a formal gift?
Does this mean you need to draw up a pacte adjoint whenever you transfer money as a birthday or Christmas present? Thankfully it doesn't go quite that far: you don't have to do this for ordinary gifts or presents.
What is the difference between an informal present and a formal gift?
A sum of money in an envelope or a transfer with a reference to an occasion (i.e. Christmas, a birthday or a wedding) is viewed as an informal present.
This doesn't require any tax to be paid, regardless of when you die.
If you give an expensive car as a gift, even though this is disproportionate to your assets, or if you transfer a generous sum to your children in order to avoid inheritance or gift tax, then it's very likely that this will be viewed as a formal gift, with all of the associated legal and tax implications.
Tax implications of giving a gift
- If the giver lives more than three years after making an inter vivos gift via the bank, then the recipient does not owe any gift or inheritance tax. You can demonstrate the start of this period by sending the recipient the signed pacte adjoint, as the postmark provides a fixed indication of the date on which the three-year period begins.
- If the giver lives less than three years after making an inter vivos gift via the bank, then the recipient will owe inheritance tax. Inheritance tax is usually higher than the gift tax.
- If the giver does not wish to take the risk that they'll die within three years, they (or the recipient) can register the pacte adjoint at any registration office in Flanders. This can be done immediately after drawing up the pacte adjoint, but also after two years, for example. The recipient will then owe gift tax, but no inheritance tax.
How heavily are gifts taxed?
Gift tax has a flat rate of 3% in Flanders and Brussels between partners and for direct line relatives, while in Wallonia this is 3.3%.
For more distant relatives, friends or acquaintances the rate is 7% in Flanders and Brussels, or 5.5% in Wallonia.