Usufruct gains between spouses: a complex tangle unravelled

Suppose a married couple donates a flat to their children with reservation of usufruct. "When either parent dies, his or her usufruct will accrue to the surviving spouse. Whether the latter in that case has to pay inheritance tax in Flanders depends on several factors", Remke says.

In principle, statutory succession, conventional succession and legally granted successive usufruct coexist autonomously, each with its own legal basis. A brief overview:

The givers provide a specific clause in the gift agreement that makes the usufruct automatically accrue to the surviving spouse. Since the gift is made on the basis of the agreement, it falls outside the estate and the transferee spouse does not pay inheritance tax, according to VLABEL. 

Article 4.18 NBW states that if a spouse makes a gift with a reservation of usufruct during the marriage, this usufruct automatically accrues to the surviving spouse upon death. In that case, according to VLABEL, inheritance tax is due in the Flemish Region.

Section 3.141(4) of the Civil Code stipulates that the death of the usufructuary automatically transfers the usufruct to the surviving usufructuary. This type of acquisition is exempt from inheritance tax. 

"A complex legal framework, in which the different systems can also overlap perfectly," Remke explains. "Take, for example, the situation where a spouse makes a gift during the marriage with reservation of usufruct. Then, at the time of death, there may be concurrence between the WTOV and the legal accretion in property law. And this overlap has important consequences, because where no inheritance tax is due under the legal increment, this is the case under the WTOV."

In a maze of legislation and VLABEL positions, how can you be sure that usufruct will accrue to the surviving spouse free of charge? Remke and her colleagues in the tax expert team closely follow tax news and distil a certain hierarchy between the different systems. The rule of thumb is as follows:

Conventional accretion takes precedence. If nothing was provided for in the gift deed, the WTOV applies. The statutory accretion in Article 3.141(4) is at the bottom of the hierarchy. 

"If the deed of gift contains a specific increase clause, the surviving spouse in Flanders does not have to pay inheritance tax. If there is no stipulated accretion, then the surviving spouse acquires usufruct on the basis of the next rung in the hierarchy, the WTOV, and tax is due in the inheritance. There is one exception to this last situation, namely when the donor expressly excludes the WTOV, for example in a will. In that case, the surviving spouse acquires usufruct on the basis of Article 3.141(4) and does not pay inheritance tax." 

It may therefore depend on one contractual provision whether the Flemish tax administration levies inheritance tax on the usufruct. Calling in a professional to draw up a well thought-out deed of gift with proper modalities is then no superfluous luxury. This way, the surviving spouse stays out of the WTOV's sights and no inheritance tax is due in the Flemish Region.

Up-to-date expertise and an eye for legal nuance are a must to advise clients correctly and proactively. That is why Novius' tax law lawyers sit around the meeting table every two weeks and take an in-depth look at legal twists and turns. "Those sessions are enormously instructive," Remke explains. "There we discuss cases, analyse case law and accurately map out VLABEL positions. We often start from a concrete case at the office, in order to get to the heart of a legal topic and share best practices with the rest of the team. Very fascinating as a lawyer to exchange ideas with experienced colleagues and gradually become masters of the tax field."