3 minWhat to consider when transferring personal movable property
You want to donate a securities portfolio or a valuable collection to your children, now or in the future. How can you keep control of the assets? Read on for an explanation of the three options available to you by Christophe Delanghe, Estate Planner at Banque de Luxembourg.
This article was published on the website of daily newspaper De Standaard.
When something is given, it’s given. So conventional wisdom tells us. And it’s also the reality in law. But are donations that straightforward? Can things be done a little differently? Can you retain some control over a donation of personal movable property, such as a securities portfolio, an art collection or a vintage car collection?
Christophe Delanghe, Estate Planner at Banque de Luxembourg puts us in the know: “As a general rule, a donation is irrevocable – with one notable exception: donations between spouses are revocable. In other words, the donor spouse can revoke the donation during a divorce or on their death. Donations to others, such as children, cannot be revoked, although the donor can stipulate certain obligations and condition. For example, they might want to keep some control over the assets or to secure an income stream.”
What do you mean by retaining control? How?
“There is no single solution that works for all transfers of movable property. The most common arrangements are donation of the property in full, but with certain obligations and conditions; donations retaining right of usufruct; and formation of an ordinary limited partnership (société simple) to manage the donation.”
What are the advantages of setting up an ordinary limited partnership?
“A combination of an ordinary limited partnership – a société simple under Belgian law – and a donation is a good solution to reduce future inheritance tax. Although the manager of the partnership, who is usually also the donor of the shares, retains a degree of control under the rules of this company form, they cannot have absolute control. The aims of the partnership may include maintaining the donated assets under one umbrella and/or an educational purpose for the beneficiaries. The duties of management include an annual report on its activities at the annual general meeting, for example explaining why certain securities were sold and others purchased.”
What other considerations should the founder keep in mind?
“Like any other company, an ordinary limited partnership must meet certain obligations: accounting requirements, registration with the Belgian central companies database known as the Crossroads Bank for Enterprises (CBE), reporting and annual confirmation of the beneficial owner. In other words, it’s important to know the ins and outs of the undertaking. If you don’t want or cannot meet the administrative workload, then it’s better to opt for more straightforward estate planning.”
Such as donating the property in full, with certain obligations and conditions?
“This could be an option when the donor wants a simple way to pass on assets during his or her lifetime, while imposing some obligations and conditions. For example, you can donate your securities portfolio, on condition you can claim interest each year if you need funds in the future. You can also include a prohibition on disposal, stipulating that donated assets may not be sold without your express consent for as long as you live.”
When is a donation retaining right of usufruct the best way forward?
“This is a popular option for transfers of movable property. The donor retains the usufruct of the assets donated during their lifetime, which means they can claim the income (interest and dividends) from the assets. What is more, the usufructuary can continue to manage the donated securities portfolio. On the death of the donor (or their spouse), the usufruct is extinguished, and no inheritance tax is payable. Remember that a donation of movable property retaining right of usufruct requires a notarised deed, which means that a gift tax applies. In all three regions of Belgium, you have the right to transfer personal movable property during your lifetime at a gift tax rate of 3–7% (3.3% and 5.5% in the Walloon Region).”
