Kevin Begon -

Skipping a generation: what if you left your inheritance to your grandchildren?

Most Belgians, particularly those aged 60 and over, think about how to support their children or grandchildren. A recent survey we commissioned from the Profacts research bureau sheds light on this concern, highlighting the need to address the worries of Belgians. In some cases, a "generation skip" – leaving an inheritance to grandchildren instead of children – can be a viable solution

As life expectancy increases every year, the age at which your children will inherit is becoming increasingly distant. They may even be well-established in life by the time they have to worry about your estate. Could your grandchildren not make better use of this money? This is where the "generation skip" solution comes in.

"A generation skip allows you to pass on an inheritance by skipping a generation," explains Philipp Bollen, Director Estate Planning at BNP Paribas Fortis. "Such an operation has a dual purpose. Not only do financial resources reach your grandchildren more quickly, but you also avoid paying inheritance tax twice: first, when your children inherit and again when their children inherit after their death."

There are different ways to implement a generation skip in practice.

The most drastic: waiving the inheritance 

When your parents pass away, you can arrange for your children to receive the entire inheritance by waiving your share. In this case, you do not inherit anything and your share goes entirely to your children.

Partial generation skip 

For now, reserved for Flanders, this formula allows you to give part of an inheritance received without paying inheritance tax, provided you have already paid the tax. Two conditions apply: the gift must take place within the year following the testator's death and must be made through a notarial deed.

Favouring your grandchildren directly 

Forward-thinking grandparents who want to prioritise their grandchildren can also include this generation in their will. The advantages are numerous: you determine what each grandchild will receive and you can divide your estate among more beneficiaries. As a result, each person will pay less inheritance tax, which is levied on the basis of tax brackets.

The modest legacy 

In Flanders, estates under €50,000 benefit from a tax advantage. Up to €12,500, inheritance tax is even zero. Grandparents who want to give their grandchildren a financial boost and want their heirs to pay as little inheritance tax as possible can therefore consider bequeathing a maximum of €12,500 to each of their grandchildren through their will.

Gift during lifetime 

With this method, your grandchildren do not have to wait for your death to benefit from the assets that are theirs. The great advantage here is the favourable rate of gift tax of 3% in direct line. If you are in good health and think you can live for at least three more years, you can even consider not registering the gift and thus not paying any gift tax.

Discuss it 

To avoid any misunderstandings among your loved ones, think carefully about all aspects related to your estate. Do not hesitate to ask a notary for advice and discuss it with your children. They may also be interested in a generation skip.

About Ask Your Bank 

BNP Paribas Fortis wants to help you see things more clearly when it comes to managing your money. That's why we asked over 1,000 Belgians what their questions and concerns were. With the Ask Your Bank series, we answer them transparently.