Married, cohabiting or in a non-cohabiting relationship: the impact on gifts and legacies

Being a suitor was a serious matter back in the day. Idly swiping left or right? No way. Dating was for one purpose and one purpose only. To get married!

Fortunately, the rules are more relaxed today. At the same time, other forms of cohabitation have also emerged, which are more in tune with the spirit of the age. But that doesn't mean all forms of cohabition are now treated equally by the courts and the taxman – particularly not when it comes to gifts and legacies.[@Keytrade Bank: if technically possible -> maybe work with spring links or 4 sections that you can open and close?]

1. Gifts and inheritance in a non-cohabiting relationship

2. Gifts and inheritance for de facto cohabitation

3. Gifts and inheritance for legal cohabitation 4. Gifts and inheritance in a marriage

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1. Gifts and inheritance in a non-cohabiting relationship

> What if?

You and your partner are domiciled at different addresses, then you have a non-cohabiting (LAT – living apart together) relationship. Although you may have been together as a couple since kindergarten and you can read each other’s minds, for legal and tax purposes you are strangers to each other. This has several different implications. For example, whatever income you each earn during your relationship remains strictly part of your own separate assets. The assets that you built up separately before your relationship began also remain your own. What's more, neither of you can be held liable for the other’s debts. Each person also has to submit a separate tax return.

> Nothing settled on death?

If your non-cohabiting partner dies, the entire estate goes to the legal heirs of the deceased. In other words, if your partner dies without having made arrangements for you (e.g. through a will), you will not receive anything from his or her estate. So even if you have had a non-cohabiting relationship for 40 years and even if you have children together, the surviving partner will receive nothing from the estate unless it has been arranged. Do you have a non-cohabiting relationship and want your partner to inherit something if you are suddenly no longer there? In that case, you should take the necessary steps yourself, for example by drawing up a will or using a third-party clause.

> Inherit?

Did you inherit movable property (money, shares, jewellery, etc.) from your non-cohabiting partner, for example because he or she left you something in their will (we will not cover real estate in this article)? You will find you will be heavily taxed on this. In the Flemish Region the inheritance tax between third parties (you are legally strangers) is 25% in the lowest bracket, rising to 55% in the highest bracket for movable property. In the Brussels-Capital Region, the lowest rate is 40%, while you pay 80% in the highest bracket. In the Walloon Region, the rates are 30% and 80%, respectively.

In a non-cohabiting relationship or de facto cohabiting: have you thought about a friendship legacy?

The "friendship legacy" has existed in Flanders since July 2021, and will also be available in Brussels from 2024. With friendship inheritance, you can leave part of your inheritance to one or more "friends" or blood relatives not of the first degree, at the most favourable tax rate. This includes your partner in a non-cohabiting relationship or a partner with whom you cohabit de facto. A low rate of inheritance tax (3%) applies to a friendship inheritance. However, a friendship inheritance is capped at a maximum of EUR 15,000. Furthermore, this ceiling of EUR 15,000 does not apply to each of your friends, but to all friends taken together.

> Gifting?

To avoid a stiff inheritance tax bill, it may be a good idea to gift movable property to your non-cohabiting partner while you are still alive. If this is done through a bank transfer, no gift tax is generally payable on it. If the donor lives in the Flemish Region or the Brussels-Capital Region, and he/she dies within three years of issuing the gift, inheritance tax will still be payable (see rates above). Please note: a qualifiying period of 5 years applies in the Walloon Region. If you wish to completely eliminate the risk of a towering inheritance tax bill, a good alternative is a notarial gift. Gift tax must then be paid – in Flanders and Brussels this is 7% and in Wallonia 5.5% – but there is normally no inheritance tax afterwards, even if the donor dies within 3 or 5 years.

2. Gifts and inheritance for de facto cohabitation

> What if?

Do you live with your partner at the same address and share a household? Then you de facto cohabit. Cohabitation does not apply solely to "romantic" relationships. Siblings, for example, may also live together. Nor does this have to be limited to two people; you can also de facto cohabit as a three. In theory, you do not even need to be domiciled at the same address. You can prove that you live together de facto – should this ever be necessary – by means of a declaration from a neighbour, or a power of attorney on each other’s current account, for example. The basic rules here are the same as for a non-cohabiting relationship:

• one partner cannot be held liable for the other partner’s debts.
• Your income and assets remain your own: both the assets you built up before you de facto cohabited and the assets that you all acquired during the de facto cohabitation.
• Each of you submits your own separate tax return.

If you wish, you can jointly draw up a cohabitation agreement. This will set out your practical arrangements. For example, who owns exactly what, so there is less chance of a dispute in the event of you splitting up.

> Nothing settled on death?

If you de facto cohabit and your partner dies, the entire estate goes to the legal heirs of your deceased partner. If your partner dies without having arranged anything for you, you will not receive anything. It does not matter whether you have children together or not. Even if you’ve been living together for 30 years or more, it makes no difference. Do you de facto cohabit and want your partner to inherit something if you are suddenly no longer there? In that case, you should take the necessary steps yourself, for example by drawing up a will or using a third-party clause.

> Inherit?

Let's say you inherited some movable property from your partner, maybe because he or she has left you something in their will? Then the taxman will come calling. In the Flemish Region the inheritance tax between de facto cohabitants is, in principle, 25% in the lowest bracket and 55% in the highest bracket (see below for exceptions). In the Brussels-Capital Region the lowest rate is 40%, while you pay 80% in the highest bracket. In the Walloon Region the rates are 30% and 80%, respectively. Lower inheritance tax rates may apply under certain circumstances. These are the same rates that apply to married couples. Please note that this favourable arrangement only applies in the Flemish Region. In order to qualify, you must have lived together for at least one year and have a shared household. The surviving partner then pays the lowest inheritance tax rates for movable property (3%, 9% and 27%), and no inheritance tax at all is due on the first EUR 50,000 of movable assets. Have you de facto cohabited for more than three years? If so, you can benefit from an exemption from inheritance tax on the family home in the Flemish Region. Please note that in this case the partners must arrange for themselves that the de facto cohabiting partner actually receives the inheritance.

> Gifting?

In order to reduce your inheritance tax bill, it may be a good idea to give movable property as a gift while you are still alive. If this is done through a bank transfer, no gift tax is generally payable on it. If the donor lives in the Flemish Region or the Brussels-Capital Region and he/she dies within 3 years of making the gift, then inheritance tax will still be payable (see rates above). Please note: a "qualifying period" of 5 years applies in the Walloon Region. If you wish to eliminate the risk of a high inheritance tax bill altogether, a notarial gift may offer an alternative. Gift tax then needs to be paid – in Flanders and Brussels the rate is 7% in principle (see below for exceptions) and in Wallonia 5.5%. After that, inheritance tax is generally no longer due even if the donor does die within three or five years of the gift.

Have you lived together de facto in the Flemish Region for at least one year and do you have a shared household? If so, you will benefit from the same low gift tax rate as for married couples. This is 3% instead of 7%. Starting in 2024, de facto cohabiting partners in the Brussels-Capital Region will likely also be treated the same way as spouses. The conditions are the same as in Flanders: at the time of the gift, you must have lived together for at least one year and share a household. Instead of paying 7% gift tax, only 3% is due.

3. Gifts and inheritance for legal cohabitation

> What if?

In order to legally cohabit, you must file a declaration of legal cohabitation with the civil registry in your municipality. As with a non-cohabiting relationship and de facto cohabitation, legally cohabiting partners retain as their own the assets that they built up before the relationship started as well as the income they earn during the relationship.

Like de facto cohabiting partners, legally cohabiting partners can draw up a cohabitation agreement with a notary, but it is not obligatory. If the legally cohabiting partner is the (co-)owner of the family home, then it cannot be sold without the consent of the partner. The household contents of the home are likewise protected. Legally cohabiting persons generally submit a joint personal income tax return. As legally cohabiting partners, you are "jointly and severally liable for household and tax debts". This means you are jointly liable for certain debts, such as housing or childcare costs and tax owed. If one of the partners is unable to pay, the other party may be held liable. The debt will not automatically be divided in a ratio of 50/50. If one of the partners pays the debt in full, they then, in principle, have a claim against the other partner for the part they should have paid.

> Nothing settled on death?

The surviving legally cohabiting partner will then inherit the usufruct of the family home and its household contents. However, be aware that a legally cohabiting partner can restrict this right of inheritance in a will, even without the knowledge of the other partner (married partners cannot do so).

The usufruct of the family home means that the surviving partner may continue to live in the home after the partner’s death, even if that home does not belong to them. He or she may also choose to rent out the property and benefit from the rental income. The bare ownership belongs to the legal heirs of the deceased (in the first instance these are the children, if any).

If you legally live together and would like your partner to inherit something extra if you suddenly are no longer around, you must take steps yourself, for example by drawing up a will or applying a third-party clause.

> Inherit?

If you inherit something from your legally cohabiting partner, you will be taxed in the Flemish Region in the same way as married partners. The rates for movable property are from 3% in the lowest bracket, rising to up to 27% in the highest bracket. In the Flemish Region, legally cohabiting persons also benefit from exemption from inheritance tax for the family home. In the Brussels-Capital Region the lowest rate for movable property is 3%, while the highest rate you will pay is 30%. Legally cohabiting persons also benefit from an exemption from inheritance tax for the family home.

In the Walloon Region the lowest rates for legally cohabiting persons are 3% and the highest rates are 30% (for movable property). An exemption from inheritance tax on the family home is also possible under certain conditions in the Walloon Region.

> Gifting?

If nothing was planned when legally cohabiting, the surviving partner automatically receives the usufruct of the family home and its household contents. Do you want to gift movable property such as money, shares, investment funds, etc. while you are still alive? You can do this through a bank gift. As a rule, no gift tax is payable on this. If the donor lives in the Flemish Region or the Brussels-Capital Region, and he/she dies within three years of issuing the gift, inheritance tax will still be payable (see rates above). Please note: in the Walloon Region, a waiting period of 5 years applies. If you wish to avoid the risk (of the donor dying within the waiting period of 3 or 5 years), a notarised gift may offer a solution. Gift tax then needs to be paid – in Flanders and Brussels this is 3% and in Wallonia 3.3% – but there is generally no inheritance tax afterwards, even if the donor does die within 3 or 5 years of making the gift.

4. Gifts and inheritance in a marriage

> What if?

When you are married, you enjoy certain rights that are not included as standard in other forms of cohabitation. On the other hand, you also commit to a series of responsibilities and duties:

• Married people are obliged to remain faithful to each other, to provide help and support, and to cohabit.
• As with legal cohabitants, you are "jointly and severally liable for household and tax debts" (see gifts and inheritances for legal cohabitation).
• If a spouse is the (co-)owner of the family home, neither of them can sell the home without the consent of the other.
• In principle, married couples submit a joint personal income tax return.

As a couple, you can choose the matrimonial regime that best suits your situation or your wishes. Under the law (without having a marriage contract), earned income is shared from the start of marriage. Any inheritance that predates the marriage, or assets acquired as a gift and/or inheritance during the marriage also generally remain personal. Another option is the regime of separation of goods. Under this matrimonial regime, everything remains separate: the assets from before the marriage, gifts or inheritances received during the marriage, and income earned during the marriage. In other words, "to each their own". Do you want everything to be common (i.e. to include the assets acquired before the marriage)? If so, you can opt for the regime of community of goods. If you are married under this regime and

one of you receives an asset as a gift or through a will, then it may exceptionally be determined that it remains their sole property and does not become jointly owned. A marriage contract does not have to be a standard document. Depending on your needs and wishes, you can add things, for example to protect the family’s assets better or to leave the surviving partner with more. It is also possible to change the matrimonial regime.

> Nothing settled on death?

What a spouse inherits on the basis of statutory inheritance rights will depend on

the family situation:

• Did the spouse have any descendants? In this case, the surviving spouse inherits the usufruct of the entire estate. For example, if your deceased spouse had a custody account, you would inherit the future dividends and other income from that account. Bare ownership of the shares and other securities goes to the descendants.

• If there are no children, but parents and/or siblings are still alive, the surviving spouse inherits full ownership of the joint and exclusive undistributed property, and the usufruct of the deceased spouse’s own property. Full ownership of the joint and exclusive undistributed property means that the surviving spouse may both use and sell the property and has full control over it. Undistributed means that the goods have not yet been distributed or allocated. For example, a separation of goods does not mean that the spouses cannot have any shared assets or debts. For example, there may be money in a joint current account. They then have "joint ownership" of this. The usufruct of the deceased spouse’s own property means that the surviving spouse has the right to use the property and enjoy its "fruits" (such as interest, dividends, etc.) but is not allowed to sell these goods. Bare ownership of these assets goes to the parents and/or siblings of the deceased.

• Are there no descendants, parents, brothers or sisters? If so, the spouse inherits full ownership of the entire estate.

An important point is that spouses (as well as children) have a protected inheritance, also known as a reserve. This reserve consists of the usufruct of half of the estate, with the usufruct of the family home and its household contents at the minimum.

> Inherit?

Movable property that you inherit from your deceased partner is taxed at the lowest rates in the Flemish Region. These are 3% in the lowest bracket, rising to up to 27% in the highest bracket. In the Brussels-Capital Region and the Walloon Region the lowest rates are 3%, while you can pay up to 30% in the highest bracket. In all regions, married people benefit from an exemption from inheritance tax on the family home.

> Gifting?

Do you want to gift movable property to your spouse while you are still alive? You can do this through a bank gift. As a rule, no gift tax is payable on this. If the donor lives in the Flemish Region or the Brussels-Capital Region, and he/she dies within three years of issuing the gift, inheritance tax will still be payable (see rates above). Please note: a period of 5 years applies in the Walloon Region. If you wish to eliminate the risk (of the donor dying within the waiting period of 3 or 5 years), a notarised gift may offer an alternative. Gift tax must then be paid – in Flanders and Brussels this is 3% and in Wallonia 3.3% – but there is generally no inheritance tax afterwards, even if the donor does die within 3 or 5 years.

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